INVESTMENT NOTES
By CUSTOS
MONDAY in the stock markets is always characterised' by the hasty marking-up of the equity shares recommended by the tipsters in the Sunday press. Tuesday usually sees a correc- tion, but a sufficient following is often found to carry the shares forward in a highly selective bull market. (DE HAVILLAND is a case in point.) There have been a number of good industrial reports )vhich have served to maintain the underlying confidence. BRITISH OXYGEN, for example, pro- duced profits for the year to September last which were 23 per cent. higher. After depreciation and tax its equity earnings advanced from 24 per cent. to 28.6 per cent. and the distribution with the special interim dividend is raised from 10 per cent. to 12 per cent. Clearly the company is now profit- ing from its recently completed capital programMe which was calculated to treble its oxygen capacity. These good results have been more or less dis- counted in the market and the shares rose only slightly to 53s. 9d. to yield around 4f per cent.
Road Material Shares The steady increase in government expenditure on roads, which is bound to last for many years, has caused road material shares to rise consider- ably over the past six months and the yields of the better known are now below 5 per cent. and one of them even below 4 per cent. This is not attractive enough in my opinion, and I advise the investor to look for the smaller companies which have not been written up in the financial press.
I have found two quarry-owners which seemed to be worthy of attention. HILLHEAD HUGHES has an equity capital of £400,000 (with preference capital
of only £180,000) and has had a steady but slow growth in earnings since 1954. It owns granite and limestone quarries in Derbyshire, and a sub- sidiary company has tar distilleries and markets bituminous compounds. In 1957 it earned nearly 50 per cent. and increased its dividend from 171 per cent, to 221 per cent. The same interim of 5 per cent. has been paid and the final, due in April, might well be increased again. At 22s. the 5s. shares yield just over 5 per cent. on the old basis. ROADS RECONSTRUCTION, owners of quarries and concrete works in Somerset, with an equity capital of only £325,000 has also had a steady but sharper growth and in the year to March, 1958, increased its earnings from 23.7 per cent. to 32 per cent. with a record turnover due to special contracting work for the Government. The chairman stated that when the Government enlarged its road pro- gramme the company was ready to expand pro- duction everywhere at very short notice and would then earn its proper reward on the heavy expendi- ture it had incurred in recent years on all types of equipment. In the last five years the directors have kept the dividend to 10 per cent. and it seems reasonable to expect a higher final in October for the year ending next month. At 19s. 6d. the 10s. shares yield just over 5 per cent. and over 16 per cent. on earnings. They should prove a profitable investment.
Cementation The financial year of CEMENTATION also ends next month and the dividend to be declared in October should be an improvement on the 121 per cent. maintained in the last four years. The company had the benefit of the new money raised in December, 1957, and began the year with a larger volume of work. It has been successful in obtaining some very important overseas orders. Recently it took over the Demolition and Con- struction Company by an exchange of shares. At I Is. 6d. the 5s. shares yield 5.3 per cent. When first I recommended them the yield was nearly 8 per cent.
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