Answer To FINANCIAL QUERIES
Question—In a few months I shall have $1,000, which I wish to put into some safe investment. Up to the present all my small savings have been put into Government bonds and I would like to do something different with this. Some, of my friends have spoken of Royal Bank, Bank of Montreal, C.P.R. and Maritime Telegraph and Telephone stock. What do you advise?' —E.S., Canso, N.S.
Answer—The bank shares you mention represent Canada’s two premier banking institutions. As banks we have none sounder in Canada. It is almost inconceivable you would ever meet disaster with such an investment, or that you would ever be faced with the double liability. But the fact remains that the double liability clause attaches to an investment in bank shares, and, for this reason, we are rather disposed to advise women to avoid them. Then, too. at the present time public sentiment is adverse to the banks. We have no hesitancy in advising a purchase of C.P.R. At current price levels (148 at this writing) the yield approximates 6M Per cent, and there is always a strong possibility of future enhancement of values. Maritime Telegraph and Telephone is a well seasoned public utility stock. Its market, however, is somewhat restricted, compared with the broad international market offered by C.P.R.
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IS Question—Will you kindly advise me of the standing of the United Bond Co., Ltd., of Windsor, Ont., and whether their seven per cent, first mortagge bonds are a reliable investment?—Prince Edward County.
Answer—The United Bond Company, Ltd., of Windsor, Ont., is the Canadian end of a Detroit enterprise of a similar nature. The company has been operating in Windsor for a comparatively short term. We are informed that their mortgages are placed in a highly conservative way. Nevertheless we would hesitate to recommend the bonds as a woman’s investment. We would prefer to see a woman place her funds in more seasoned securities. A woman’s funds are more properly invested in Government bonds. The return may be slightly lower but the risk is nil.
Question—What do you think of St. Maurice Paperas an investment?—L.C.M., Mariintown, Ont.
Answer—There seems every reason to believe that, sooner or later, St. Maurice will be one of a group which will be consolidated into a vaster paper-producing enterprise. The Laurentide Company will be one of the component parts of this merger, or so it is now contemplated. In such company, St. Maurice should be distinctly happy. The question of future enhancement of the stock’s value is something entirely for the future to demonstrate, but the fundamentals of the situation suggest further progress for the company, and resultant increase in the value of the securities.
Question—Kindly .give your opinion of Union Bank stock.—Farmer, Regina, Sask.
. Answer—Banks have been subjected to a vast amount of heckling and the end is not yet, it would appear, with the Home Bank revelations widening. Then, too, the investor has always to consider the double liability clause, when he commits himself to an investment in bank shares. This latter accounts in no small degree for the lack of public cordiality of recent ■months toward bank securities.
Specifically, the Union Bank is reported to be making, healthy, if somewhat slow, recovery from the position into which it was forced a year ago. The future of the Union Bank is bound up in the future of Western Canada; the bank’s full recovery, therefore, will be largely determined by western conditions.
Question—Please give your opinion ■ of Nova Scotia Tramway and Power Co., preferred. What value will the preferred shares have under the new valuation of this company by the Nova Scotia Public Utility decree?—“Halifax.”
Answer—Little change was shown in the company’s earnings for 1923. Although expenses were substantially reduced the net earnings were less than in the previous year by nearly $3,000. It would be mere guess work, however, to attempt to value the securities while the enterprise is hedged by outside influences. It is a case of where politics enter in, the investor had better “get out.”
Question—I shall be obliged for any information you may be in a position to give me with regard to Orange Crush Bottling Co., Ltd. (Winnipeg).—S.B.D., Vancouver.
Answer—We cannot advise putting money into this enterprise unless you are prepared to tie up your money for some considerable length of time. Others have written us of their inability readily to market Orange Crush shares. This is the chief difficulty, when you take on securities which are not listed upon a recognized stock exchange. One of your first considerations should be that a security may be
quickly converted into cash. Orange Crush is a fair industrial stock, which may possibly be ranked as a business man’s investment. The management is aggressive. The business depends upon public patronage, at the best of times, a fickle thing, and now, with the Province of Manitoba “wet,” that element would appear more than ever speculative for the soft drink manufacturers.
If, as you say $30,900 of preferred stock was disposed of last year and the balance sheet revealed a charge of $13,200 for stock commission, it would appear some further explanation was due the shareholders. Clearly the commission charges are high.
Question—Please advise me whether, in your opinion, Dominion Wool Combing Mills, at Trenton, Ont., is a safe and good investment.— H.E.A., Ottawa.
Answer—The writer was shown oyer the plant of the Dominion Wool Combing Mills, a few weeks ago, and at the time was considerably impressed with the possibilities of this new industry. The Trenton plant appears well equipped, and the industrial end of the organization is said, by experts, to be excellent. But the industry, so far as Canada is concerned, is in the experimental stage and for this reason an investment in the enterprise can scarcely be ranked as other than a business man’s speculation.
Question—I have a couple of thousand dollars which I want to invest. What do you advise?—F.W., Tottenham, Ont/
Answer—If you want to put your two thousand dollars where you may rest assured of no future worry, other than to clip your interest coupons, and to continue mindful of the maturity dates, you cannot go astray by investing in Government or Ontario Municipal bonds. If, however, your personal earning power is still good (this depends upon your present age and your present ability to produce an annual income by your own effort), you would be well advised to seek seasoned stocks, like C.P.R., any of Canada’s well established industrial enterprises, or any of the well entrenched utilities. These securities would no doubt show you enhancement of value, in the not too distant future, and, in the meantime, your dividend return would be higher than from the more conservative bonds. The element of risk has been reduced virtually to nil (unless, of course, you happen to enter at the top of a declining market) in such stocks as Laurentide, Spanish River, Steel of Canada, Lake of the Woods, Ogilvie, Bell Telephone, Mackay, Montreal Power, Shawinigan, Montreal Tram, Twin City, Can. Cottons, Dominion Textile, Canada Cement, Canadian General Electric. For a “long pull” any one of these stocks should prove satisfactory to you.
Question—Do you consider the Montreal Tramways & Power Company six per cent, bonds, issued March 1, 1921t., payable March 1, 1929, a safe investment?—I.S., Peterborough, Ont.
Answer—Montreal Tramways and Power Company’s bonds are backed by one of the best street railway properties in Canada. This particular issue is secured by the pledge with the trustee of $7,000,000 Montreal Tramways five per cent, perpetual mortgage debentures and (through pledge of another issue of bonds of the company) by $2,100,000 par value capital stock, being the majority of the outstanding stock of Montreal Tramways Co., on which dividends are being paid at the rate of ten per cent. The pledged collateral will produce revenue substantially in excess of the amount required to pay interest on these bonds. The yield upon your investment would slightly exceed six per cent. The bonds should be perfectly safe for investment purposes.
Question—Can you advise me as to the soundness of the Manufacturers' Finance Corporation, eight per cent, cumulative participating preferred shares?—S.B.H., Montreal.
Answer—The Manufacturers’ Finance Company deals in automobile and piano paper. Generally, such financing is regarded as safe, but, of course, the manner in which it is purchased is of vital importance. Generally speaking, the purchaser of automobile paper has not only the agent who sells the car, but the purchaser of thecar, and the car, as well, to guarantee payment. The type of business is considered profitable but much depends upon management. The management of this particular business is divided; the automobile end handled by Mr. Rowlands, long experienced, and by Mr. McDonald, who had thirty years piano experience. The directors are:—Senator McDonald, vice-president; K.A.C. Cameron; Senator P. E. Blondín, Senator G. D. Robertson, Col. C. R. Street, Ottawa; Col. J. A. Cooper, Col. Boyd Anderson, Moncton; R. S. Clark, Halifax; J. D. McPherson, Toronto.
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Question—Will you please give me your opinion of the common stock of the Debenture Company of Canada, Ltd., head office located at Regina, Sask. What do you think of this stock as an investment?
For surplus funds, which would you consider the better investment, bonds, or the common stock of the Canadian Pacific Railway Company? Kindly give me also a brief opinion of B. Greening Wire Co., Ltd., of Hamilton, Ont., and of the bonds of the Howard Smith Paper Mills, Ltd.— '—J.A.C., Holdfast, Sask.
Answer—The Debenture Company of Canada, operating under a Dominion charter, has not as yet branched out into business outside of the province of Saskatchewan, where it has its head office. The company invests its funds in tax sale certificates on farm lands, a security ranking ahead of mortgages, liens, etc. The business is entirely legitimate and productive, with a margin of safety which appears satisfactory. The company is still operating in a quiet way, but is understood to be making steady progress.
If there is any objection to an investment in the company’s capital stock, it would be chiefly because of the fact that there does not appear to exist as ready market for it as for those securities which are listed upon a reputable stock exchange.
There is no security in the Dominion whose soundness is less questioned than Victory Bonds. You can readily borrow upon these bonds, if necessity arises, or you can quickly dispose of them in the open market.
At a price of 148, the common stock of the C.P.R. returns the investor approximately 6% per cent. The yield is commensurate with the safety of the security. There have been those who have discouraged commitments in C.P.R., but no one who is “long” on Canada can go “short” on C.P.R.
The bonds of the B. Greening Wire Company are backed by a modern wiremanufacturing industry which has been established for sixty-five years. The earning capacity of the plant has been established.
The bonds of the Howard Paper Mills are equally well-seasoned, industrial securities, for which there is an almost constant market. The paper industry of Canada is now on a well-deflated basis and should go forward to a new era of development and progress.
Question—I have the following stocks, which I purchased at different prices, viz.— Steel of Canada, common, at 79; Steamships preferred, 57; Brazilian, 50y¿l Sí. Lawrence Flour, 135. What is your opinion of the above? What are the best stocks on the Montreal list, at present?—A.L.H., Belleville, Ont.
Answer—Your stocks represent a fairly well distributed assortment. Steel of Canada has lately been under some pressure because of the tariff fears that were aroused at the time of the Budget announcement. Then, too, the company is said to have been encountering keen competition. However, Steel of Canada hag built up a strong financial position, and having weathered, successfully as to dividend payments, at any rate, far more strenuous days, it is not to be supposed that its management will not pull it through the present.
Brazilian’s outlook is not unpromising. It is well managed, and the property is therefore well maintained. But world conditions are the chief worry for the Canadian shareholders.
Steamships’ position is considered to have vastly improved, since the financial' statement was pruned. Much “dead wood” had been eliminated and the new season begins rather hopefully for the patient shareholders.
St. Lawrence Flour should react favorably from any increase in export trade which comes to the millers.
Your query as to the “best stocks of the Montreal list” is a somewhat broad, disconcerting order. You will require to be more specific. You will need to intimate whether you are interested in the market as a speculator, as a business man about to invest, or whether you seek the widow’s type of investment, which must have no element of risk. There are many phases, as you will sense, to the security markets. Properly to guide the investor, it is vital that one should be placed, more or less fully, in that investor’s confidence, particularly as to earning power,-resources and other questions.
Question—Would you kindly give your opinion of the safety and standing of the Dominion Iron and, Steel five per cent, second mortgage bonds, due 1939?—L. P. C., London, Ont.
Answer—Dominion Iron and Steel five per cent, second mortgage bonds are subject to a five per cent, bond issue due in 1929. This bond has considerable merit, for it is a mortgage on very valuable properties, and must in time be able to demonstrate a large earning power. At the same time you must remember the Dominion Iron and Steel is tied up with the future success of the British Empire Steel Corporation, and as this merger has been effective only for a short time, earning statements that have been issued to date have not been such as would make it possible to determine if bond interest has actually been earned. Dominion Iron bonds offer a satisfactory opportunity to get a high yield on a bond issue and the possibility of some appreciation.
Question—Can you give me a list of the companies forming the British Empire Steel Corporation, and their capitalization?—W. T. R., Halifax, N.S.
Answer—The subsidiary companies of the British Empire Steel Corporation are as follows: Dominion Steel Corporation, Dominion Coal Company, Dominion Iron and Steel Company, Cumberland Railway and Coal Company, Dominion Shipping Company, James Pender and Company, Sydney Lumber Company, Nova Scotia Steel and Coal Company, Eastern Car Company, Acadia Coal Company, Wasis Steamship Company, Nova Scotia Land Company, and Halifax Shipyards. The authorized capital of the various companies is as follows: Dominion Steel Corporation, $50,000,000; Dominion Iron and Steel, $30,000,000; Dominion Coal, $15,000,000 common stock and $3,000,000 preferred stock; Dominion Shipping Company, $1,000,000; Cumberland Railway and Coal Company, $2,000,000; James Pender and Company, $100,000; Sydney Lumber Company, $150,000; Nova Scotia Steel and Coal Company, $15,000,000 ordinary stock and $1,000,000 preferred stock; Nova Scotia Land Company, $100,000; Wasis Steamship Company, $16,000 ; Eastern Car Company, $1,000,000 preferred; Acadia Coal Company, $2,000,000 common, $2,000,000 first preference, and $1,000,000 second preference.
Question—I am thinking of buying some bonds of the Municipal Bankers Corporation. Would you kindly give me your opinion of this security?—S.T.W., Toronto.
Answer—The bonds of Municipal Bankers are well regarded. They are secured by mortgages on houses in the city of Toronto. These mortgages are deposited under a trust deed with a welî known trust company. Valuations of the property are also made by independent officials of Toronto trust companies. The men behind the company are highly regarded, and they have had considerable experience in financial and business operations.
Subscribers to MACLEAN’S MAGAZINE desiring advice in 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 oivn financial and family position, so that definite and individual suggestions can be given.