FINANCE AND INVESTMENT
By CUSTOS
ONCE again there are signs of tiredness in the stock markets. Prospective reinvestment demand from the repatriation of Argentine loans has spent its force as a stimulus to buying, and investors are awaiting some new sign. As I have previously emphasised in these notes, pauses are to be expected in a market which has already enjoyed a very substantial rise, and it is natural that as values get higher more and more people should ask themselves whether they are not high enough. My own view is that the leading industrial ordinary shares are fully valued at current levels unless one can look for a further rise in long-dated gilt-edged stocks. If such a rise took place front-rank industrials would move higher through the process of yield adjustment, but the odds seem to me to be very much against any worthwhile improvement in gilt-edged. One is driven, therefore, to look for promising investments among the lesser-known shares offering better-than-average yields, among the steadily diminishing number of companies which have not yet exhausted their recovery possibilities and among, the shares whose dividend prospects are closely bound up with E.P.T. While I am not convinced that even after the war there will be a rapid alleviation of the tax burden on industrial profits, I shall be surprised if there is not a sufficient reduction in E.P.T. to open up a vastly different prospect for many companies. Nor is it .impossible that before the war is over the Government might see fit, in the interests of the post-war drive for markets, to make some cut in E.P.T. It is a possibility which the discerning investor will do well to keep in mind.
GOLD AND DIAMOND SHARES
One of the factors contributing to the dullness of markets has been the shake-out in the more volatile Kaffir shares. My suggestion last week that the rise in the Orange Free State group had gone too far has proved timely. Quoted at 6os. only ten days ago, Lydenburg Estates have fallen precipitately to 45s. Money has been lost in these and in similar shares and, for the present, any substantial recovery is unlikely. On the other hand, diamond shares, latterly overshadowed by Kaffirs, have revived to the accom- paniment of optimistic estimates of final dividends for the current year. If, as seems probable, De Beers bring up their total distribu- tion on the deferred shares to 8o per cent., the yield at L2It On the La ios. shares would be nearly to per cent. without making any allowance for Dominion Tax Relief. A further, improvement in the diamond group seems likely between now and the final dividend season.
R.M. REALISATION
For the speculative investor interested in capital appreciation ana not in 'income return the position of the R.M. Realisation Co. is worth a little study. This company, which is in process of gradual liquidation, has now two main assets awaiting disposal. One is 341,000 LI shares in Anglo-Foreign Properties which should fetch their full par value after the war. The other is a holding of " B" shares in the O.S.N. Realisation Co. which holds a large block of ordinary capital in the Cunard-White Star. Now that the Cunard-White Star is again paying dividends this investment has a substantial value which can be conservatively estimated as the equivalent of at least 5s. 6d. on R.M. Li shares. If one adds in the £341,000 which should accrue ultimately from the Anglo- Foreign Properties there is another 6s. 9d. a share on the Li,000,000 of R.M. capital. Altogether, the ultimate break-up value indicated is something -over I2S. a share against the present price in the market of 7s. 9d. Those prepared to exercise patience should reap a substantial tax-free profit assuming all goes well.
Any readers who would be willing to post their copies of THE SPECTATOR to Service men can be supplied by Miss A. Hamilton,
The Polytechnic, 309, Regent Street, with names of soldiers, sailors or airmen who would welcome copies.
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