Investment Notes
By CUSTOS
rr HE weight of new issues is restraining the I advance of the market. The total outstand- ing—mostly fixed-interest but this week some large issues by tender of equity shares—amounts to nearly £50 million. This will mop up insti- tutional funds probably for the rest of the year. The recent strength of the equity market has been imparted by the force of institutional buying which has been running at the rate of nearly £3 million a week—£2 million from the life insurance companies and nearly £1 million from the unit trusts. The continuance of good company reports—•METAL BOX, BRITISH PLASTER BOARD and Gus are the latest examples—has been attracting this investment and there is every reason to assume that good company news will remain a feature. During November company profitS increased by 10.7 per cent and dividends by 6.6 per cent. But markets must pause for investment breath; they must quietly digest these new issues.
Hire Purchase and Insurance I referred last week to the excellent report Of ANGLO-AUTO FINANCE which I recommended last August at 10s. lid. The shares are now I Is. 71d., having come back from 12s. 3d.—in anticipation of the coming rights issue—to yield nearly 44 per cent on the increased dividend of 50 per cent now covered 1.4 times. This is the most successful hire-purchase finance company in the country, having an unbroken record of success. The year to October 31 revealed a rise of 66 per cent in net profits and of 52 per cent in equity earnings. Its success has been mainly due to the extra careful selection of motor-car dealers Two-thirds of its business is in used vehicles (which is the most profitable and carries the least risk) and one-third in new vehicles of which half is in Ford cars. A yield of 4.5 per cent is about the highest obtainable in the h.p. group, but do not be misled by the low yields on the shares of other hire-purchase finance companies which have not yet reported the current improvement in trading conditions. The MERCANTILE CREDIT yield of 2.4 per cent can probably be doubled, for the company is ex pected to double its 8 per cent dividend. Such a 'recovery' share is surely a good exchange from the depressed composite insurance shares For example, COMMERCIAL UNION, Which is going through a very difficult time and may pos sibly have to cut its next dividend, might well be exchanged into Mercantile Credit. If the investor is loath to part from insurance, then ROYAL at 38s. 6d. to yield 4.1 per cent would be a better holding than Commercial Union.
Recommendations An appreciative reader was kind enough to write and thank me for the recommendation Of WILLIAM PRESS at 18s. which was long before the scrip issue of. 50 per cent. The shares are now 31s. 6d. and yielding only 2 per cent but probably worth holding still. He hesitated between that and another recommendation PENN ELASTIC—which did not fare so well, bu I am glad to see that the recent report wa encouraging and that the directors regard th worst as behind them. At 35s. 6d. to yield 3.' per cent Penn Elastic shares are worth holding for recovery. (They have been as high as nearly 40s.) I would also revive my old recommenda- tion of DISTILLERS whose management, having disposed of its.drug interests, is now more con- fident. Its plastic companies are in better shape, having merged with those of Union Carbide of New York. As regards whisky, it was some- thing of a sensation in the trade that Distillers decided to market a new light-coloured whisky in the United States to compete with the brands of J. and B. Rare. At 38s. to yield nearly 4 per cent Distillers are reasonably valued in a market which is tending to price the 'blue chips' too high for my liking.
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