Investment Notes
By CUSTOS
T T was thrilling to read in a broker's New Year 'review that 'a new bull market has begun'— until we found that the rise would be very gentle (hardly noticeable?) and would be based on fear of inflation and the expectation of a rever- sal of the Government's restrictive policy. Mr. Lloyd's next statement will probably make it clear that there will be no reversal of his policy for some time—at any rate until after the Bud- get. I agree, however, with this broker's invest- ment advice—buy for recovery prospects rather than growth. I cannot see much growth coming from Mr. Lloyd. Even if there is, he will want to tax it in his new capital gains tax.
Recovery Shares
I gave two recovery shares last week—JOHN SUMMERS and SMC. A threatened 'rights' issue for the former may provide a useful buying opportunity. Another 'recovery' share is A. a. REED, which has been feeling the competition of Scandinavia on the lowering of tariffs by the EFTA. If we join the Common Market A. E. Reed will benefit, not only because of its con- tinental interests, but because the external tariff will be raised against Scandinavia. This well- managed paper, paper board and packaging group (now owning Anglo-Canadian Pulp and Paper) should be able to weather the present storms. At the present price of 41s. 3d.—against a high of 56s. 6d.—the shares yield 7.6 per cent.
Polycell Holdings These shares have been as high as 10s. lid. this year and have come back to 8s. 3d. to yield 3 per cent. It is a growth company, for it acquired in 1958 the company which makes the well-known Polyfilla and other polYcell products used in the building and painting trades. In 1960 it acquired other companies making paint and brushes and the benefits of these will accrue in the current year to September, 1962. To finance the acquisition of the new factories and the development of new products-the com- pany's technical staff is very inventive-it made a rights issue of one for five-underwritten by Warburgs-and the 25 per cent. dividend was paid on this increased capital. In another year the dividend should be higher.
A Gamble
It is rare for me to recommend a gamble, but AMERADA PETROLEUM, the one-time favourite of all American oil shares, the greatest of all oil prospectors and the discoverer of the famous Willison basin, is holding out a dazzling pros- pect if it sells off its valuable Libya interests (valued at $140 per share). Its other assets in the US and Canada must be worth over $100 and it is selling at $109+ ($195 London). The current yield is just under 3 per cent.
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