FINANCE AND INVESTMENT
By CUSTOS
On a long view this policy seems to me to be appropriate to the needs of the gilt-edged market. Prices have recovered well in recent months under the influence of what the City judges to be sound financial policy and, given reasonable freedom from shocks on the international political front, the rally may well continue in the coming months. As for the speculative groups, I still counsel caution. Equities are now shares with a dividend ceiling but no floor and, with sellers' markets giving place to buyers' markets over a fairly wide field, this is obviously no time for rushing in. The liquidation groups, shares offering unduly high yields, and those with strong assets behind them are now the pick for those wha wish to be fairly fully invested.
E.C.A. LOAN TERMS If, as I suppose one must, accept the American ruling that this country should receive 25 per cent of its, first year's Marshall aid in loans, as distinct from free grants, the terms now announced for the borrowing of 310 million dollars look reasonable enough. The interest rate of 21 per cent, is only slightly above the rate which the E.C.A. is paying to the American Treasury, repayment, spread over 35 years, does not start until 1952 and there is a liberally- framed waiver clause. All the same, this addition to our dollar liabilities, on top of the 3,750,000,000 line of credit exhausted in 1947, is not exactly welcome. Nor need one take too seriously the announcement that the proceeds will be used in buying capital goods. The loan is part of our total E.C.A. dollar allocation whose use has to be determined by the requirements of our recovery programme as a whole.
HIGH TOBACCO YIELD
Some months age I called attention to the merits of the Li Par- ticipating Preferred Ordinary shares of the Amalgamated Tobacco Corporation. The shares were then quoted around 16s. and have, in the meantime, been as high as as. To-day they are available around 16s. 9d., a price which still seems to me to do much less than justice to their investment merits. Results for the year to May 31, 1948, have just been announced. Net profit, before tax, has risen from £201,594 to a new record of £234,632. In con- sequence, the Preferred shareholders once again receive not merely their 6 per cent, dividend, but a further participating payment of 2 per cent., making 8 per cent in all. At the present price, the yield is, therefore, the attractive one of well over 9 per cent. In present conditions the group finds a ready market for its output and profits are now receiving some help from the recently established South African factory. It seems to me that in the light of the outlook for the marketing of the company's various brands and of the amp'e cover behind the 8 per cent. dividend, the shares are worthy of a higher investment rating than is afforded in the current market prie:.
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