FINANCE AND INVESTMENT
• USTOn
AFTER their preliminary adjustments to the uncertainties of the domestic political situation markets are behaving surprisingly well It is now pretty clear that last week's selling was induced almost entirely by " liquidity preference " among professional and semi- professional investors—or speculators—who are in the habit of taking short views about their holdings. Accustomed to trimming their sails quickly to the changing winds, these holders scrambled for cash, but their selling was not of sufficient weight to cause such a prolonged fall as would unnerve the main army of investors and precipitate a real slump. That is all to the good, and it may well be that the worst is over.
Is it then time to buy? Once again I must repeat that it all depends on the election result. My own view is that before the news is announced there will be enough people who are confident that a Conservative victory is assured to bring an improvement in prices from today's level. Recovery is already under way, and there is so much money about that the forces making for a rise are very strong. While I am prepared, however, for a further improvement, it is certain that if hopes of a Conservative victory were to be dis- appointed there would be a very sharp relapse. Investors. who are willing to back their political sense should buy now. Those who would prefer to wait and see will hold back, even if it means paying more. A middle course is to buy, say, 25 per cent, or 5o per cent. of what one has in mind, postponing completion until the election result is known.
BURMAH OIL PROSPECTS
It is not surprising that in the recent recovery in markets the £1 Ordinary units of the Burmah Oil Company should have rallied from 82s. 6d. to 86s. 3d. This stock has always been rightly regarded as a good recovery investment, and this view is supported by the figures just announced for 1944. Although the properties in Burma are still making no contribution to revenue, the net divisible profit has increased, thanks to the incidence of taxation, with the result that the maintenance of the 12f per cent. dividend is consistent with the raising of the transfer to general reserve from Doo,000 to £600,000. The earnings on the Ordinary capital have, in fact, risen from just under 15 per cent. to 21 per cent., which strongly suggests that stockholders may look forward with confidence to a higher rate of dividend as soon as the properties in Burma have been rehabili- tated. This company also has investments in Shell and Anglo- Iranian, the revenue from which should be increased in the post- war years. At their present price of 86s. 3d. Burmah Oil Li units are yielding about 32 per cent., allowing for Dominion tax relief. They are worth putting away for ultimate capital appreciation.
HOME & COLONIAL POSITION
There are few of our larger commercial undertakings which have been more severely hit by Excess Profits Tax than the Unilever retail group of companies headed by Home and Colonial Stores. This group was in the throes of trading reorganisation in the E.P.T. standard years, with the unfortunate result that improved earnings during the war period have been entirely absorbed in taxation pay- ments. Taking last year's figures, the group increased its trading profit from £1,267,369 to £1,349,373, but, owing to the incidence of taxation and the need to build up reserves, Home and Colonial has merely maintained its Ordinary. dividend at the ungenerous rate of 3 per cent. In his statement accompanying the accounts, Sir George Schuster explains that this conservative distribution policy is in the long-run interests of the stockholders. He also expresses the view that after the war the group's policy of high turnover and low profit margins will bring its reward. As I have previously emphasised, the 4s. Ordinary shares are an outstanding example of an equity in a heavy E.P.T. paying concern which will benefit very substantially when this particular form of taxation is eliminated or reduced. At the present price of 7s. 9d. the yield is less than If per cent. I think holders would be well advised •to see things through into the post-war period.
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