FINANCE AND INVESTMENT
By CUSTOS THESE are eventful days in Thsogmorton Street, and it is becoming increasingly difficult to form a view. So far, the inflation school, who argue that too much money chasing too few goods must mean higher equity share prices, are getting the better of the argument. After falling about 15 per cent. from the peak readied in January, the industrial ordinary share index has recovered over one-half of the lost ground. That, in face of two White Papers underlining the country's difficulties and the still more obvious blow at the profitability of industry delivered by the shut-down, is a remark- able ' achievement. Any old-fashioned observer of the recent behaviour of the stock markets must wonder whether the investing public has lost its sanity.
But is the market recovery really so senseless as the pessimists think? Unless British industry is going to be so badly hampered by fuel shortages and bottlenecks as to lose a really substantial part of its output and profits, the earnings prospect is good. Sellers' market conditions will continue and, as is already very clear, they mean large profits and dividends. The main danger is the coming Budget, which may contain some special tax on industrial earnings or on capital profits or some other dose of deflation. I. do not advise a policy of full investment just...now.
ARGENTINE RAIL POSITION
Since I called attention on February 7th to the promising prospects of a selected group of Argentine railway stocks there have been lively dealings in this market and prices have moved up spectacularly. B.A. Pacific 1912 Debentures, then 63, are now 82, B.A. Great Southern 5 per cent. Preference, then 47, are 68, and Argen- tine North Eastern " C " Debenture has come up from 56 to 78. Around these levels these stocks are probably fairly fully valued, although it is not yet possible to assess the possibilities, except with some margin of error. Although the allocation of the global sum of L15o,000,000 which the Argentine Government is paying for the railways and the ancillaries has now been disclosed, we still do not know how the directors propose to apportion the money between the various classes of stockholders. My feeling is that the best purchases at this stage are the top-class Debentures, such as B.A. Great Southern 4 per cents., BA. Western 4 per cents. and Central Argentine 4 per cents., all quoted around 92. It seems to me to be beyond doubt that all these stocks will be paid off at par in the corning liquidation schemes, so that a buyer who is prepared to see things through over the next three or four months should get a moderate tax-free profit without incurring any serious risk.
A GOOD INDUSTRIAL
If the coal crisis has any obvious investment implication it is surely that the producers of oil and oil engines are not going to seder from any lack of demand for years to come. Among the companies manufacturing diesel and other types of oil engines is Crossley Brothers, of Mandhester, whose 5s. Deferred Ordinary shares are now quoted around 158. 6d. At. this price the yield on the last dividend of 124 per cent. is only just over 4 per cent., but an interim of 4 per cent. has already been declared on account of the year ending April 30th and, as the previous 121 per cent. was paid out of available earnings of over 25 per cent., there seems to be a strong likelihood of a total of 15 per cent. for the current year, even though the capital has been increased.
Crossley Brothers holds the entire Ordinary capital of Crosdley- Premier Engines, diesel oil engine makers, and also has a substantial interest in Crossley Motors, . who manufacture petrol and diesel- engined omnibuses, commercial vehicles, electric trolley buses, as well as private cars. As an indication of the internal strength of Crossley Brothers it is worth noticing that the 600,000 5s. shares in Crossley-Premier Fingines are carried at their par value of £125,000. That company is paying a dividend of 25 per cent., which implies that the shares today must be worth something over £600,000. The investment in Crossley Motors is similarly carried at a book figure much below its real value, Crossley Motors having -paid a 15 per cent. dividend in each of the last eight years. It seems to me that this group is likely to be kept very busy for a long time ahead and that one can look forward to a progressive profit record. The shares pay reasonably well for their keep and have scope for appreciation.
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