5 APRIL 1957, Page 38


By CUSTOS THE stock markets stood up better than was expected to the darkening strike news and were quick to re- cover at thefirst sign of the light

breaking through the clouds. The gilt-edged market was the worst affected, being sensitive to the weaker sterling exchange, but after dipping below 73 War Loan recovered one point on the news of a return to work. Industrial shares were equally hard to depress. Even REYROLLE threw off its bad report on Monday with a rise of 4s. The 25 per cent. drop in Reyrolle profits (before tax) confirmed the broker's view I quoted last week, namely, that the profitability of the major heavy suppliers in the electrical equipment industry has fallen in the last six years in spite of the huge expansion in turnover. I would have thought it wise for investors to become much more selective in their choice of industrial equities and to switch from companies whose profit margins are declin- ing to those less troubled by labour.

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For example, there are better prospects today for the consumer goods shares, particularly those concerned with hire purchase. The stores have been reporting much better business in the first quarter of the year. The worst effect of the hire- purchase restrictions seems to be over. Customers appear to have saved enough for the' higher deposits and are buying more freely. The extra purchasing power of the wage earners who are successful in the present round of claims will add to the shopping spree. Some optimists believe that a new hire-purchase boom is coming. This explains the buying.of GUS (A), which have risen to 44s. 3d. to yield about 7 per cent. The more conservative will probably confine themelves to MARKS AND SPENCER, which have risen to 42s. 6d. to yield only 2.95 per cent. on the assumed 25 per' cent. dividend. This share was one of my New Year recommendations at 30s. (allowing for the 100 per cent. bonus).

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Canadian gas shares flared up this week with an important new discovery by PACIFIC PETRO- LEUMS. Natural gas in Canada is a rapidly developing industry in which the British investor would do well to take an interest—quite apart from any holdings he may have in Canadian oil. The gas trunk line owned by WESTCOAST TRANS- MISSION linking the gas fields in British Columbia with the coast and the American border will be completed by November. The company will then be selling gas to the huge American market as well as to BC POWER and INLAND GAS for distribu- tion in British Columbia. Westcoast Transmission, which should earn $3 per share in 1958, rose 8.3 this week but is still attractive at 811 London. Also BC Power at 92f London tab yield 2.8 per cent. and the Inland Gas 51 per cent. convertible debentures (now 110).