Investment Notes
By CUSTOS
s. I write, Throgmorton Street is reacting to
a temporary setback in Wall Street, but looking back over the recovery since the Cuban crisis there can be no fault to find with the Wall Street performance, for it has climbed nearly
per cent. from its low level of last June. The quality of the buying is said to be excellent and ,blue chips' are preferred to the speculative sPace' and electronic gambles. The price/ earnings 8s ratio is now the reasonable one of This corresponds to an average net earnings Yield of just over 6 per cent., equivalent to a gross earnings yield in the UK of nearly 10 per cent. There are few 'blue chip' shares on the ,
London Stock Exchange list giving so high an e .2 narnings yield. The last reported coverage was per cent., but on 'blue chips' it would be less than .6 per cent. British Plaster Board
I added LONDON BRICK and REDLAND HOLDINGS to my list of companies likely to benefit from the increased government spending on housing, hospitals, schools and slum clearance. I would HOW add BRITISH PLASTER BOARD, a company which manufactures a wide range of products in the building trade based mainly on gypsum, including plaster board, cement-bricks, acoustic tiles and roofing felt. It also has subsidiaries in packaging. The company has entered into an agreement (financial and technical) with US Gyp- sum, which is taking a 15 per cent. interest in the company's equity while British Plaster takes a smaller interest in the American equity. The interim statement recently published by British Plaster encourages hope of an increase in the 1962-63 dividend, which is at present 12-1. per cent. The pre-tax profits for the six months end- ing September were slightly higher and earnings for the twelve months should be about 28 per cent. This should allow a dividend of possibly 14 per cent., an increase which would be justi- fled by the improvement in the company's cash position. As the chairman viewed the prospects favourably, I think the 10s. shares at their present price of 29s. 3d. are a reasonable pur- chase to yield 4.2 per cent. on current dividends and nearly 5 per cent: if the dividend-is raised. My final addition to the building list would be JAMES LAIDLAW, which is making a good recovery from the setback of 1961-62. But its 5s. shares, at 13s. 6d. to yield 5.55 per cent. (Of' 7.4 per cent., if the dividend is restored froth' 15 per cent. to 20 per cent.), are virtually unobtainable.
Wiggins Teape
There has been a sharp rise in wicGiNs TEAPE on the news that BRITISH AMERICAN TOBACCO is to subscribe for a further block of shares at 60s., which will give it a 30.3 per cent. interest in the equity. Wiggins 'Teape is also taking over BAT's half interest Millbank Paper, 'a com- pany formed to take over the paper Milts which BAT acquired overseas. The position of the paper companies will be greatly. improved if, we enter the Common Market, for they are now subject to Scandinavian competition under EFTA. On any reaction in the market, Wiggins Teape should be a good purchase. It is now 60s. to yield 4.6 per cent.
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