Boom in view
PORTFOLIO JOHN BULL
There are times when you have to look not at the individual shares in a portfolio but at the balance, at the proportions invested in differ- ing sectors. Over the past few years there have been times when it has paid to be heavily com- mitted to gold, to financial shares, to big exporters, even to consumer-goods manufac- lurers. Now investment attention has turned to the capital-goods sector. And I largely, though not wholly, agree with the analysis which says that there are unmistakable signs that British industry is beginning to re- equip again. Industry has got the funds; divi- dend restraint and high profit figures have left retentions looking pretty healthy. And accord- ing to recent surveys, many companies are looking forward to a reasonably full work load in the coming months. In any case, there has been an unusually long gap since the end of the last re-equipment phase. So the economists —from government, from the Confederation of British Industry and from the private sec- tor—are agreed : a capital spending boom is round the corner. If I have a doubt it is be- cause capital investment depends upon business confidence and I am not completely sure that the mood is right. All the same, it is clear that my first portfolio does not have enough capi- tal-goods manufacturers. This week, therefore, '1 intend to clear the decks a little by trimming down certain holdings.
My investment in Associated British Picture., for instance, is looking a bit overweight, having increased by more than 50 per cent in value as a result of the bid for Electric and Musical Industries. I have decided, therefore, to sell three fifths of my *holding, keeping the balance because I think that EhfI is showing a pretty fair turn of speed at the moment and because I believe that Mr Bernard Delfont will do great things with AB Picture, taking it into profitable film production, for instance.
I also believe that my holding in National and Grindlays Bank has served its purpose. I originally bought the shares because I thought that the bank would be taken over. In the event I was nearly right: an American bank has taken a 40 per cent stake in the equity. And since then the shales have gone up a few shillings, leaving me with a profit of just under £1 a share, so I am reasonably satisfied. In the coming weeks I shall add a couple of capital- goods producers to the portfolio—the delay is necessary because I want to see what the Alfred Herbert results are like.
Meanwhile, I have bought a modest holding in .1. Bibby for my second, speculative port- folio. The shares have dropped several shillings in recent weeks because there has been some disappointment that the forecast for the year just ended was first revised down- wards—and then missed by a small margin. In fact, I think that the shares deserve better. Profits were, in fact, higher last year and look like being up again in 1969. The position is as follows. Bibby is big in animal feeds, where margins have been under pressure but now look to have stabilised, but it is getting 'even bigger in branded foods, where growth prospects are good. It has also put new management into its broiler-chicken subsidiary and should see a sharp recovery there. Indeed, on my calcu- lations, pre-tax profits should rise this year from £1.8 million to at least £2.4 million, which means that the shares are selling (at 30s 9d) at about thirteen times last year's earnings and at ten times this year's. That, I reckon, is cheap, particularly as the group could fall prey to a takeover. The shares are, however, in the speculative category because price-cutting in animal feeds remains a threat.
Valuations at 12 March 1969 First portfolio 100 Empire Stores at 65s 3d ..
125 Phoenix Assurance at 43s 6d 330 Witan at 23s 414 500 E. Scragg at 20s 9d 500 Clarkson (Engineers) at 19s 6d 60 Rio Tinto Zinc at 145s 6d ..
1,000 Associated British Foods at 10s744 1,000 Jamaica Public Service at 6s 3d 200 Associated British Picture at 34s 100 Lyons 'A' at 84s 200 British and Commonwealth Ship- ping at 45s 9d £457 200 Forte's Holdings at 43s 3d .. £433 400 Bowmaker at 28s 6d .. £570 1,000 English Calico at 9s 101d £494 Cash in hand .. .. £1,064 £7,048 Deduct: expenses £246 Total £6,802 Second portfolio 600 Pillar Holdings at 19s 1044 15 Kaiser Steel at £36 8s .. 250 Lonrho at 66s 100 British Petroleum at 154s 300 Vosper at 22s 9d 1,000 Allied Breweries at 21s lid
300 J. Bibby at 30s 6d .. • • Cash in hand ..
£6,050 Deduct: expenses £173 Total £5,877 £326 £272 £385 £519 £488 £436 £531 £313 £340 £420 .. £596 .. £546 .. £825 .. £770 .. £341 . . £1,056 E457 .. £1,459
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