FINANCE AND INVESTMENT
By CUSTOS
ONCE again it is being brought home that the fundamental fact in the stock markets is the pressure of money on a limited supply of securities. From time to time the pressure is relaxed when the news from the war fronts imposes restraint on those who hold investible funds, and there are phases in which the prevailing mood is so cautious that investment demand is canalised into safety- first stocks. This is what is happening now. Everybody realises that the Russian news is anything but good, but as most people are also quite convinced that victory is merely delayed, and, further, that even if the worst happened one would not be any better off with cash than with securities, they are not rushing for liquidity, but just going on investing on cautious lines.
For the moment the emphasis is on- gilt-edged, which suits the Treasury well. With various guesses as to the Government's War Bond intentions as a talking point, the " bulls " have raised quota- tions quite substantially, although nobody seriously suggests that it is practicable yet awhile to reduce the interest on medium-dated stocks below 3 per cent.
HOME RAILWAY ATTRACTIONS When yields based on war-time dividend rates range between 7 and ro per cent., it is not difficult to make out a ,case for the border-line preference and ordinary stocks of the railway companies. In advance of next week's interim dividend announcements there is just a mild speculative flutter in the market, but quotations have been rising much more in recent weeks as a result of genuine investment buying. For the duration, and at least one year after the war current rates of dividend are assured under the fixed rental agreement subject to the risk that really heavy war damage might call for some reduction. I say "really heavy" because it has already been made plain that any moderate charges under this head will not be allowed to interfere with the amount distributed to stockholders.
What of the post-war prospect? It is pretty long odds, I sup- pose, that the railways will form part of a unified transport system
under some form of public ownership and control. In this event present stockholdings will be exchanged for stock in a new national transport board. What the terms for such an exchange would be is anybody's guess, but this much is plain—that holders of the border-line preferences and ordinary stocks could not fail to receive something worth more than current market prices in any scheme which made the slightest claim to being fair. My favourite stocks in this section of the market are Great Western Ordinary, at 461, L.M.S. 1923 Preference, at 55, L.N.E. Second Preference, at 23, and Transport " C " at 42.
A SURPRISING OFFER
Shareholders in the Midland Woodworking Co. may be forgiven if they are somewhat taken aback at the offer made to them to buy their 5s. ordinaries at iss. each. On the face of it the 'price looks tempting. In recent months the market quotation has always been below ro5, in spite of the steady 171 per cent, rate of dividend and bonus, and in their circular Messrs. Dawnay, Day and Co, who are acting on behalf of the buyer, state that profits for the year ended March 31st, 1942, will show a "substantial reduction" com- pared with those of the preceding year. Why, then, this offer of is.? If I were a shareholder in Midland Woodworking I should want to know (I) who are the buyers ; (2) why profits fell during the past financial year ; and (3) what is the earning position now and the immediate prospect?
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