Investment Notes
By CUSTOS
rr HE further rise in the equity share markets- ". spurred on by the fever of take-over bids and rumours-has widened what is called the 'reverse' yield gap, that is, the margin by which the yield on old Consols exceeds the average yield on industrial equities. This is now 1.2 per cent.-the yield on Consols being 5.8 per cent., and the yield on the Financial Times industrial share index 4.6 per cent. The impression is grow- ing that, with the underwriting completed of the huge steel prior charges, the authorities will allow some recovery in the gilt-edged market. The medium-dated stocks are certainly better and for those who want a twelve-year stock there is no doubt that Electricity 3 per cent. 1968-73 at 741- ex dividend seems.cheap to allow a capital appre- ciation at the rate of 21 per cent. per annum over this period. The redemption yield is 6 per cent. and 'grossed up' the 'true' gross redemptiOn yield is 7.45 per cent. Incidentally, for those 'gross' funds scaling a high running yield there will be some fine yields of 74 per cent. on steel redeem- able preference shares to be advertised next week. This issue may see the 'bottom' for the fixed- interest market and I see that some brokers are already advising clients to go for the rise!
Bullishness
Equity shares have ignored the bad company results-2SHOWERINGS, INTERNATIONAL COMBUS- TION, HOOVER, etc.-and• the evidence of falling profit margins-as in MONSANTO'$ report-but have gone ahead on the good reports-BRITISH HOME STORES, ALFRED HERBERT, etc.-and the not SO bad-like ENGLISH ELECTRIC. Moreover, they have been cheered by the optimistic note of Wall Street and the feeling that our own motor slump has seen the worst. FORD and STANDARD have put their workers back on a five-day week and BMC are doing the same for the Mini-Minor and Oxford. But the main cause of the bullishness is undoubtedly the outcrop of bids. The brewery share market, which I have constantly recom- mended, has seen most of them, including some false alarms like the lake-over' for BASS. 1 still think that ANSELLS at 26s. 3d. to yield 31 per cent. have 'take-over' possibilities. Of the poten- tial takers I prefer WATNEY MANN and MITCHELLS AND BUTLERS. Incidentally, if a motor recovery is coming, CLIFFORD MOTOR COMPONENTS are attractive at 8s. 9d. to yield 51 per cent. This company is famous for its steering wheels.
Odhams
Having originally recommended ODHAMS at 31s. 6d. I felt obliged to advise readers on Feb- ruary 3 not to sell 'much under 55s.' The new DAILY MIRROR offer of five Daily Mirror shares plus 5s. cash makes Odhams worth about 58s. 6d. with Daily Mirror at I Is. 3d. As I write the quo- tation is 56s. and this I would gladly take in the market.
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