1 FEBRUARY 1963, Page 27

Investment Notes


THE shock from de Gaulle has abruptly stopped the bull movement in both gilt- edged and equity shares. Perhaps the gilt-edged Market is the worst affected, for the institu- tional buyers have loaded themselves with long- dated stocks in the hope that the Chancellor would see his wish carried out—namely, a re- duction in the long-term rate of interest to 51 per cent. or 51 per cent. Politicians are not well known for honouring their economic pledges. The more sterling conies under suspicion as the investment dollar premium rises—it is now I0 Per cent.--the more nervous will holders of gilt- edged stocks become. War Loan is once again below 60, yielding over 5.9 per cent., having been as high as 631. If the Government wishes to avoid a rise in the long-term rate of interest it Will have to support the gilt-edged market before long. Equity shares have perhaps stood up better, but the trend is doubtful, and it now looks as if the 16 per cent. rise from June last year was premature.

Investment Abroad The financial press is full of advice to those seeking investment abroad to buy the continental investment holding companies or unit trusts. I cannot agree with this policy. The return is low, there is usually no double taxation relief and the holding companies invariably have portfolios stuffed with continental steel and chemical com- panies which are suffering from a state of over- 8tIPPI.Y. In fact, if the European boom is tailing °rt, as it is, why buy continental shares unless they become clearly undervalued? (Some of the Ger- man stores companies are looking attractive on the fall.) The only sensible way to invest abroad 's to buy the shares of the big international cam- Panics such as PHILIPS LAMPS and ROYAL DUTCH. Both these shares have lately risen to prices which are not particularly cheap. At the moment Of writing Philips Lamps yield 2.4 per cent. (after a rise of over 30 per cent.) and Royal butch 2.8 per cent. (after a 50 per cent. rise). Export Shares There are a number of companies which will du Well in the export trade in spite of being 91-aside the EEC. In the motor industry. JAGUAR ,.I Obviously one. These shares will become attrac- tive on a further fall. LEYLANDS, which is now home more to the export markets than the 'gine markets for expansion, should have a big when in the developing countries. Even 4.1nen the developing country sets up its own tni anufacturing plant, Leylands will continue to n(,). well in their sale of spares. The company. 's course, has competitors in the world markets, but as General Motors, Fiat, Daimler, etc., )1°1 should hold its own. On the Continent, its joe.igian associate has undertaken to launch a d int attack on the European bus market, haying market, three new models. In the American analket, there is a sales tic-up between Lcylands savings Jaguar. The company is now realising __'_Ings from its merger with Standard-Triumph ;anti the estimate of profits for 1962-63 shows cernings on the equity of a little over 50 per nt., so that at the present price of 77s. the shares are on a potential earnings yield basis of about 14 per cent. The dividend yield is just over 5 per cent.