FINANCE AND INVESTMENT
By CUSTOS
HELPED by some positively resounding dividend increases and to a smaller extent by Wall Street's partial recovery of poise markets here have striven valiantly to stage a rally. Some recovery there has been, but it has not yet developed to a point at which one could regard it as really convincing. On Tuesday what looked like blossoming out into a genuine improvement was cut short with abrupt swiftness by MT. Shinwell's gloomy words on the coal prospect. Buyers have gone back into their funk-holes, nervous sellers have reappeared, and jobbers have reacted in traditional style by marking down quota- tions. I would not go so fax as to state that hope of a sustained recovery must now be abandoned, but I am not impressed by the markets' recent performance. Although list week's selling must have eliminated many of the weaker positions, there still seems to be a good deal of loosely-held stock. Some of it would come out if markets incurred a fresh fall ; some would be sold on any appreciable rise. I know that people are apt to change their minds and hold on once recovery sets in. At present, however, investment confidence has been Shaken and there must be many by whom any material rise would now be regarded as a selling opportunity.
NATIONALISATION STOCKS
That is why I should expect markets to remain sensitive and to move within relatively narrow limits during the coming weeks. By the same token this is not a time for letting out much speculative sail, although I would like to make it clear that I do not see anything in the business prospect which would call for the jettisoning of sound stocks which have been bought for lock-up purposes. Several weeks ago attention was called in these notes to the uncertain outlook for the general run of industrials and to the attractions in such circum- stances of what may be conveniently labelled nationalisation stocks. On July 5th I wrote: "The value of nationalisation shares is largely independent of the future trend of the stock market, so that even if the market took a downward turn a buyer might find himself well placed in the matter of capital appreciation by the time that a financial settlement was reached at the end of, say, two or three years." The truth of the first part of this argument has already been demon- strated. The general run of industrial shares have fallen, while the nationalisation group, and especially leading colliery shares, whose merits I singled out, have risen quite sharply. Carlton Main Colliery Li Ordinaries, recommended at 33s., now stand at 40s. 6d., Powell Duffryns, which were then 22S. 3d., have come up to 25s., and Tredegar Coal have moved from 14s. 9d. to t6s. 9d. I still see no reason to disturb such holdings, and the leading units in the South Wales coalfield, especially Powell Duffryn, should be capable of further improvement.
HEAD, WRIGHTSON ISSUE
Some weeks ago I outlined the position of Head, Wrightson and Co., the old-established constructional engineers and steelfounders. This company was then a heavy E.P.T. payer, its trading profits having risen very sharply during the war years. A dividend of 6 per cent, was being paid on the Ordinary capital out of earnings which would have permitted a much larger distribution if E.P.T. had not been operative. Like so many other concerns which have paid E.P.T. on a heavy scale, this company has suffered a setback in its trading profits now that it has resumed its normal peace-time activi- ties. The strength of the position has been revealed, however, in that in face of a reduction in trading profits from £228,o23 to £102,125 the directors have been able to increase the Ordinary divi- dend from 6 per cent, to 9 per cent. owing to the incidence of taxation. In his statement the chairman emphasises that none of the company's engineering works are on the Government's list for nationalisation and that the order-book is in a healthy state. He also forecasts that in the near future an opportunity will be take to replenish liquid resources by means of an issue of new shares to the Ordinary shareholders. Altogether the prospect looks distinctly promising, and at 32s. 6d. the Li Ordinaries should pay well to put away. The yield on the 9 per cent, dividend is over 5f per cent.
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