31 JULY 1964, Page 23

Investment Notes


THE excitement in the textile market caused by COURTAULDS' bid for LANCASHIRE COTTON and FINE SPINNERS AND DOUBLERS—and later that of ENGLISH SEWING COTTON for BARLOW AND JONES—cloaked the fact that the market was really lapsing into its summer doldrums. I doubt Whether the bull market can be resumed before the election unless there are more positive signs Pointing to a Conservative victory—which is not impossible. In a dull period it would be useful for investors to pick up the shares of a really outstanding 'growth' company like THORN ELECTRICAL. The results for the year ending March were really brilliant. Group trading profits after tax were up 60 per cent and the dividend was raised by 5 per cent to 221 per cent (covered 4.6 times on earnings) on capital doubled by the scrip issue. The 'A' shares have Come back to 64s. 3d. to yield 1.8 per cent on divi- dends and 7.9 per cent on earnings and would be cheap at any lower level.

Tobacco Shares

An attempt is being made to bring the investor back into tobacco shares, partly on the grounds that they are good 'income' investments, partly on the grounds that the tobacco companies are to process of diversification. To take the first Point, a high-yielding share whose dividends are covered twice or more may be regarded as a good income investment only if the capital value the market does not fall away. Every time the doctors make a strong attack on smoking, link- ing it with lung cancer, the market prices of tobacco shares drop and only gradually recover. According to a prominent broker's report : `Tobacco is a habit-forming drug and the average Englishman is not going to give up smoking voluntarily. Sales are likely to continue to be resilient in the face of every onslaught.' Actually the consumption of tobacco in this country tends to increase by about 2 per cent Per annum in spite of medical warnings and this may be due to the cigarette habit getting hold of Woinen, who now account for 30 per cent of the total consumption. However, further medical attacks on smoking may force governments to. take more positive action. A restriction upon advertising might even increase company profits over £12 million was spent on tobacco advertis- ing last year--but a much higher taxation could be Penal. Finally, the effects of diversification should not be exaggerated.It is bound to be a slow Process. BRITISH AMERICAN TOBACCO Will eventu- ally have a 30 per cent interest in WIGGINS TEAPE and it has now made a bid for TONIBELL. Even so the profits to be drawn from both these invest- ments will not exceed 3 per cent of the group's total profits. IMPERIAL have invested in Golden Wonder (potato) Crisp, Teaching Machines,


lay's lay's hairdressing shops, and Bernard Klein (men's suits) but all these will contribute only a small fraction of the total profits. There was a Ninour in the market that Imperial would hive lilt its main investments in tobacco machinery, !liter paper, etc., not to mention its 361 per cent Inc ■ ALLAHER and 281 per cent in BAT, but nothing

has , so far been done. There would be little gain

t° shareholders if it came. There was some dis- appointment that the increase in the Imperial Inlerim dividend was only from the equivalent Of 52

Js per cent to 6 per cent, but the market has

since improved and at 48s. the shares yield only G.6

Per cent. BAT at 52s. 11d. yield 6.4 per cent ,_ the 201 per cent tax free dividend which was ktst, covered 2.6 times.