Investment Notes
By CUSTOS By CUSTOS
THE half-year in the equity markets has give the investor plenty of thrills. From the los# point in December to the high point in May the advance in the Financial Times index was close on 25 per cent. In six weeks nearly half of it was lost. The subsequent technical recovery wa5 washed out this week by Kuwait. The pace of the advance was, of course, too hot to last, but the important point to observe now is that the big investors—private and institutional—have not been frightened out of their shares. The selling has been small. The recent correction was iv markable for the paucity of dealings. Jobb& slashed their prices, hoping to get stock and
encourage liquidation, but precious little stock has been turned in, except in a few special cases. Talk of inflation and devaluation does not, of course, encourage investors to sell equities; it makes them keener to buy when they think the fall has gone far enough. This will not be deter- mined belore the end of July when the Chan- cellor is expected to announce his corrective measures. If these are tougher than the market is anticipating most of the gains of 1961 may be wiped out. Then will be the time to buy. That sterling may eventually be devalued is a long- term chance that will keep equity shares in fashion. Only recently the modest devaluation of the Canadian dollar caused Canadian shares to rise sharply.
Hovis-McDougall
The 5s. shares of Hovis-mcDormALL were re- cently as high as 22s. on the rather silly rumour that SPILLERS were trying to take them over. They are now back to 16s. and as the dividend has been raised from 111 per cent. to 121 per cent after a fairly good year's trading the yield is now close on 4 per cent. This is a reasonable return to expect from a sound equity which is not without possibility of continuing growth. Apart from the famous self-raising flour and brown loaf the company has spread into other food lines--butter and cheese, wholesale groceries, farming and poultry foods, etc.—and in addition has a commercial van manufacturing business. It is a curious spread but it makes for stable profits. The company- is now raising £2 million by a rights issue of one new share for every ten at 12s. 6d. This will give the investor a fine opportunity to acquire shares free of stamp at an attractive price. As the dividend last year was covered about twice, we may assume that the 121 per cent. dividend will be repeated on the
enlarged capital. .
The Trustees' Dream
Trustees who will find it difficult, as I sug- gested. to give up good income for a low-yielding equity (and take a capital loss) may find the coming iiY (EN ritE PROPERTIES convertible loan stock a dream, I 'w rite before the final details have been settled, but it seems that a 5 per cent. stock at 95 with conversion rights at the equiva- lent of 62s. 6d. a share is not unlikely. The shares have been as high as 65s. 9d. this year and are currently quoted at 57s. 3d. to yield a little over 2i per cent. A running yield of around 51- per cent. with thc prospect of converting into the equity of the largest developing property com- pany is attractive.
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