THE MARKET
Textile option
John Bull
Just compare the irritation caused by the buzzing of a wasp as one dozes in the summer's sun and how the rail strike has disturbed the stock market as it enjoyed the happy climatic of bullish activity. This is how I picture recent events. But once again share prices are moving towards new peaks. Against this background I am pleased that the alert speculator would have been able to make a handsome profit from selling Guest, Keen and Nettlefolds before it moved back into favour following the results. But I would be in two minds before attempting to sell short again under present circumstances. Meanwhile, Gill and Duffus, last week's recommendation, has moved up from 201p to 210p. After this frenzy of activity, however, I feel a pause is required. And instead of chasing another situation for the account I turn to a different form of speculation, that of operating in the option market. First the situation that I fancy to show a useful enough appreciation in which to warrant taking a call (or right, to buy) option. This is Bolton Textile. You may recollect that this textile, clothing manufacturer and leather distributing group hit a bad patch some months ago, being let down by its paper panties division. It should not be forgotten, however, that from 1967 to 1970 it maintained an enviable rate of growth. And at the last year-end (April 30, 1971) having rid itself of the paper clothing subsidiary and with over El million in cash, still looked in pretty good trim for the future. This was endorsed by the interim results announced in January, with profits again on the forward tack, up by 13 per cent or 19 per cent on a comparable basis, extractincr the paper clothing's contribution in 1970-71. What has happened since? Well, the shares have advanced from 51b to 634p. This rise, however, does not daunt me, since I believe there is more to come. Bolton was a glamour stock of the late 'sixties and it looks as though it's making a comeback. And I think, were it not for noises that ICI Pension Fund was selling its stake, Bolton would be much higher at this moment. For at the current price the shares are selling at 12 times 1971-72 earnings which I estimate to be in the region of 106 per cent. Even so, why should I want to take a call option in the shares when the results are not due until later in the year? Well, a whisper was made in my ear the other day that an injection of some business would be made in Bolton. What it is I have no idea but I believe it will be big enough to cause something of a stir in the market. And helped by the general trend of share prices I am very confident in taking what amounts to a three-month view on Bolton's share performance.
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