Investment Notes
By CUSTOS
ui ellects of the speculative gains .tax are now being seen in the equity markets. The rise in 'quality' investment shares. has been ac- centuated. There has been a constant stream of small buyers and no sellers-particularly in the hank and •insurance markets. This rise, seems likely to continue for the next six months- thereafter it may slow down---and the only sell- ing to check it must come from the life-assurance companies,' which are happily excluded from the capital gains tax (the Finance Bill treats the Mutual-life. offices differently, but this is bound 10 be remedied in committee). Investors who run their own 'portfolios should see that they have their full complement of these top-grade shares --banks, insurance, investment trusts and Property shares. Brewery shares might also be included-certainly for over a six months' hold. 91ARRINGTON, which I recommended on March 2 at under 140s.. is now I74s. on the merger with UNITED BREWERIES and still looks cheap to yield a potential. 4.1 per cent.
Insurance Shared
1 he life companieti provide the investor with automatic growth and . the leaders are un- doubtedly i_Ectrit. AND GENERAL and nitUDLN I IAL • A' --offering yields of only I per cent. and 1.9 Per cent. Legal is unique: first. in putting Property before equity shares in its investment policy (the percentage held in property is about ''7 per cent. or more against 12 per cent. in equity shares); secondly, in having the bulk of its life funds in non-profit-sharing policies. Its next triennial valuation will be next year, when a substantial increase in .dividend can be expected. Prudential has just reported for the year, holding dividends on both 'A' and 'B' shares at their Previous levels. But for Mr. Lloyd, there would have been an increase from 8s. 9d. to 9s. 3d. On the 'A' and a small increase on the 'B' (now getting Is. 10d.). The rate of increase in dividend income on the 'A' is slowing down-,--the bulk of the profits going to the policyholders-and the 'B' are probably the more attractive for long- term growth.. Of the composite companies, my. Preference is for GENERAL ACCIDENT, EAGLE STAR and SUN ALLIANCE, yielding 1.4 per cent., 2 per cent. and 2.7 per cent. respectively. Eagle Star has a rapidly developing life fund, the premium income on which already equals that from the accident branch. General Accident . is shortly "'taking a rights issue of one-for-live at 00s. This should present a good opportunity for a pur- chase.
Two Recovery Shares •
Apart from 'quality' shares the investor should always have in his portfolio one or two recovery shares. I suggest two--TIMES FURNISHING and vr-1NEsi.A. I 'have previously recommended the hares of Times Furnishing on the fall because
I learned that by skilful management it bad • • avoided bad hire-purchase losses. in fact, bad debts on hire-purchase sales have never exceeded one-half of 1 per cent. But I was disappointed by the results for the year to last December, which showed a very small decline, for the opening of new stores and the expansion of the tailoring business (Willerbys) might have brought higher profits. Apparently the tailoring business ran into cut margins and the new hire-purchase rules of the Board of Trade last year hurt the furniture business. Trading conditions have now improved and with further stores being opened there is the chance of better profits for the current year. The 5s. shares have fallen to 13s. against a high last year of 18s. and at this price return 5.1 per cent, on the 1311 per cent. dividend, which was covered over one and a half times. The stores stand in the balance sheet at a figure much below their market value. Venesta has recently fallen to 57s. 6d. and is now quoted at 60s. to yield 5.8 per cent. on the estimated dividend of 17i per cent. This com- pany has been digesting its acquisitions- notably Winterbottom Book Cloth-and is ex- pected to declare this week the maintenance of the 17i per cent. distribution. If the chairman can report better trading, the shares could move up rapidly.
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