BUSINESS & INVESTMENTS

ANSWERS TO FINANCIAL QUERIES

August 15 1926
BUSINESS & INVESTMENTS

ANSWERS TO FINANCIAL QUERIES

August 15 1926

ANSWERS TO FINANCIAL QUERIES

Question—Are there any books that explain the different kinds of stocks, common stocks, bonds, etc.?—A.R.T., Toronto.

Answer—Hartley Withers’ “Stocks and Shares” would be an admirable book to teach the elementary principles of speculation and investment with particular stress on the various terms used in stock exchange operations.

Question—Kindly send any available information regarding Canadian Coal and Coke Co., Ltd.—Miss G., Edmonton Alberta.

Answer—The Canadian Coal and Coke Co., as far as we are aware, passed out of the picture some years ago. Foreclosure proceedings were taken against this company in the Supreme Court at Calgary in 1915 under application of the Royal Trust Co., on behalf of the bondholders.

Question—Could you tell me something about Western Homes Co? Is it a good business investment? I have some government bonds and would like something paying a bigger dividend.—Subscriber, Fort William Ontario.

Answer—-Western Homes Limited is regarded as a sound mortgage company placing loans on improved property in good farming districts and on city property in Winnipeg. These loans, we understand, have been placed upon a conservative basis and it is stated that not a dollar has been lost in the nine years of the company’s activities. The eleventh annual report of Western Homes Limited, for the year, 1925, shows substantial gain. Subscribed capital stood at $2,325,000 an increase of $177,400 over 1924. Paid up capital showed án increase of $111,920 being $911,476. Further substantia] increases have been made since the first of the year in both subscribed and paid-up capital, the figures now being $2,350,000 and $950,000 respectively. Assets have increased in ten years from $36,613 to $989,864. These are practically all mortgage investments, the security for which, according to the general manager, is conservatively appraised at $2,049,000.

Question—Please give me your opinion of Winnipeg Electric preferred as an investment for a man of small means?— P.R.N., Manitoba.

Answer—Winnipeg Electric Railway Co., is regarded as a good utility enterprise, and its preferred stock should be a suitable investment for a business man. But we hesitate to recommend it for a man of limited means, such as yourself for the reason that the stock is liable to fluctuations, favorable and otherwise, as the company continues to negotiate with the city for an extension of its franchise.

A man of limited means should adhere to government and municipal bonds for his investments.

Question—Will you tell me if the Port Alfred Pulp and Paper Company's seven per cent, preferred stock and the St. Maurice Valley Pulp and Paper Company's stock are good and safe investments?— Hart, Montreal.

Answer—Port Alfred Pulp and Paper preferred stock and St. Maurice Valley Pulp and Paper stock both represent two well regarded Canadian industrial enterprises. Both companies are under experienced management. There is no doubt that a great future exists for the pulp and paper industry in this country. It is an industry which is constantly going forward, particularly when the companies are under experienced management, as in these instances. They are a reasonable business man’s investment.

Question—Will you please give me information concerning the soundness for investment of the St. Lawrence Paper Mills securities?—Miss C., Saskatchewan.

Answer—Having in mind the constantly expanding business opening up before the Canadian pulp and paper companies, we have no hesitancy in recommending the senior securities of the St. Lawrence Paper Mills Limited—that is bonds and debentures. The preferred stock is probably still in the business man’s speculation class and, of course, the common stock is an out and out speculation until the company under its new financing settles down to a season’s output. The company is well managed and with the continuance of this management, its future should be more or less assured.

Question—Do you consider German bonds a good investment —Doctor, Saskatchewan.

Answer—The special commissioner for German government loans in Montreal has issued a warning which is of interest to those who are considering speculating in the foreign government bond issues which are being so freely offered at the present time. The commissioner, Hans Kruger, points out that investors are thus frequently victimized by unscrupulous brokers; he declares:

“Certain brokerage firms are offering several kinds of German paper-mark bonds to the investing public. The circulars of these firms are meant to give the public the absolutely wrong impression that they have a fair chance, if not the certainty, of huge profits.

“For that purpose the brokerage firms issuing these circulars use the trick of publishing excerpts from speeches of known public and business men, recommending investments in German bonds. It is, however, omitted that these speeches apply to the new German bonds issued after the stabilization of the mark either in the new German currency or in the currency of the United States. A further means of making the public misunderstand the true value of the inflation-bonds of German cities is to picture the wealth and commercial activities of a city or its inhabitants as guaranteeing the bonds; of course all this has nothing to do with the case; the revaluation of these inflationbonds is proceeding on legally drawn lines which are well known. It is particularly to be regretted that utterances promoting investment in such new bonds in stable gold currency should be made use of for boosting a type of bond they were never meant for.

“The value of these—either pre or post war—paper-mark bonds is to be calculated only on the basis of the revaluation provided for in the German laws of July 16, 1925. As to the city and mortgage bank bonds, these laws prescribe that the percentage of revaluation is to be figured on the face value of the bonds only insofar as these bonds have been issued before January 1, 1919. Concerning all later issues, the percentage is to be figured on the actual gold value, which, of course is a very different matter, considering that at the end of the inflation period in November, 1925, not less than a trillion paper marks represented the equivalent of one single gold mark.

“Now, these circulars make the public believe that all these bonds, irrespective of the time they were issued, are going to be revalued at a percentage of the face value.

“As a matter of fact, all the big papermark amounts printed on the bonds offered must be reduced to the actual gold value of the paper mark at the official date on which the community or corportion issuing the bonds received the money for them.

“I have not yet received from Germany an official statement as to the gold value of the different post-war issues, but I have on hand a list of the prices paid in Germany for some of these issues on March 11, 1926. For instance, Munich Loan of 1923 has been sold at R. M. 1.80 ($0.43) for Ml,000,000,000, while in one of the circulars referred to M500,000 are offered at $40— quite a difference . . .

“As to the so-called ‘Forced Loan,’ which is offered in lots with other bonds, this loan, having been excluded from the revaluation, has no value at all.”

Question—As a subscriber I would like to have you inform ns as to the adrisability of purchasing preferred shares in Supertest Petroleum Corporation.—Merchant, Western Ontario.

Answer—Supertest Petroleum Corporation was organized under Ontario charter for the purpose, amongst others, of acquiring and consolidating several individual companies handling Supertest petroleum products such as gasoline, lubricating oils, etc. Supertest first became known about three years ago through the development of local companies in different sections of the country, operating under one control. Since that time the growth has been consistent and profitable, until to-day with the consolidation completed the company owns and operates several well equipped storage stations, as well as controlling upward of sixty service stations in western sections of Ontario.

The financial statement for the year ending September 30, 1925, shows worxing capital to be very good. The company claims net profits for the six months ending September, of $44,362 and for the months of October and November of $2,779. A claim is also made in a letter of President Thompson that combined earnings of constituent companies, since inception, have paid twenty-five per cent, per annum on the paid-up capital. The earnings for 1926 will be $110,000 or four times dividend requirements. The marketability of this stock is not high at the commencement, hut provided the company’s success continues, there is no reason why this should not be overcome. This seems to he a reasonable commitment for a business man.

Subscribers to MACLEAN’S MAGAZINE desiring advice t. regard to Canadian industrial investments, or life insurance problems, will be answered freely. Inquiries should be addressed to the Financial Editor of MACLEAN’S MAGAZINE and a stamped, addressed envelope enclosed.

If you are asking in regard to insurance, please give full details of your own financial and family position, so that definite and individual suggestions can be given.