NVESTMENT
THE SUNDAY TELEGRAP
A Modern Forsyte
LAST week we discussed how a
young man of moderate means could invest a £1,000 legacy. As £1,000 was a considerable sum of money to him, a "steady as we go portfolio was required. This week we consider the case of another young man with a £1,000 legacy. His tem- perament is different.
He has no intention of "blow-
He is keen on capital appre- ciation, the sooner the better, but he does not mind holding on for five years or so, if he feels there is a big profit at the end of it.
Seventy p.c. of his cash should go into fairly sizeable and well established companies which have (a) had a rough patch recently, (b) have done extremely well, but should do a lot better and (c) where the market is unjustifiably suspicious of a company's prospects. The other 30 p.c. should go into three or four outright speculations.
Our first choice would be £200
in Kensington Palace Hotel
shares. On the face the shares at 16s. 6d. are already highly rated on a yield of 3.2 p.c. and a price/earnings ratio of 20.2.
The key to this company is the Securicor subsidiary which is a leader in the security business and where turnover could rocket from the current £7.36 million to between £50/100 million within the next decade. If at the same time margins improve, as they should, from the current sub 5 p.c. to nearer 10 p.c., then on the higher of the two estimates the shares would be on a price/earn- ings ratio of below 1.0 There is the possibility that Securicor could be floated as a separate company in the near future, in which case its shares will prob- ably be valued at around times earnings.
а
40
Our next choice is a motor dis- tributor. Garage shares are very depressed at the moment but are probably past the worst. It is case of going for the right models. Vauxhall's Viva is selling very well and he should put £100 into Dorada Holdings, which is a Vauxhall distributor. Maintained profits should be earned for 1967
ing" the lega some fun with ledge of the above all tim
He intend is prepared t and is alert, which he hop losses. He scale in view
and Dorada looks well placed to jump ahead once car sales turn up. At 13s. Od. the 7.2 p.c. yield and 8.7 price/earnings ratio reflect all the uncertainties and none of the potential recovery.
Another £150 should be put into either Handley Page at 14s. Od. or Vickers at 28s. Od. The case for Handley Page is that the group already has enough orders to ensure good profits while the prospect of American military orders for the Jetstream turbo prop airliner makes the shares, as we said last week, an outstanding speculation.
As for Vickers the 7.1 per cent yield is cast iron. Meanwhile the gamble is that the long awaited
recovery may not be far off.
He should invest another £150 in London Brick, or Marchwiel Holdings. Building shares have had a good rise recently, but the potential is enormous. London Brick is adding to its capacity at a rate of knots and once condi- tions improve profits should bounce back to well over the peak £4.53 million struck in 1964 compared with last year's £2.73 million.
Marchwiel, which owns Sir Alfred McAlpine, only yields 1.6 p.c., but the dividend is covered 5.2 times by earnings and the shares should recover strongly from the current 32s. Od. over a two-year view.
this section, he Finally, in should invest £100 in Arbiter and Weston an entertainment com- pany which is in a phase of strong profit growth.
At 15s. 6d. the shares yield a strongly covered 6.4 p.c. on last The year's dividend of 50 p.c. company will almost certainly pay 60 p.c., which pushes the return up to 7.9 p.c.
For the really speculative part