Investment Notes
By CUSTOS THE quotation of the British and Dutch UNILEVER companies on the New York Stock Exchange led to an unprecedented turnover in Throgmorton Street. The Americans were buy- ing the British shares at the rate of 400,000 shares a day—for the four days it lasted. The British holders seemed delighted to sell them—the yield being only 24 per cent. The boom must have brought a very happy Christmas to the few job- bers and brokers concerned in the business. Else- where there has been a cautious buying of equities —prompted by the narrowing of the trade gap in November, the recovery of orders in the ship- building industry and the suggestion that the fall in demand for steel is levelling off. (Something was needed to dispel the gloom caused by the cut in the STEEL OF WALES dividend.) Looking round for the next share to be in demand from. America some brokers have been suggesting icr, which has just reported a rise of 12} per cent. in pre-tax profits and of 20 per cent. in net profits. As the new chairman is an ex-Treasury official, the dividend could hardly have been in- creased. On the maintained 114 per cent. the shares .yield only 2 per cent. at 109s. On past growth record 1 would be happy to sell the shares to the Americans—at rising prices. But , when will the Americans switch to ICI which has fallen sharply on its bid for Courtaulds?
Food Merger In the face of increasingly tough competition between the grocery chains, supermarkets and discount stores, food shares can no longer be regarded as 'defensive' shares. The proposed merger between HOVIS-MCDOUGALL and RANKS is therefore to be welcomed. This is a true marriage and not a rape, as the Hovis-McDougall chairman, Mr. Kenneth Moore, has said, for the interests of the two groups are largely interde- pendent. The shareholders of Hovis-McDougall come best out of the merger, as they are entitled to do, seeing that their company has shown in the last few years the better growth record. The merger is by exchange of shares and the Hovis- McDougall shareholders will get nearly 36 per cent. of the new combined equity, although they contribute only 271 per cent. of the combined profits. And their income will go up from 121. per .cent. to 16.8 per cent, on each existing share. From 16s. 6d. the shares have improved to 17s. 3d. and now yield 4.8 per cent. On any fall in the market they should be worth buying.
Fitch Lovell These shares are. in my opinion, to be pre- ferred to those highly priced 'growth' specula- tions—.Tesco. and LONDON GROCERS, which yield respectively 11 per cent. and 1 per cent. (The fact that Tesco is having management trouble no doubt accounts for the extra 1 per cent. on the yield!) These two companies may have been the pioneers in supermarkets, but they have no monopoly and I fear this business is becoming increasingly cut-throat. For example, the old- established FITCH LOVELL (merged four years ago With Lovell and Christmas) is now bidding for Green's Stores to bring its chain of stores up to 500, of which over 100 are, self-service or supermarket. Apart from its retail business, the Pitch group ,is engaged in all stages of food production and has a large bakery interest, so that it is integrated 'in depth.' In the last three years its profit growth has been good and at 12s. 3d. its 2s. 6d. shares yield 3.3 per cent.— three times as high as the 'supermarket' glamour stocks.
lllingworth Morris
Having recommended these shares for income in the past I was reassured to see the corrected Profit statement showing that profits for the last year had only fallen 5 per. cent. Cover for the 13+ per cent. dividend is 1.7, or 1.9 if the pre-acquisition profits of SALTS SALTAIRE are added. At 5s. 9d. the 4s. shares look cheap to yield 9.3 per cent.
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