Investment Notes
By CUSTOS THE equity markets began the new account in a confident fashion—with a premium of 18s. 3d. on the new ICI shares, issued at 55s.— but failed to derive much encouragement from Mr. Kennedy's Churchillian speech warning the American nation to expect 'blood, tears and sweat.' Gold shares in particular fell on the President's declaration that the price of gold would not be written up and that the dollar would be defended by the use not only of all the American gold reserves (including the internal currency cover), but also of all the credits avail- able at the IMF. The total of America's gold reserves is now below $17,000 million (includ- ing $12,000 million internal gold cover), and according to the President $4,500 million can be drawn from the IMF. I would not say that the future of gold is as assured under Mr. Ketnedy as it was under Mr. Eisenhower. In the mean- time, American shares should recover further with Mr. Kennedy's determination to end the recession. In addition to the shares I mentioned on January 20, I would recommend AMERICAN TELEPHONE AND TELEGRAPH. Apart from being the largest telephone company in the which is steadily increasing its earnings as it introduces direct long-distance dialling and other cost-saving devices, it has subsidiaries (Bell Lab- oratories and Western Electric) which are assist- ing the government in its space programme, while Bell is also expanding its international cable systems. In other words, AT & T is a growth stock. It is again raising its dividends—from $3.30 to $3.60 next July—and this month is making a rights issue of one-for-twenty. At ttie present price of $1161 the current yield is just over 3 per cent. before tax relief (4.3 per cent with tax relief).
Odhams--Daily Mirror I am glad to have recommended WHAMS shares on September 9 last at 31s. 6d. on their merits as the equity of a trading concern which had a highly profitable group of magazines, a very successful Sunday paper and a determina- tion to turn the loss on the Daily Herald into a profit after its release from the TUC. For a long time the shares stayed at just under 30s. and then, in a few days last week (which are now the sub- lect of a Stock Exchange `leak' inquiry) became I strong, rising market up to 34s. before the news of the proposed merger between Odhams and the rhomson group was announced. The basis of this merger was an exchange of shares and as the news was accompanied by the announcement that Odhams profits had risen and the dividend was to be increased from 174 per cent. to 25 per cent., Odhams shares jumped to 40s. Clearly this was still too cheap, for, if they were to maintain their previous yield basis, they should have been 45s. at least. This gave the opportunity to the DAILY MIRROR group to make a more attractive bid, which on the basis of nine Daily Mirror voting shares for every two Odhams made the latter worth 55s. lid. As Daily Mirror is raising its dividend from 13 per cent. to 15 per cent. Odhams shareholders stand to gain a 35 per cent. increase in income. Clearly they have no cause for complaint, but the management have quite a lot. It is well known that the Daily Mirror maga- zines are not doing so well as those of the Odhams group and it may be the purpose of the Daily Mirror to suppress some of the women's magazines which are not facing up to competi- tion. There will be much heated controversy be- fore this take-over `bid' is 'settled, but I cannot see how the Government can put a stop to a purely commercial operation, the initiative for which came from the severe competition in the women's magazine field. I would not sell Odhams ' much under 55s. Even without the merger they are worth about 50s. on an estimated earnings yield of over 10 per cent. and a dividend yield of 5 per cent. Daily Mirror on the fall are also cheap if the merger goes through.
Tate and Lyle Investments
A curious development was announced by Sir Ian Lyle at the TATE AND LYLE meeting. It is proposed to reverse the hiving-off operation which the company undertook when it was threatened with nationalisation. This means that it will buy back Silvertown Services, which runs the shipping, lighterage and road transport, and Tate and Lyle Investments which owns the over- seas sugar refining companies. The break-up value of the latter's shares is around 19s. 6d.,. but the market price is only 13s. 3d. Is there not a rise coming to shareholders here?
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