Investment Notes
By CUSTOS
rri HE Stock Exchange account started well and \I if to can turn in good half-yearly results very soon-as ALBRIGHT AND WILSON did-the market will be going further ahead, The Finan- cial Times index has already moved into a new high ground for the year at 326+ and seems bound for 350. As the prices of industrial equities are not exactly cheap, a firm of brokers has been trying to pick out companies which have suffered severe trading misfortune and re- duced their dividends-the idea being that re- covery cannot be long delayed; AEI and JOHN THOMPSON are selected as being now in a re- covery upswing. Their shares have already moved up-AEI from a low point of 32s. 3d. to 45s. 3d., to yield 4.4 per cent, and John Thompson from 14s. to 16s. 9d., also to yield 4.4 per cent. BOWATER PAPER is selected as a company at or just past the nadir of its troubles. The half- yearly results recently published do not as yet show any recovery, but the market was impressed by the confidence which the new chairman, Sir Christopher Chancellor, expressed in the longer- term future. Although the group is faced with uncertainties, he said, he believed that profits would show a considerable and steady improve- ment after 1963. Bowater shares have recovered from their low point of 33s. 9d. to 41s. 3d., to yield 4.8 per cent.
British Oxygen
With consumer shares running into high prices and low yields, the investor will rightly want to
include in his portfolio some capital goods shares, even if recovery is not yet round the corner. Several brokers are now recommending BRITISH OXYGEN, which Is not so dependent on the steel industry as some imagine. It serves the chemical and other industries and has a large and ex- panding overseas business mainly in the sterling area. In fact, the overseas is now larger than the home business, accounting last year for 60 per cent of the pre-tax profits. Last January the chairman forecast a further improvement in overseas profits, which were actually 25 per cent higher in the first six months of the current year. More recently, the chairman was reported as saying that there was a considerable recovery to come if the heavy side of industry improves. 'It could have a cumulative effect upon us. But it is just a bit ahead. Call me a delayed opti- mist.' When it comes, the profits of British Oxygen will climb out of the plateau they, have been on for the last five years. Last year the company earned 24 per cent on its equity capital and about 12 per cent on the capital employed. -Profit margins are now showing some improve- ment. The 5s. shares fell from a high of 28s. 6d. te 12s. 11d. and are now 14s., to yield 3.7 per cent on the dividend of 10f per cent and nearly 9 per cent on earnings. A purchase must be re- garded as a long-term investment, but should not involve much risk at this price.
British Belting and Asbestos
With the motor industry flourishing, the ex- panded facilities Of BRITISH BELTING AND ASBES- TOS have come into operation at the right time and there is some hope of a higher dividend in respect of the current year to December. Since the war this company has had an impressive record of growth, profits having increased at the rate of about 121 per cent per annum com- pound. It was originally formed to supply power transmission belting to industry and this still accounts for about a fifth of its business, the National Coal Board being its largest customer. But today the main business is the manufacture of brake and clutch linings, primarily for the brake and clutch manufacturers-Lockheed, Girling and Dunlop. The company pioneered disc brake pads and, as everyone knows, the disc brake is becoming universal. Last year the com- pany made an arrangement with the Bendix Cor- poration of America whereby British Belting will be able to manufacture under licence certain brake linings and other friction materials de- veloped by Bendix. The company does not own any asbestos mine, but supplies are no difficulty as there is a world surplus of the long-fibre asbestos it uses. Profits rose slightly last year and earnings on the equity capital amounted to 49 per cent, which covered the dividend of 171 per cent 2.8 times. At 25s. 3d., the 5s. shares yield 3.4 per cent on dividends and 9+ per cent on earnings.
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