2 JUNE 1961, Page 33

Investment Notes


BEFORE he left the Treasury for the new Ministry of Technical Aid Sir Edward Boyle Might well have given some technical aid to the gilt-edged market. Instead, he gave only false Promises, having told the Commons that the market could face the months ahead with more confidence. After a modest rally on these encour- aging words the market has, in fact, sunk to new low levels, War Loan touching 551 to yield 6.3 per cent. Certainly, it has had to put up with a succession of new loans—from Birmingham, Stirling, Glasgow and New Zealand (the last a 6 per cent. at 98+)—but the main trouble has been the weakness in sterling, which adversely affects sentiment and gives rise to fears about Hank rate being advanced. Why, then, was the government broker instructed to unload stock Op the gilt-edged market when the post-Budget rally took place? Why did he not allow the Market to recover then and why -does he not Steady it now that it is depressed? No one can understand the Treasury interest in making equities so preferable to bonds.

The Move into Equities

The suspicion grows that some trustees are anticipating the new Trustee Act and are already selling gilt-edged to buy equities. This may explain the constant stream of small selling in that market. The move into equities is thus gain- ing strength .,regardless of the less favourable Prospect for industrial company reports, of which the chairman of ICI and Of GUEST KEEN have lately been warning us. The organisation of a local authority unit trust, under expert guidance, Is evidence that the passing of the Trustee Bill Will bring another wave of buying. To this Will be added that of the new unit trust being formed for some prominent trade unions. The Stock Exchange, in publishing its annual statistics at this opportune time, will hasten this rush into equities. In the year to March, 1961, equity shares showed an increase of £4,900 million (nearly 20 per cent), the total now being valued at almost £30,000 million. This overstates the actual appreciation, for allowance must be made for new capital issues for cash which amounted In the year to some hundreds of millions. (I hope the Stock Exchange will in future give the details of new issues by types of securities.) Perhaps a 10 per cent, appreciation for equities in 1960-61 is nearer the mark, but this is quite sufficient to encourage private trustees, local authorities, trade unions and all to jump into equities as soon as they have the power without waiting for the market setback which would inevitably come With a few more bad industrial reports.

'Trustee' Equities

Trustee equity buying will probably be directed mainly into bank, insurance, investment trust and store shares (and possibly breweries). Bank shares seem relatively high, but I would recommend BANK OF LONDON AND SOUTH AMERICA, which is making an issue of one-in-four at 40s. No fore- cast is given of the dividend to be paid on the increased capital, but the market is going for the maintenance of the present 10s., and if this proves correct, as I suspect, the yield at the current price (ex rights) of 50s. would be 4 per cent. It is a long time since this bank equity could be bought on such a reasonable basis. Of insurance shares I have lately recommended EAGLE STAR and GENERAL ACCIDENT (still worth buying) and of investment trusts SECURITIES TRUST OF SCOTLAND and GLOBE. Of store shares MONTAGUE BURTON 'A' and TIMES FURNISHING are my choice, and of beer shares I still recom- mend WATNEY MANN at 97s. 6d. to yield 3.7 per cent. on the twice-covered 18 per cent. dividend. With 5,100 licensed houses Watney is second only to the great IND COOPE, TETLEY, ANSELL merger. It retains 51 per cent. in its property company and it is intending to go ahead with its chain of 'motels.' It is clearly a dynamic brewery.

Hawker Siddeley

A high-yielding industrial equity with a divi- dend twice covered is rare, but this seems assured by HAWKER S1DDELEY. it is not easy to compare its results for the seventeen months to December, 1960 (which included the profits of De Havilland, Blackburn and Folland), with the previous twelve months prior to these acquisitions, but it appears that the parent's trading profit in the UK in- creased by 18 per cent., while its Canadian sub- sidiary made a loss. Earnings on the equity for the seventeen months amounted to about 32 per cent. to cover the 15 per cent. dividend over twice. The annual rate, it is hoped, will be rounded off to 11 per cent. so that at 32s. the shares would yield 6.65 per cent.