INVESTMENT NOTES

By CUSTOS

A; the equity markets had not declined veil much when threatened by the railway strike. there was no reason why they should advance after the settlement of that crisis. In fact, the) fell because they had adverse influences. First,' warning from the Governor of the Bank 0131 if the economy went beyond healthy expansion and ran into overstrain the authorities would have to take 'further restraining measures.' It was oh" vious that he thought that overstrain was here

(Continued on page 265)

1.1 SPECTATOR, FEBRUARY 19 ,,VE`STMENT NOTES-(Continued from 262) ',that restrictions upon bank lending and hire- csectaitse finance would be required. It looks as t; ,r. Cobbold had been reading my colleague's tide of February 5 on the technical conditions demand and supply in the equity share ri!ets. There was too much money, he said, fling,,.., ,t°0 few first-class shares and there was ri.` ror the small investor in the prevalent " mood that one had only to buy a few 0'es to make money for jam. His words were 8 read on the same day that TUBE INVEST- iii announced a rights issue to raise £21 CI' The short supply of shares may not last rof,,s8' So I advise caution and the taking of , on the very low-yielding shares of banks, 'me'Porehase finance companies and the con- e• ,r-durabie trades. Reinvestment in non- ;fluidonable shares like IMPERIAL TOBACCO (recom- rillite.rd last week at 75s. 6d. and now 76s. 6d.)

!

ble. '181-1 AMERICAN TOBACCO should prove profit) _ RATs have just raised their annual distri- terin from Is. 9d. to 2s., tax free, and the first ee. to for the current year from 6d. to 7d., tax 7 As net profits have risen by 11 nd t

61

Per Cent he equity earnings from 51 per cent. to per cent. ., the 10s. shares at 71s. 6d. to yield Per cent. gross are an attractive purchase. 310.5 411 Street Influence la ths An seen ii in adverse influence has been the sharp 101 ' in Wall Street, the Dow Jones index drop- pl ing ir, , Yor Puzzled Per cent, in less than a month. This has Amer.`" most investors, seeing that well-known Yta,„.1can economists have been predicting a sub- pro t° n.:1141 expansion of the economy this year. Per- ,..,,Prt; lres, 11, I attribute it to the determination of 7,, e orevent Eisenhower to balance his budget and ,..irr ear 1y a $4,000 million surplus in the financial '' itrave.'60-61 for the retirement of debt. This is a our 3ensibideflation warning and the market has been pro' tie, ouY discounting a recession in 1961. Would irlic bud„,,,,r own bull market collapse if Mr. Amory ct$' the '',.e.(1 in April for a £500 million surplus for We has b'etirement of debt? The fall in Wall Street 'ion in lAk, allY hit the shares like UNILEVER and PHILIPS ight Nr cl'esuihrich have dropped by 10 per cent. and 15 espectively. °Lir tnt° , al -rs and Components rter The fiatd kiifu‘laist e

o xpansion plans of the motor industry

teas Y diverted by the Government to the

cot rob.' i

Where unemployment is high-make it oral ble that next year there will be another tern- 01 roY over-supply of cars. The manufacturers ist arrn,led the National Institute of Economic Re- al( o 111 that their output would be 10 per .cent. Jr eft f 'IhP.er cent, above end-1959 rates by the middle all nieh is Year and by the summer of 1961

o ore than that. Motor shares seem

41 be fully discounting the immediately rosy 51; OsPect, with roan the star turn-yielding only ;9 P:rni?er ,,, Cent. on dividends and 11 per cent, on fail 1gs. Motor components companies rise marks wall k

,;;lightly valUes

;light! Inc motor companies, but the ma yield their equities on a higher yie rY ENQISK; „PerhaPS the most attractive is ASSOCIATED LI PistoZEItING. This company man ufactures '1; cludiW' Piston rings and other components, in.. busti g radiators, for all types of internal condn.- ing ,°„11 engines. Its profits have been expan il capitirY satisfactorily as a result of its heavy ,I 1Thi ha. expenditures over the last three years 3 andeiinare to be continued for the next three

Year -i,"annced probably out of profits. For the

• 1 s ,,,,''' September, 1959, its profits rose some , to 451. cent• and the equity earnings amounted ' 3.8 Per Per cent. The 5s. shares at 22s. 6d. yield ear fli.ngs. cent. on dividends and 91 per cent. on Mining Finance The report of RAND SELECTION for the year to September last reveals that the market value of their investments has appreciated nearly 50 per cent. Profits are up 17 per cent. and the dividend is modestly raised to 2s. 9d. from 2s. 6d., giving a return of 3.8 per cent. on the 5s. shares at 71s. This company is a junior partner of the ANGLO- AMERICAN group and rumour had it that it was going to be absorbed. It seems dear as com- pared With CONSOLIDATED GOLDFIELDS at 91s. to yield 5.4 per cent. This company, under new aggressive management, is also to be preferred to RIO TINTO, which committed itself so heavily to uranium mining. I see that Rio Tinto Canada, in which the parent has a 54 per cent. stake, is amalgamating its four uranium mines and closing down three during the course of this year. Rio Tinto 10s. shares at 45s. yield 4.4 per cent.