FINANCE AND INVESTMENT
By NICHOLAS DAVENPORT THE welfare and instruction of the small investor are my constant preoccupation. I am therefore keenly interested wheii 'Sir Edward Wilshaw, the Governor of Cable and Wireless (Holding), splits the £100 stock of his company into £1 units in order to attract the savings of the small investor. I noticed that in the first two days of dealing in the new form the £1 units rose sharply by 3s. 9d. to 34s. 6d. (to yield 5.5 per cent.). This is hardly likely to attract the cautious buyer, for it suggests that the professional gentlemen in the City plunged into the market in order to take the small investor for a ride. But I agree with Sir Edward Wilshaw that a good investment trust com- pany gives the security essential to the small saver by the spread of its investment port- folio. Cable and Wireless can boast that they have nearly a thousand different invest- ments in their portfolio, spread widely over industries not only in this country but over- seas. (They made a substantial investment In Rhodesia and South Africa and are now ,1 going into ' Canada.) Everything depends, of course, on the success of the management. Sir Edward was not too shy to claim that the 'management of Cable and Wireless had been very successful, dividends having been stepped up from 4 per cent. to 6 per cent. in 1950, to 8 per cent. in 1951 and 1952, and to 9 per cent. for 1953, not to mention a free bonus of one new share for every ten. It was the aim of his management, he said, to blend mature investments giving a satis- factory income with long-term investments building up for the future. (He instanced Britavia, Ltd., owning an air line, the con- trolling interest in which has just been sold to the P. and 0. group.) They would never be content, he added, with just collecting dividends from established companies and passing them on to stockholders. It is there- fore clear what Sir Edward is offering the small investor : it is not a conventional investment trust but a blend between an investment trust and a constructive go-ahead promoting company. It is none the worse for that, but it means that in spite of the spread of its investments Cable and Wireless (Holding) is rather more speculative than the investment trust proper which Sir Edward was trying to sell.
vestment Trusts and the Small Investor But I am not anxious to recommend Investment trusts proper for the small investor although they may still be regarded as a good purchase today by the professional investor. I know that the report season is approaching which will reveal handsome appreciation in the market value of the port- , folios. I am aware that the higher industrial dividends of 1953 will not be fully trans- lated into investment trust dividends for another year. Nevertheless, I do not con- eider investment trusts suitable for the small investor for the following reasons. First, the market is very narrow and the stock is often heavy ' in size. (Sir Edward Wilshaw can fairly claim a better market for Cable and Wireless with 10,000 stockholders of which over 6,000 hold less than £200.) Secondly, the quality of the different man- agements and the distribution of the differ- ent portfolios may be well known to the professionals but remain complete mysteries to the outsider. Who is likely to know any- thing of the aloof managers of the secretive Scottish investment trusts ? Who can say which has the best bag ' of American and Canadian securities, which is their speciality ? In the third place, if I know anything of the small investor, he does not like to buy a pig in a poke ; he likes to select his investments himsplf, secure the yield he wants and take on the risks congenial to his nature. He gets pleasure as well as profit from trying to spot the winners and he is doing what the country needs—laying out his capital at risk and helping the expansion of the free enterprise system. He can also spread his own invest- ment risks by holding small units in as many companies as he can practicably watch, although I hope he will avoid having too many small companies because, the quality of their managements cannot be as consistently good as that of the big com- panies. Watching investments is always a trouble, but the financial papers are full of information and advice—and there is always the Spectator to supplement them. Of course, if the small investor is lazy or unin- terested, he can safely leave his money to be managed by the conventional investment trust, but he is putting his capital in a parasitic form of life, in fact, in an industry which is moribund. The promoter, like Sir Edward Wilshaw, is more deserving if he can offer stock at the right price.
Mr. Clore's Second Thoughts Speaking of promoters, it is interesting to see that Mr. Charles Clore, whose group paid over £3 millions for the control of J. Sears, has re-arranged that company's assets, transferring the footwear business to the subsidiary Freeman, Hardy and Willis, selling the freehold properties (subject to long leases to Sears) and recollecting £3 millions as surplus cash resources. How will these be invested ? Mr. Clore cannot yet say, but J. Sears is on the road to becoming an industrial investment company with a large footwear interest. This promoting business may be speculative but it may turn out better for the country than going to sleep on investments.
Previous page
