Investment Notes
By CUSTOS
HE market gave up trying to make sense of I Mr. Callaghan's contradictory remarks. In the House of Commons he said that the credit squeeze was biting and did not need tightening up. At the Durham Miners' Festival he said he was prepared to impose fresh restrictions. I do not suppose that he knows himself what line he should take. To add to the confusion of the market, some companies, such as WOOLWORTH, are making net profit calculations on the basis of a 35 per cent corporation tax, while others, such as ALLIED BREWERIES, are assuming 40 per cent. (On their recent reports, I prefer Allied Breweries, to yield 5.7 per cent, to Woolworth, to yield 5.3 per cent.) The wretched investor who cannot resolve his uncertainties should look again at steel. If the Prime Minister can be taken at his word, there will be no general elec- tion before 1966. We can therefore expect a nationalisation Bill next session. In that event it would pay to pick up LANCASHIRE STEEL at 23s., Or STEEL OF WALES at 24s., or COLVILLES at 32s. 6d., which are selling, respectively, at dis- counts of 33 per cent, 26 per cent and 32 per cent on their takeover prices.
Cope Allman
I get the impression that professional inves- tors, unable to resolve their doubts like anyone else, are now prepared to pick up the shares of well-managed companies in expanding trades. In other words, they are prepared to invest in brains and expertise, particularly if they consider the brains superior to those of the Inland Revenue. As a fair example I would select COPE ALLMAN, which has seventy companies in its group with products extremely widespread in the field of light engineering. The large part of its business is the manufacture of cosmetic containers and aerosol valves-the company is the biggest pro- ducer of lipstick cases in the UK-and lately it was announced that the company is developing a revolutionary new plastic injection-moulding technique which enables screw-top plastic bottles to be made for the first time as cheaply and as rapidly as glass. The presiding genius is Mr. L. Machan and, as more than half his turnover is overseas, he will no doubt be thinking out how best to offset the adverse taxation. I have great confidence that he will be successful. The shares have fallen from 33s. 3d. to 25s. 6d., to yield 5.3 per cent on a dividend covered 2.3 times.
Sun Alliance Convertible
Before I had finished writing this note, the price of SUN ALLIANCE 61 per cent Convertible had gone up to 104, but as it is the sole con- vertible in the insurance-share market and one of the few which offers a reasonable period of time before the first conversion date-1968-I am calling attention to it. The equivalent conversion price of the ordinary in 1968 is 68s. against the present price of 57s., but three and a half years should be sufficient option time to allow the bene- fits of the merger with LONDON ASSURANCE to show up in profits. Although London Assurance had a loss on its underwriting, the profit on Sun Alliance underwriting exceeds this loss by some £386,000.
City of London Brewery Investment Trust
This investment trust has no dollar securities but a well-spread British portfolio with an asset value of 23s. 6d. plus against the market price of 19s. 6d. It last paid 15 per cent out of earnings of 24.2 per cent, and under the new definition of investment trusts it should next pay 25 per cent (the final dividend will be declared on the 27th next). On that basis the shares would yield 5 per cent.
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