INVESTMENT NOTES
By CUSTOS HE bull movement has now carried the in-
dustrial share market through the index point -192-which ruled before the raising of Bank rate to 7 per cent. a year ago and set it at 196. It is an astonishing performance and, reflects the new-found, sturdy confidence which the in- vestment world now feels in the Government's handling of our economic and political affairs. The movement has, on the whole, been discrim- inating and controlled. The yield on equity shares has not fallen below the yield on bonds, as it has practically done in Wall Street. In fact, the Financial Times index of thirty industrial shares still gives the attractive average yield of 5.72 per cent. against a yield on old Consols of 4.85 per cent. It cannot, therefore, be said that British equities are over-valued. Moreover, the investor has not run after the capital-goods companies, where profit margins have been falling: he has concentrated on the consumer-goods shares where dividend yields are mostly high.
Property Shares and Land Securities
The only boom which looks like getting a little out of hand has been in property shares. This was set off by the new profits tax which, favoured the property companies distributing up to the hilt. I would counsel investors to take some profits here
and avoid shares with yields of around 2 per cent. I would still hold the leader-LAND SECURITIES- which has just declared a scrip bonus of one-for- one and forecasts a dividend of not less than 6 per cent. on the increased capital. At 31s. 6d. cum bonus the potential yield is 31 per cent. The shares of a company called WOODGATE, half property and half investment trust, are shortly to be intro- duced on a yield basis of over 6.4 per cent., which should prove attractive to those who have profits to cash in from this property-share boom.
Radio Rentals In three months' time the final dividend will be declared by RADIO RENTALS for the year ending August 31. This company's business consists mainly of the renting to subscribers under contract of radio and television sets which carry the com- pany's guarantee of service and maintenance. This renting is undoubtedly gaining in popular favour. In February this year it acquired Hyman Lazarus Cabinets, now called Radio Rentals Accessories, whose assets were mainly cash and quoted invest- ments. The directors then forecast dividends of 30 per cent, on the increased capital, but as the profits this year have exceeded those of 1956-7, it is not impossible that the rate will be increased. Two months ago a one-for-one scrip bonus was declared and the market is looking for something more than the equivalent 15 per cent. One jobber I consulted ventured to predict 20 per cent. At 23s. 9d. the 5s. shares would yield about 4.2 per cent. on this basis and I think as a 'growth' business this equity should be bought for good income and capital appreciation.
Rank Organisation and Gaumont British Although a. recovery in profits from its excep- tionally bad year 1957-58 seems certain on many counts, RANK ORGANISATION 5s. shares at 9s. to yield only 2.8 per cent. seem high enough. GAUMONT BRITISH 5s. ('A') ordinary at 3s. 71d. pay, however, for their keep to yield 10 per cent., although the 71 per cent. dividend was not earned. This company owns 233 theatres of which thirty are closed and awaiting disposal; it also owns the manufacturing subsidiaries-Rank Precision In- dustries and Rank Cintel-whose profits could show some recovery this year. But the market interest in Rank Organisation is centred on its one-third holding in the Southern TV station. The estimated profits of £1 million for the first year of operation would give Rank Organisation the equivalent of 131 per cent. on its equity. A com- bined purchase of Rank and Gaumont British ('A') would seem to be the best way of participating in any recovery which the Rank group may now enjoy from TV.
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