FINANCE AND INVESTMENT
By CUSTOS
HAVING made an appropriately cautious response to the sudden recovery in gilt-edged prices, markets have now relapsed into a lethargic condition. On yield comparison alone leading industrial Ordinary shares were bound to get some benefit from the gilt-edged rally—and there is also the sustaining influence of election hopes. Nevertheless, I shall be surprised if we see any major movement in the industrial market either way between now and the election. All the indications are that the Government is content to hold the new 4 per cent. medium-long borrowing line, and, as for election in- fluences, I cannot imagine that confidence in a Conservative victory will develop to the point at which it would be expressed in an enthu- siastic buying movement on the Stock Exchange. The Government will do its best, of course, to dress the shop window, and Sir Stafford Cripps, taking on the unwanted role of economic optimist, has already given a lead ; but the City is not easily deceived in these difficult days and is keeping to the side-lines. The right policy, I feel sure, is a reasonable degree of liquidity. A holding of iron and steel shares as a political " hedge " and a modest stake in gold shares are both worth including in a balanced portfolio.
SHIPPING DEAL TERMS As I forecast last week, Anchor Line Ordinary stock has become the subject of a purchase deal on distinctly satisfactory terms. A
week ago the Li Ordinary units were changing hands between 85s.
and 90s. It is now disclosed that the United Molasses Company is a willing buyer of the whole or part of the Ordinary stock at L5 a unit. While it seems probable that United Molasses have already acquired a substantial holding in Anchor Line at lower prices than the Ls now bid a total purchase price of L2,500,000, which would be the sum involved if all the 500,000 Li units had still to be bought,
seems to me to indicate that the assets have been acquired on economical terms. The difficulty in forming a judgement is that
Anchor Line's last balance-sheet discloses the position as far back as September 30th, 1948, since when important changed may haw taken place. On those balance-sheet figures it looks as if the flea has been taken over for something less than its book value, whick comes as a reminder .that in the more difficult operating conditiots with which the shipping industry is now faced tonnage is naturally fetching lower prices.
A week ago I outlined the merits of Cairn ios. Ordinary uniti, now quoted around par. In view of the strength of the assets my view about those shares is unchanged. Another shipping company, whose securities also attractive in the light of the assets positiot is Silver Line. In this case-'he 41- per cent. Cumulative Li Preference shares, which are in arreArs for dividend since June, 1948, arc quoted around 14s. 9d. The los.Drdinary units stand at 8s. 6d. In re.cnt months this company has been following a policy of planned con- traction by the disposal of surplus tonnage, with the result that its liquid assets are being steadily increased. As there has only be? a slight improvement in operating conditiolis, I should expect this policy to be continued, and even allowing for the lower prices which the tonnage now commands it would be surprising if the issued capital of £2,250,000 was not covered by a fairly substantial margra In a liquidation the Preference shares are repayable at .1 IS. recommend a combined purchase of Preference and Ordinary shares.
PRIMITIVA HOLDINGS
Since the suspension of financial discussions with Argentina there has been a reaction in the stocks of companies such as ARO' Argentine Trams and Pritnitiva Holdings, whose compensation hopes are dependent on agreement between the two countries on ma matters of trade and finance. At their present level of 9s. 6d., wh compares with Its. 9d. a little time ago, the £i Ordinary shares Primitiva Holdings now look attractive. If one takes the Lo assets of the company and of its subsidiaries the shares have a b up value substantially higher than today's market quotation, this excludes any allowance for the compensation which the c pany still hopes to receive for the expropriated assets in Argent When this compensation question is settled, Pritnitiva Holdings proceed to a winding-up. Although buyers of the shares must prepared to exercise patience, they shoul.d see a worth-while car profit in due course.
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