Investment Notes
By CUSTOS
THE sharp correction in gold shares brought a better balance to the Stock Exchange this week. It does no good to see equity investors running away from normal trade to currency hedges. After the recent dividend flurry, bank shares have settled down to their new ranking. LLOYDS and MIDLAND are out of favour for not paying more than they forecast, but WESTMINS- TER, which surprised the market with a final of ls. 6d. against the forecast Is., is the most popu- lar, with BARCLAYS and NATIONAL PROVINCIAL, which paid the extras expected, following closely. The current yields are: NP 4.8 per cent at 67s., Westminster 'B' 4.5 per cent at 52s. 6d. and Barc- lays 4.1 per cent at 54s. 6d. In view of the doubt- ful prospects for most industrial profits this year, there is much to be said for riding the recession on bank shares. But not on the hire-purchase com- panies. MERCANTILE CREDIT has reported that net profits will be lower in the next six months because of higher interest charges. An exchange into ANGLO AUTO, which should avoid a profit shrinkage, might be considered. The comparative yields are 61 per cent and 6.1 per cent. The market is waiting anxiously for the composite in- surance results. The new corporation tax will have a sharp effect upon composite insurance shares—favouring those companies which are making underwriting profits and knocking those which are making underwriting losses. On this count I favour NORTHERN AND EMPLOYERS at 54 to yield 4.3 per cent and ROYAL at 37s. to yield 4.3 per cent also.
Gold and Metal Shares
The steep rise which gold shares enjoyed last year should have made investors wary of plung- ing into the market on the rumour of devalua- tion or of the writing-up of the price of gold. Some of the leading ors shares, such as MIT, WESTERN HOLDINGS and FREE STATE GEDULD, had risen by a third or more—OFSITS by over 40 per cent—and with yields of 61 per cent to 71 per cent before DTR, but without allowing for amortisation, they seemed fully valued, in spite of the fact that dividends may be slightly raised again this year. On the whole, I prefer some of the metal shares, whose sterling prices would reflect the writing-down of the £ if it ever came. For example, RIO TINTO ZINC at 29s. (after 35s. 6d.), to yield 6 per cent, is not unattractive.
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