Investment Notes
The debate goes on as to whether brewery shares are 'growth' stocks or not. The answer seems to be that this is not a 'growth' industry but that some energetic and well- managed brewery companies can be relied upon to make their profits expand—
through skilled management, concentrations and mergers. This is the conclusion of a well documented brokers' report which calls special attention to certain companies in the South Midlands. In this area property values are rising because of the high rate of increase in population and industrial development. At the same time the ratio of 'on' licences per hundred people is higher than the national average. Hence there is scope in this area for amalgamations and sales of surplus properties. The report picks out three Midland companies for their growth record—Mitchells and Butler, Ansells and Davenports. The first two have a joint subsidiary to undertake the building of new premises. Davenports, a Birmingham com- pany, is the smallest of the three, but its shares sell at a large discount on real asset values. The dividend yields at present market prices are—in the order named- 4.2 per cent., 4.55 percent. and 5.05 per cent. Of the national companies the pick seems to be Bass, Truman, Whitbread and Ind Coope, offering yields of 4.2 per cent., 4.7 per cent., 4.6 per cent. and 4.6 per cent. This year the Treasury is apparently antici- pating an increase in beer sales of 12 per cent.—last year was a bad year for con- sumption because of the weather—and there is no doubt that the increasing popu- larity of canned beer is evidence that a new market is being tapped through television. Another source of growing profits for the modernised public house is the increasing consumption of wines and soft drinks. New and cheaper methods of brewing have been introduced and production is being concen- trated in the larger and more efficient plants. Distribution is being rationalised as well as production and amalgamations are taking place at the rate of dozens a year. This is the case for selective investment in the brewery market and Whitbreads, with its aggressive policy of acquiring trading agreements with, and share interests in, other brewery com- panies, is the obvious choice among the leaders. But I was interested to see that these brokers also picked out Joshua Tetley whose shares I have previously recom- mended around 35s. They are now quoted at 46s. 6d. to yield 4.45 per cent. This company's houses are mainly in Yorkshire and Lancashire and its profits have yet to show the full effects of the heavy capital expenditures of recent years.
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