HOME RAIL PROSPECTS
My advice to home railway stockholders to await events is proving right. Another wave of buying inspired by com- pensation hopes has given prices a fresh lift, with the result that most of the border-line stocks, such as L.M.S. 1923 Preference and L.N.E.R. First Preference, are standing several points above the level of the middle of December. Naturally enough, Great Western ordinary, which must also be ranked as well in the running for a reasonable dividend if the border-line preferences are to be covered, has attracted a strong following, and there are bold speculators who have been willing to seize the bull by the horns and buy L.M.S. ordinary, Southern deferred and L.N.E.R. second preference.
Whether current market prices will be justified depends, of course, on the compensation terms. These, I am in- formed, are still being discussed, and there is not yet any agreement with the Government, even in principle. Why, then, is everybody so optimistic? Mainly, I think, because it is apparent that the railways are doing well in war con- ditions, which surely places them in a strong bargaining position. So far, it is true, no industry seems to have suc- ceeded in getting generous terms from the Treasury, but the rail stockholders' case is in competent hands. I would not follow the rise in such issues as L.M.S. ordinary or Southern deferred, which seem to me to be fairly valued, but there should be scope for further improvement in L.M.S. 1923 preference at 44 and Southern preferred at 66. If, as I expect, the full dividends on these stocks are covered under the terms of the agreement, the L.M.S. issue will yield over 9 per cent. and Southern preferred would give a return of over 71 per cent. at to-day's prices. •
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