INVESTMENT NOTES
By CUSTOS
THE gilt-edged market made a partial recovery but went easier again this week when the American Treasury bill rates rose further—the three months to 3.9 per cent. and the six months to 4.46 per cent. There is really no reason why our own Treasury bill rate should rise above its present level of 3.48 per cent. Who wants to-send money to New York for a slight gain in yield if there is a discount on the forward dollar? The Ameri- cans have a domestic problem to solve because Congress has refused to raise the 4.; per cent. ceil- ing on long-term loans and this is driving the Government into the short loan market. No 0 seriously thinks that our Bank rate will be rail to meet this odd situation. Qne good thin': II Radcliffe Report has done with its scepticism money policy is to make it less likely than e' that the Bank of England will want to put lU rate up to 41 percent.
Motor Shares
The recurrence of labour troubles at 1 BMC works has switched investors away 1.10 BRITISH MOTOR CORPORATION, whose shares Iv' been quietly easing. At 17s. 6d. the yield on [1' 5s. shares on the indicated dividend of 151 cent. is under 41 per cent., but the market is no going for 20 per cent., which would allow a r turn of 5 per cent. Motor shares have had 50 per cent. rise this year, but a firm of sto,i brokers, reviewing the motor trade prospect expects a further 30 per cent. rise if the Co servatives win the election. This, I think, is et tainly possible for BMC. The fruits of the capil' expenditure on its recent very successful 11' models, not to mention the £10 million spent the new baby car now being launched, have to be seen in the trading account. These brols'r expect the net profit per BMC vehicle to impro`, on the existing £17 and approach the £35 I", vehicle realised by FORD. This may happen NO 1' output moves into full swing and overtakes is year's average. The waiting list for BMC ea at home is said to be longer than at any t since 1955. And their popularity abroad is sl rising. BMC hopes to increase its sales in European Common Market in view of its man facturing agreement with 'Innocenti in Italy a the extension to its factory in Holland. This BMC's year, say the brokers. They may be rig However, if Ford is adversely affected by threat of the new American small cars in the market—the size of Zephyrs!-1 would tempted to buy. As I write, Ford shares Ns. fallen 2s. to 79s. 6d. to yield 3 'per cent. on a dend nearly 5 times covered.
International Equities
ROYAL, DUTCH and SHELL shares are the prial,: examples of international 'growth' equities all there was some fresh buying when the half-ye:'1r results were announced, showing a 41 per Cali'', increase in sales and a 15+ per cent. increase in 0 income. But second thoughts were sobering whey it was realised that the second qu6rter of last yea was the Shell worst and that the taxation char, in the second quarter of 1959 was only 40 per cent of income against 50 per cent. in the first .quarter' Profits before tax seem to be growing very slow17 and profit margins to have narrowed very 01;11;
The oil industry is not yet improving its statistical position. Crude oil production for 1959 is expected to rise by 7 per cent., but consumption by only 5 per cent, or 53 per cent. The Borden Energy Commission did not help' matters in its final report published this week when it recom- mended that the international oil companies %hould make room for Canadian oil exports in the American market or face the possibility of import licences in Canada for Venezuelan and Middle East fields. Shell shares have come back to 151s. to yield 4.3 per cent., but even so do not look so promising an international growth equity
as PHILIPS LAMPS. This company's second quarter results show that sales have increased in the first half of this year by 14 per cent. and net income by very nearly 40 per cent. Profit margins have slightly improved, although the prices of radio and television sets in Germany and Holland have been lowered. When 1 last recommended Philips Lamps the shares were 75s. They have risen from 86s. 74d. this year to 128s.-and the yield on the 14 per cent, dividend covered nearly three times is only 2 per cent. But a 5 per cent, stock dividend was distributed in 1958 and more bonuses will come. This share should be in every 'growth' list.
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