Portfolio
The bounce in Avon
Nephew Wilde
"I don't like the look of some of your Far Eastern holdings one little bit and if you asked me what to do, I would emphatically tell you to sell Sime Darby." This was my broker Wotherspool's advice last week after he had spotted the weakness in the Hong Kong and Singapore markets.
At present, however, I am prepared to throw caution to the wind and shall wait and see what happens in Singapore over the next few weeks before deciding what to do about Sime Darby. One reason why I am so optimistic still about Singapore and Malaysia is the current strength of the economy. This to a degree is due to the improved benefits from higher prices of commodities such as rubber.
Thinking further about the appreciation of rubber I pondered on the effect of commodity prices on shares. I know that in recent weeks, with copper moving ahead, RTZ has performed well. On this train of thought it seemed to me that I might be neglecting the companies at the ' downstream ' ends like the Large users of rubber.
At this juncture something totally irrelevant crosses my mind concerning rubber. Only the other day I learned that the bouncing properties of the commodity were first noted by a chaplain at the court of Ferdinand of Aragon in the 1500s while on a trip to South America, As he was reputed to have commented at the time, when he saw the Aztecs playing with rubber balls, "They (the balls not the Aztecs) being stricken upon the ground but rebounded incredibly into the ayer."
I have rather strayed from my original point but the fact is I fancy Avon Rubber. Apart from being small enough to be extremely efficient it must be attracting the attention of many of the majors in the allied field. But I am buying Avon for its first-rate prospects.
Last year's results were admittedly rather disappointing. However partly behind the fall in pre-tax profits from £2,32m to £2.01m was' the miners' strike which cost Avon about £200,000. Also the German subsidiary, which has now been closed down, made heavy losses. On the industrial side at least the chairman, Mr H. C. I. Rogers says he expects better profits this year. I base my high expectations on an improvement of the tyre business, too. Avon should be in for a very good year.
I have got impatient and am selling Amari to finance this acquisition. Amari, as I said when I bought it, has built up good connections in the metal world and these should benefit the group well in time.
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