Investment Notes
By CUSTOS IN• the first thirty days of the new Government equity shares have fallen by about 10 per cent from the top and most professionals think that there is another 10 per cent to 15 per cent to go. The Budget this week will be a very depressing factor. The only stable market appears to be steel shares. Re-nationalisation is clearly not :going to have top priority. There are to be dis- 4,;..oussions both with the steel managements and With the trade unions and hints have already been given that not all the steel companies will he taken over. An average price over a period seems to be the likely basis for re-nationalisltion and that may well be slightly above the present market. In any case, the Bill cannot come for- ward before next spring.. Sd, when in doubt, buy Nleel shares, but better still, do nothing until the market finds its bottom.
laristol Aeroplane ,
This share has been often recommended in • this column and must now be reviewed in the ' 'light of the change in government policy. The ,gloomiest view, as one firm of brokers points out, is that in order to pay for its social pro- "gramme the Labour Government intends to • 'mantle our air defences. This I do not believe. The more cheerful view is that the Government intends to build up our conventional forces, 'Which I do believe. This would help BRISTOL AEROPLANE, both through the engine side (it has a 50 per cent holding in Bristol Siddele■,, Engines) and through the new aircraft (the TSR 2 and, of course, the Vulcan). The company also has a 20 per cent interest in the British Aircraft Corporation, Which is responsible for the Lightning. Regarding civilian aircraft, it is believed that little produc- tion work has as yet started on the Concord. The VC 10, which is being made for Vickers, seems to be assured a great success. Of course, if there N■ere heavy cuts in defence expenditures, the air- "raft companies might be left with insufficient work, which might mean compensation or nationalisation, but the brokers I have quoted believe, as I do, that with the new Govern- ment:s accent on scientific research and tech- 419100, our most advanced industry will be helped and not .destroyed. In the meantime, the shares a Bristol Aeroplane, which have fallen from a high of 24s. to 17s. 9d., to yield 7f per cent, should be supported by the expected good results for the kl.r to December 1964, which will be published 'n lylay 1965.
Machine Tools Some Labour Ministers in the past have com- mented adversely on the lack of drive in the Machine-tool industry and in the first half of this
year imports of machine tools were, in fact, a third higher than in 1963. There were, however, some special reasons for this rise and against it we must set the 7{ per cent rise in exports. Last year the machine-tool industry exported 34 per cent of its total production. Outstanding as ex- porters are CHARLES CHURCHILL (35 per cent ex- ported, rising to 40 per cent), ALFRED HERBERT (40 per cent), B. ELLIMT (40 per cent), CRAVEN BROTHERS (over 50 per cent) and NEW LL (nearly 60 per cent). As one must now try to avoid com- panies distributing up to the hilt, I can only recommend the following, whose dividends are very well covered: C. Churchill at 14s. 101d., to yield close on 3 per cent (dividend covered nearly 3 times) and B. Elliott at 24s. 6d., to yield just over 4 per cent (dividend covered 2.4 times). Eventually all these companies may be subject to State competition if the Wilson Government sets up a public machine-tool company.
Convertibles During this 'bear' phase in the equity debentures. I can recommend three:
Rank Organisation 6 per cent, 1983-88 Radio Rentals 61 per cent, 1983-88 Courage and Barclay 61 per cent, 1976-81
markets investors should play for safety in convertible
Equivalent Price Ord. Current Price at next conversion Price Ord.
106 32/1i at Oct. 10, 1965, to Dec. 9, 1965. 29/6
1061 40/- in Feb., 1965 37/3 110} 24/- at Sept. 30, 1965 23/6
I do not recommend a switch from the ordinary into these debentures, as most of the shares have fallen sharply, but for new money wanting income as well as security, they are ideal.
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