INVESTMENT NOTES
By CUSTOS
AFURTHER decline in the Treasury bill rate to £4 3s. 51d. per cent. has helped the gilt- edged market, and War Loan went over 671. It seems bound on this movement for 70. The fact that the credit squeeze has been eased by the Chancellor was another reminder to the industrial equity markets that a trade decline is officially expected. However, some trades are always going up While others are receding. Commercial tele- vision contracting is the only current example of a boom. The latest accounts of ASSOCIATED PICTURES show a jump in equity earnings from 48 per cent. to 81 per cent. This was fore- shadowed in my recent note and, although there is Still scope for a further rise in profits as television advertising increases and unprofitable cinemas are sold off, the best part of the television boost has probably been seen. The shares have risen from 19s. 3d. to 22s. 6d., and at this price return a Yield of 6.6 per cent. By contrast with television the trend of profits of a well-managed company like RICHARDSONS WESTGARTH, engaged in marine turbine, electrical and general engineering, is Pulled down by falling profit margins. The Chair- Man, Mr. 0. J. Philipson, told his shareholders
that while cancellations or marine orders had been comparatively few, the deferment of Govern- ment capital programmes left gaps to be filled in production programmes. He seemed worried by the new wage claim in the engineering and ship- building industry. Since 1938, he said, wages and salaries had risen over 300 per cent. while divi- dends had advanced by only 94 per cent. This was in money terms. In real terms wages and salaries had gone up 59 per cent., but dividends are actually down by 24 per cent. The 10s. shares at 13s. 9d. return a yield of 5.95 per cent. on the indicated dividend of 8f per cent. covered 2+ times. All this confirms my investment policy-to keep away from equities in the capital goods- export industries for the time and concentrate on the consumer goods and services.
Copper Shares and Selection Trust After the smart rally in copper-both in the metal, which has recovered by about 25 per cent., and in the shares, some of which have recovered by about 50 per cent. from the bottom-the short- term investor might well reconsider his position. Six months ago when the great BANCROFT mine was closed down by Anglo-American group (N'CHANGA, RHOKANA and RHODESIAN-ANGLO- AMERICAN being forced to contribute to its care and maintenance) I recommended a joint pur- chase of BANCROFT at Its. 6d. and CHARTERED at 43s. Subsequently they rose to 18s. and 63s. 9d., and even at present prices of 16s. 6d. awl 63s. profits might well be taken. Rhodesian Anglo- American have risen from 50s. to 72s. 6d. and are now 68s., but in view of the possible cut in the dividend from 6s. 6d. to 4s. the shares are also better sold than bought. If the investor is reluctant to leave the copper share market he might con- tinue to hold SELECTION TRUST, which I have previously recommended at lower levels. As I have explained, the whole basis of the company has been changed by the amalgamation of its sub- sidiary American Metal with Climax Molybde- num. Its holding in the new American Metal Climax represents about one-half of its total assets, and as the Chairman, Mr. A. Chester Beatty, told shareholders, this will have an import- ant stabilising influence. Whereas before the merger 25 per cent. of the company's interests were in North America and 65 per cent. in Africa, the respective percentages after the merger are 35 per cent, and 55 per cent. Before, it had 60 per cent. invested in base metals outside molybdenum; now it has only 40 per cent. Molybdenum repre- sents 20 per cent. of the total and gold 12 per cent. Diamonds, I estimate, account for about 10 per cent. Although, with the low price of copper, revenue will be lower this year, Mr. Beatty is `hopeful' that it will be possible to maintain the 7s. dividend. As a fifth of the dividend cost will be met by the estimated savings from the new profits tax, this 'hopefulness' seems reasonable. At 78s. 6d. to yield nearly 8.9 per cent, the shares seem to be a good refuge for the speculative investor.
OFSITS
Another exchange from the straight copper market is gold. 1 have previously recommended PRESIDENT BRAND and PRESIDENT STEYN, but if the investor prefers to spread his mining risks more widely he should buy ORANGE FREE STATE INVEST- MENT (OFS1TS). This company has holdings in all the best OFS mines and its dividends are bound to increase over the next few years. For 1957 it paid art interim of Is. and a final (in March) of 2s. This year the distribution is likely to be 5s. or more : the interim dividend due to be declared this week should give a fair indication of the total. At 66s. 6d. the 10s. shares offer a potential yield of over 6 per cent..
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