14 MARCH 1958, Page 29



THE end of the Stock Exchange account on Tuesday and the worsen- ing 'depression' news from America brought the market recovery to a mere temporary halt. With over five million unemployed—the worst figure for sixteen years—America is in the throes of a slump which the Government can only hope to moderate with its hastily improvised public works. The vital question for our own country is whether the American slump will turn world trade downward and bring a recession to our export trades. No one can know the answer yet and it is absurd for the financial journalists to say that recovery is round the corner. One Sunday paragraph even started a rise.in shipping shares, which shows up either the credulity of the bulls or the nervousness of the bears. The domestic economy must wait and see, so must the market in industrial shares. RUGBY PORTLAND CEMENT did well to increase its profits even slightly in a year when home sales of cement fell by about 5 per cent. and export sales by 10 per cent. Earnings amounted to a little over 70 per cent. on the ordinary shares, and the main- tained dividend of 221 per cent. is therefore well covered. At 22s. the 5s. shares yield 5 per cent., as do ASSOCIATED PORTLAND CEMENT. This is not attractive enough to bring in buyers. The report of the PRESTIGE GROUP shows that the consumer trades are having a better time than those in capital goods. Its turnover is 25 per cent. up and its profits 30 per cent. higher. The dividend is held at 45 per. cent. against earnings of 82 per cent. and at 35s. the 5s. shares return a yield of nearly 6+ per cent. (This is still below the average divi- dend yield on the Financial Times index, which is now as high as 6.9 per cent.) The start of the new account saw the return of the 'bulls' to the market and a fairly sharp rise in oil shares en- couraged by a Wall Street recovery. The American 'bulls' are banking on the near prospect of sub- stantial tax cuts.

As the return from British cement shares is only around 5 per cent. investors may be interested to know that there is a somewhat exotic cement share yielding 8 per cent. This is OLYMPIC PORT- LAND CEMENT, which is a British company operat- ing only in the United States but controlled by UNITED MOLASSES which holds 63 per cent. of the £500,000 capital. The market, as you can imagine, is very restricted and at around 30s. the £1 shares give a potz:ntial yield of 8 per cent. on the basis of a dividend of 12 per cent. The last accounts, how- ever, are very out of date, being for 1956, but an interim df.vidend of 2+ per cent. was paid last November, and the market seems to expect a final of 9+ per cent., making 12 per cent. The com- pany's plant is at Bellingham in the State of Washington and is conveniently situated for supplying the trade in the north-west of America and British Columbia. The capacity of the plant is being doubled—from I to 2 million barrels— and the new kiln is expected to be ready this spring. By that time natural gas will be available for power instead of fuel oil and will bring a big reduction in operating costs. The company will presumably gain from the, overseas trading tax relief.


The question whether copper has at last reached its bottom with a price a little above £160 per ton has already been debated in the financial press and this was sufficient to drive the 'bears' to cover in the share market during the last account. Whether output has in fact been cut sufficiently for the sharp drop in American consumption it is very difficult to say, but stocks in the hands of actual consumers have been so run down that it would be surprising not to see the price of copper firmer. (This does not, of course, apply to the copper fabricators whose stocks are still very swollen.) I therefore stand by my recent recommendation of 'CHARTERED' and BANCROFT, but I would now like to add ShLECTION TRUST, whose earnings are not nearly so vulnerable to a fall in the price of copper, if it turns out that the market has been too optimistic. Selection Trust draws its copper income from Rhodesian Selec- tion Trust, Roan Antelope and the lead-zinc pro- ducer Tsumeb, but it has gold interests as well and a holding in American Metal which has lately amalgamated with Climax Molybdenum, a pros- perous company producing a rare metal which has not auffered any fall in price. The American Metal-Climax merger has really transformed the character of Selection Trust, whose interest in the new combined company is approximately 12+ per cent. Last year the Trust earned about 16s. per share and paid 7s. In the current year its earnings are estimated at about 12s., and even if the price of copper fell to £150 and stayed there for a year it would still earn about 8s. 9d. The

distribution seems, therefore, reasonably safe and on this basis the yield at 62s. (against 63s. 6d. last week) would be over 111 per cent. Selection Trust is now selling at about 40 per cent. below its last year's high and seems to me to be an excel- lent 'recovery' stock whether you are looking for a recovery in copper or a recovery in America or both.