Investment Notes
By CUSTOS
THE setback in the gilt-edged market went a stage further this week. The reason was Clear. American Treasury bill rates are still edging up—ninety-one-day paper was 3.565 per e.nt last week—and knocking at the British rate, Which, as I write, is 3.75 per cent. The Ameri- can Government is still determined to limit the outflow of capital by making short-term money dear. Another push and the Bank of England may be advising Mr. Maudling to raise Bank tate to 41 per cent to protect the reserves, although this is the last thing a Chancellor Would want to do who is trying to stimulate in- dustrial investment. The Bank may just avoid this by lending to the discount market at per Cent or 1 per cent above Bank rate—a new Practice reserved for such occasions—and so forcing our Treasury bill rate above the Ameri- tan level, but this would equally disturb the tilt-edged market. Long-term, the market is still optimistic about a fall in the rate of interest, but for the time being it is expecting trouble. The Position has been worsened by the flood of new debenture issues amounting in recent weeks to no less than £50 million. While these issues are being absorbed the institutions can put no new money nth the gilt-edged market. Moreover, many Private investors who have enjoyed a long run ofrrising prices arc now getting out of govern- ment bonds.
Ititor Shares 1:quity shares are still strong and shrugging '1t politics, in spite of the Luton by-election. Among shares which are still attractive I would Place nmc. My recent recommendation at 17s. was timely, for group profits for the year more than doubled. Earnings jumped from 124- per cent to 1i- per cent. The current trading year should De better, for the output of vehicles is to rise 1)}, 20 per cent or more, which will greatly im- Prove the profit margin. The successful 1100 tnodels, now one-third of total output, are in- tended to run for ten years, which should help Profits. BMC shares, after their rise to 18s. 6d., Yielding 5.4 per cent on the unchanged divi- dend and nearly 10 per cent on earnings, are still In a buying range. A similar earnings yield hakes JAGUAR also look attractive. For the year to July last sales were up over 40 per cent and la has become necessary to ration buyers on the Continent. Since the acquisition of Daimler In 1960 output capacity has virtually doubled knd the company should now be moving out Or its earnings plateau of recent years. The rise to the shares was restrained for some time by die success of the new Rover, which was thought be competitive with Daimler, but the market
now
4 going ahead again and at 87s., to yield .1 per cent on dividends, the shares are ow 4 the year's high..
British Sugar
I have often called attention to the coming 41ange in the status of these shares—from 25s. upwards—and I was intrigued to find the In- v„estoes Chronicle news-letter stating positively teat the shareholders will be getting their inde- pendence of government control by the end of the year. The company will then buy beet at a ci,onimercial rate from the Sugar Board, refine ! and sell in the open market. Basing its cal- vulations on the profits of TATE AND LYLE, which are in a similar position, the Investor's Chronicle !IiillateS BRITISH SUGAR earnings tinder freedom 41 around 30s.. which suggests that the present fixed dividend of 7 per cent could rise to 10 per cent. It thinks the shares are worth 50s. At the moment of writing they are 41s. I hope my frequent recommendations brought in some buyers.
Previous page
