FINANCE AND INVESTMENT
By CUSTOS
THESE are puzzling days for investors. It is not merely that it is still anybody's guess whether final victory is relatively dose at hand or far off ; but none of us knows what kind of peace we are going to get or what its full financial implications are likely to be. It is not surprising, in these conditions of uncertainty, that markets are beginning to look a little bewildered, especially when one remembers that, taken as a whole, security prices have already risen . to a level which discounts recovery possibilities fairly liberally. Here and there, of course, opportunities exist, and I am not suggesting that the scope for investment enterprise is by any means exhausted. I do take the view, however, that the time has come when would-be buyers should tread cautiously and when investors should attempt to assess the post-war probabilities.
WAR AND PEACE STOCKS
In a necessarily rough-and-ready way the process of distinguishing between the securities with relatively good and those with relatively unpromising post-war prospects has already begun. News suggest- ing early victory helps London stores, building, oil, motor, property, textile and mining shares. Discouraging war news makes for better prices for long-dated gilt-edged, home rails, diamond and most types of engineering shares. That is how markets are reacting at present, and, on the whole, I would not quarrel with their logic. At some point, however, the relative attractiveness of these two groups will be brought together by the movement of quotations. It may well be, for example, that when, say, a London stores share is yielding 34 per cent. on its current dividend as against the 84 per cent. obtainable on a home rail junior stock, the home rail stock is the better value of the two. My own feeling about rail securities is that prices are already approaching a level at which the admitted post-war uncertainties are liberally discounted. It all 'depends, of course, on how pessimistic one happens to be about the peace-time outlook. I think the pessimism is being over-done.
CINEMA DIVIDEND DECISION
There was both surprise and disappointment on the Stock Exchange at the mere maintenance of the 6 per cent. ordinary dividend of the Gaumont-British Picture Corporation. Confident estimates of an increased payment, ranging between 8 per cent. and ro per cent., had prompted buying of the ios..shares up to 17s. 3d. When those hopes were falsified the*quotation reacted rather sharply to 16s., at which the yield is less than 4 per cent. In relation to the return available on Associated British 5s. ordinaries at 16s., the Gatiinont shares still look over-valued. It is the case, however, that the economies resulting from the consolidation of the GaumOnt group have not yet found reflection in the net earnings figures. These savings, it seems, are substantial and will affect the results fo. the current financial year. It may well be, therefore, that the apparent low yield may not represent any serious over-valuation of the shares on a twelve months' view.
A PROPERTY PREFERENCE Among the recovery groups whose potentialities are not yet exhausted London property shares have latterly come into favour. It is now common knowledge that flat rents are rising and that, in spite of the heavy burden of war damage contribution, the companies are enjoying a substantial improvement in net revenue. Among the shares which are available in reasonable numbers in the market just now are the 6 per cent. cumulative Li preferences of White House (Regent's Park), quoted around 15s. 9d. Dividends are in arrear from the end of 1938, representing about as. 9d. net per share, and there is a debit balance of £3o,6t3 on profit and loss account to be wiped out. I shall be surprised if the next accounts do not show a substantial recovery, wiaile the current level of earnings must be such as to indicate the possibility of a resumption of preference dividends some time next year. So long as the inflow of population to London continues, this type of undertaking must do well. As a property speculation the shares are attractive.
Any readers who would be willing to post their copies of THE SPECTATOR to Service men can be supplied by Miss A. Hamilton, The Polytechnic, 309, Regent Street, W.x, with names of soldiers, sailors or airmen who would welcome copies.
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