I NVESTMENT NOTES
By CUSTOS
irk`nay 9, as my colleague suggested last week. Lteally looks as if the bear market ended on He new account has opened with a burst of strength and once again -insurance shares, which
as InY iffi' 310 to and
This lately favoured, have been outstanding. 1,1,11s is undoubtedly partly due to the increasing snort ..._ aiSe of shares on jobbers' books, which is r2,articularly marked in the insurance market. A rok.er's well-documented circular has called at- thention to the composite insurance shares, if e thinks are still cheap historically if the the „ s dividend yield is compared with that of composite Financial Times index. The prospects for the ,ittniPosite insurance companies for the current ;,e,ar, are undoubtedly favourable. Underwriting investment should show a further improvement, the their income (which more than 4Set,ers TIneir dividends) will continue to expand and a 1generous dividend policy should naturally 1°W. The tour 1 favour are EAGLE STAR, ' ,'"NERAL ACCIDENT, ROYAL and COMMEIt( IAL ui.41()Nt• Eagle Star has the largest life busness tir°12'ortionately to its non-life business of any erthese companies, its life premiums being t, per cent. of its non-life preiums. The 011.raction about Royal and Generalm Accident is plea t. they have converted in their underwriting ex-
rlenee in America the last year or ,so from
loss to profit. Commercial Union have recovered well after being depressed by their rights issue. The following table shows, however, that the market prices for these composite insurance shares are becoming high:
(B) Net I nvest- A) ment Yield Yield Div. Income ?;) on % on
Per Sh, Per Sh. Price (A) (B) Commercial Union 2/- 2/91 66/3 3.02 4.20 Eagle Star 2/3 2/8 83/- 2.7 3.20 General Accident 2/3 3/6 I01/- 2.2 3.47 Royal 4/8 6/31 158/- 2.9 3.94 Store Shares
As there is no expectation that the Govern- ment -will ease the hire-purchase controls even if it reduces Bank rate from 6 per cent. to 51 per cent., investors are wisely tending to favour store shares which do not do much hire- purchase business, such as MARKS AND SPENCER, UNITED DRAPERY and HOUSE OF FRASER. House of Fraser is now quoted at 47s. 6d. cx the capital bonus of one-for-twenty, and as Mr. Fraser said that in normal conditions share- holders could expect a dividend of at least 45 per cent., I think these shares, to yield a poten- tial 41 per cent., are not unattractive. I also like ARMY AND NAVY at 38s. 6d. to yield 3.8 per cent. on the dividend of 15 per cent.
Gold Shares
The panic selling of South African gold shares appears to have dried up and if there is any easing in the political situation in the near future there should be a sizeable recovery in this market. It would then be prudent to make some switches. Today the new producing mines are to be pre- ferred to the finance companies. As outside finance for South Africa is not likely to be forthcoming the finance companies will have to pay for new development out of their own financial resources. This will stop the increase in dividends which would normally have been expected. The mines, on the other hand, can go on modestly increasing their dividends after allowing for development expenditure. PRESI- DENT BRAND at 57s. 6d., to yield 9.5 per cent. on the current distribution of 5s. 6d., Would be a good share to pick on this basis.
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