INVESTMENT NOTES
By CUSTOS
rr HERE was no panic in the gilt-edged market I after the 6 per cent. Bank rate shock, but there was no eagerness to deal. Those who thought 31. per cent. War Loan cheap at 60 to yield 5.85 per cent. were about balanced with those who thought it dear. Few people in the market were prepared to trust Mr. Amory not to raise Bank rate again. The Treasury 'tap' stock, 5 per cent. 1986-89, was offered 2 points lower at 87* to yield 5f per cent. flat and nearly 6 per cent. to gross redemption: Electricity 4* per cent. can now be bought at 91* cum dividend to yield over 5 per cent. flat and 6 per cent. to gross redemp- tion. The fact that these high yields are not tempt- ing investors to sell equities to buy `gilts' is virtually a sign of no confidence in Treasury management.
Equity Policy
The preference for equities persists, but on a more selective basis. The news that Vauxhall are cutting out overtime, coming after the sack- ings at HOOVER, suggests that the boom in these trades is slowing down. Few investors will want to buy motor shares today except JAGUAR, which is in a class by itself. Hoover has managed to increase its share of the now diminishing trade, and seeing that the 'A' shares have fallen by 25 per cent. to 40s. 6d. to yield 51 per cent. holders might decide to see it through. MORPHY-RICHARDS 4s. shares at 22s. to yield only 2.2 per cent. seem dear by comparison. In the store group there will be a tendency to switch from the companies with a big hire-purchase trade into the cash group or those widely spread like UNITED DRAPERY, which has 750 stores through- out the country. The turnover of United Drapery in the first quarter of the current year shows a higher rate of increase than at the same period of last year. At 47s. 6d to yield 3.9 per cent. the shares are reasonably priced. We must wait until October for the results of GREAT UNIVERSAL s-roans. The blow to the furniture trade given by the new hire-purchase rules must affect their cur- rent profits, although the profit to come from past hire-purchase business will cushion them against a sharp fall. At 47s. 6d. to yield only 3.3 per cent. the 'A' shares seem fully valued.
Pye
Excellent results from PYE caused a sharp rise in the shares to 15s. 6d. to yield 4.5 per cent. on the increased dividend of 15 per cent. As profits before tax were 40 per cent. higher and the earnings cover for the new dividend is now around 2* times the shares still appear cheap. Pye must not be regarded as dependent upon sales of radio-television sets. It has diversified its business after a period of intensive develop- ment work. It now makes special-purpose and closed-circuit television apparatus, fixed and mobile radio-telephone equipment, radar appara- tus for aircraft, electronic equipment of every sort, and jointly with Murphy Radio holds all the `IV capital of Vritish Relay Wireless and Televi- sion, and with another partner 50 per cent. of the capital of Pye Records, which was the first to introduce stereophonic recordings. The shares seem a good exchange from less diversified com- panies like DUBILIER CONDENSER.
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