Investment Notes
By CUSTOS
AI ventured the prophecy last week that there is more to go for in dollar stocks than in British equities at the present level of prices -and with the dollar premium down to 61 per cent-a correspondent asks, fairly enough, for my Wall Street recommendations. In general, I would not concentrate on the market leaders, but would pick out growth stocks in the second line. However, 1 do not think my correspondent should leave OUt GENERAL MOTORS Or FORD, in view of the excellent prospect for the motor in- dustry. Coming to the second line, I would recom- mend SQUARE `D' CORPORATION, a company which manufactures switches, circuit-breakers and elec- tronic controls and whose earnings per share have more than doubled in the last five years; KERR-MCGEE OIL INDUSTRIES, which does contract drilling in oil and minerals and whose profits per share have trebled in the last five years.
Prier flea, Diviaenct after D.T.R
Ford ... •••
853 $1.80 3.4%
General Motors ... ••. ... 8721 33.50 4.8% Square 'D' Corp. 8431 $1.70 3.9% Kerr-McGee 01' Industries $391 31.0
2..5% If a utility is wanted, I can recommend GULF STATES UTILITIES at $361 to yield 3.1 per cent on the $1.12 dividend, For a speculative invest- ment, I would draw attention to SKELLY OIL, one of the Getty companies, which has a substantial surplus of crude oil and operates in the mid- continent area of the US. Something is brewing by way of merger or takeover for Skelly Oil and at the present price of $651 it yields 2.62 per cent on the dividend.of $1.80.
Avana Bakeries
I have recommended this company in the past and I -am reassured by its report for the year to March 30, 1963, which shows profits before tax up from £261,000 to £303,000. Since the close of the year profits, I am told, are running at a substantially higher level than a year- ago. The company makes cakes of all kinds in highly efficient modern factories and sells 300 tons of cakes and over a million Swiss rolls every week through every type of retail outlet from the big chain store, like Marks and Spencer, to the village grocer. The company was hit by the failure to enter the European Common Market, for it cannot now get enough licence quotas to satisfy its French customers. However, it is ex- panding at home and extensions to the Ledbury and Rogerstone factories are being made which will be financed through a rights issue to be announced later on. In the meantime a bonus issue of one for two is being made and a divi- dend of 45 per cent is being paid on capital increased by the one-for-ten bonus of 1962; At 14s. the Is. shares yield 3.2 per cent. The rights issue will probably provide a better buying opportunity.
Unilever
Avana Bakeries is a small company with an equity capital of only £397,000, and if the in- vestor wishes to take an interest in food he cannot ignore the giant UNILEVER. The half-year results were surprisingly good, not so much be- cause of any advance in sales, but because profit margins had improved. The result was that group profits after tax rose by about 12 per cent. The directors state that the second half-year profits are not expected to show the same improvement, but a one-for-three bonus issue is being pro- posed for both Unilever Ltd. and Unilever NV, and if this is approved Unilever Ltd. will declare an interim dividend of 10.69 per cent against 91 per cent and Unilever NV 9 per cent against 8 per cent. The finals are expected to be not less than 13.7 per cent and 11.25 per cent respec- tively. At the present market price of 46s. 9d. Unilever Ltd. yield 3.1 per cent on dividends and nearly 9 per cent on earnings.
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