Market Notes
By CUSTOS
MBE markets opened the New Year a little I more cheerfully, especially as various scribes have been producing their tips for the new year's winners. The easiest course is to say that what did badly in 1966 will do better in 1967. Rubber shares, which scored the biggest gain in 1966 —20 per cent—were actually in the bottom six of 1965. However, I cannot recommend house- hold goods shares, which fell about 24 per cent last year, seeing that Mr Callaghan has told us that when it comes to reflation he will not do anything for the consumer. He may, of course, relent over the motor industry if in the next six months the motor companies put their house in order. Many brokers are recommending BMC at 12s. simply because it is the worst managed and the worst covered dividend. Personally, I would be more conservative and prefer the petrol suppliers. SHELL, for example, at 36s. is not far off the bottom for 1966 and is selling at only 10+ times earnings (ignoring the over- spill) against nearly 13 times for BP. This year the company will begin to draw profits from natural gas in Holland, which by 1970 will increase its net income by about 10 per cent.
There has been selling of steel shares by 'gross' funds after the collection of the recent divi- dends. This has depressed share 'prices to the point when they seem attractive for those who anticipate vesting day by the end of September. Allowing for the capital profit on compensation as well as for the dividends to be received, the total yield is as high as 18 per cent in the case of UNITED STEEL. Some investors, however, would prefer to go directly into the gilt-edged market, because in the next nine months they are confident that Bank rate will be down and the gilt-edged market will be up. War Loan, after all, may be 1967's winner.
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