INVESTMENT NOTES
By CUSTOS
IE Chancellor first came to the rescue of a 1 flagging bull market when he told the Canadian Chamber of Commerce in London last week that he would be very disappointed 'if, within a few months, we do not find production, employment and exports on the way up again.' -Inflation, he added, 'was just about squeezed out of the system,' indicating that he would now be able to allow for a fuller re-expansion of the economy. He followed this up by allowing the Board of Trade to sweep away the remaining restrictions on hire-purchase and rental agree- ments. The market immediately responded, al- though it was the end of a Stock Exchange ac- count. Outstanding was BRITISH MOTOR CORPORA- TION which has advanced to 11s, 6d. The pre- liminary report and dividend are due in a week's time and the general expectation is for an increase in distribution to 15 per cent. with more to come in the current year. A large bull position has already been built up in the shares. Other leading shares among the stores and consumer durable goods trades rose as smartly as BMC, confirming again the correctness of the investment policy which has now been advocated in these notes for many months.
GUS and Grattan Warehouses am confident,' Mr. Isaac Wolfson told the shareholders of GREAT UNIVERSAL STORES in re- porting on the year to March 31 last, 'that the group will continue to benefit as the country prospers.' When Mr. Amory and Mr. Wolfson agree on a favourable outlook, the shareholders of GUS cannot go far wrong. Since the easing of the hire-purchase restrictions group sales have been in advance of those of the same period of 1957, and with 2,700 stores, shops, warehouses, factories and depots throughout the UK and overseas, GUS very closely reflects the prosperity of the country and the working classes. GUS has seven trading divisions—mail order, multiple stores and shops, salesman collector, household stores, overseas, wholesale and manufacturing— and in all seven it is doing well. Which is the most prosperous Mr. Wolfson does not disclose, but I suspect the mail-order division. This reminds me of the merits of GRATTAN WAREHOUSES, one of the greatest mail-order businesses in the country, offering a very wide range of goods in its cata- logue. Its main warehouse is in Bradford; other big depots are in Leicester and London. Prices are cash, but customers can buy on credit without extra charge. A striking feature is that the com- pany has been able to increase its profits in every year since the war and also maintain the rate of profit on its steadily increasing assets. Last year it gave shareholders a one-for-eight free scrip bonus and paid at the rate of 40 per cent, on the increased capital out of earnings of 70 per cent. This year it has declared an interim dividend of 14 per cent. as before and at 45s. the yield would be only 4.4 per cent. Clearly the market is going for an in- crease. GUS 'A' shares at 26s. 6d. yield 6.2 per tent. on the basis of the 32+ per cent. dividend (last covered 2.2 times), but the market is now
going for an increase to 35 per cent., which would give a potential yield of 6.7 per cent.
Carrier Engineering If the investor feels bold enough to begin pick- ing up some capital goods shares, which is not unreasonable in the light of Mr. Amory's confi- dent forecast of expansion, he might consider CARRIER ENGINEERING, whose 1957-58 profits be- fore tax have risen by no less than 55 per cent. The dividend has been raised to 50 per cent. out of earnings of 133 per cent. This is still a very con- servative distribution and it is not yet clear whether it is due to directors' caution or pes- simism. The company specialises in air-condition- ing equipment and 1 would have thought that the future for thermal engineering was more assured, but we must wait for the full report. The shares have risen 3s. and at 42s. 6d. yield 5.9 per cent.
Previous page
