COMPANY NOTES
By CUSTOS
THE strong recovery in Government stocks on Tuesday helped to steady the drifting market in industrial ordinary shares. It was the end of a depressing Stock Exchange account and there was no doubt some `bear covering' on the eve of the Prime Minister's speech. Nevertheless, there was some genuine buying encouraged by the rumour that Sir Anthony had nothing new to say about the disinflation which is now doing its work. The fears about another rise in the Bank rate are subsiding. The increase in the rates charged to local authorities by the Public Works Loan Board were based not on anticipation of dearer money but on the new principle that the rates must conform to the current mar- ket in local authority credit. Since freedom was given to the local councils to borrow in the mortgage market for short as well as for long periods there has been a rush to borrow 'on the part of councils squeezed by their banks. The new PWLB rates are 5+ per cent. for loans up to five years (against 4,1 per cent.) and 5+ per cent, for loans over fifteen years (against 5 per cent.). Thus there are now higher rates for, short loans than for long-term loans, which points to the harshness of the present money squeeze. We must be thankful that dear money is still regarded as an emer-
gency for the short term. * * * With a recession looming ahead in the American automobile industry—the major companies are planning to cut 1955 produc- tion by'about 12+ per cent.—it seems a bad time to market over 10+ million shares of the parent Ford Motor Company. But big financial operations (involving nearly $700 million) have to be planned well in advance
and cannot be postponed because the market has become unpropitious. Ford has just enjoyed the most prosperous year in its history—its nine months' sales equalled the twelve months of 1954—and such is the magic of the Ford name that the demand for the shares will probably exceed the supply. The price fixed is $641 N.Y. (or $1174- London) which allows the investor to buy into the-Ford equity for the first time at 8+ times 1955 earnings, This is cheaper than the current price of General Motors (9.9 times earnings) but dearer than that of Chrysler (6.6 times earnings). The dividends paid by Ford last year were $3.2 per share, but $1.31 were considered as extras. The quarterly dividend is to be $0.6 per share. If, say, $3 is paid this year, the dividend yield would be 4.6 per cent. to an American. The opening price in London on Wednesday rose to 7 premium and caution must be exercised. Henry Ford the Second did right to warn the subscribing public that the motor business was highly competitive and risky.
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For a high-yielding share outside the malaise of the industrial share markets I have chosen this week TOBACCo SECURITIES TRUST, whose gross profits increased by 171 per cent. for the year to October last and net profits by over 20 per cent. The Trust is engaged in the overseas finance of the British American Tobacco group and has a portfolio of shares, 80 per cent. of which are in tobacco (and mainly overseas). The dividends have been increased on the ordi- nary capital from 19 to 21 per cent.-and on the deferred from 18.28 to 27.42 per cent. At 52s. the ordinary shares yield about 8 per cent,; at 59s. the deferred yield 91.
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