Question — Would you advise me to transfer my Imperial Oil shares (700 shares) paying 50 cents per share per annum into International Petroleum, paying $1 per share? I am thinking of the increased dividend, but. do these stocks offer the same security?— H. R. S., Vancouver.
Answer--There is this fundamental difference between International Petroleum and Imperial Oil: the former is a producing company, and the latter is a refining and distributing organization. Imperial Oil, furthermore, controls International Petroleum, and should reflect any advantage which may fall to its subsidiary company. The business of distributing oil and gasoline to the motor trade is a more dependable and substantial one than that of developing oil from the ground. There is an over-production of crude oil and prices are low. Efforts to restrain production have not as yet succeeded, and the outlook for the crude commodity is still somewhat uncertain. On the other hand, Imperial Oil benefits when crude prices are low, as it can buy to better advantage, and prices to the trade are not greatly affected. Imperial Oil will benefit from Canada’s progress and growth, and we are inclined to believe that the outlook for this stock is better than that of International Petroleum. It is true that the dividend in the one case is double that of the other, but after all, the dividend has not been an important factor in Imperial Oil’s market history.
Question—I hold the following securities'. $3,500 Dominion of Canada, 193If. Victory bonds: $1,000 London Realty: $1,000 Beauharnois bonds: $1,000 Ontario Power: $500 Milton Brick: $800 Canadian National Electric Railways and $1,000 Kingston Elevator. What is your opinion of my holdings? Would you advise selling the Dominion of Canada bond? What would you suggest for my further investment? -—J. J. C., St. Thomas, Ont.
Answer—Your 1934 Victory Bonds form a solid background for your investment list, which in the main is composed of securities which, while not ranking at the top of the investment scale, nevertheless represent a well-assorted group, suitable for the business man.
I question the advisability of selling the 1934’s unless you wish to invest in an issue of corresponding merit of longerterm maturity. Prevailing opinion is that the bond market is still headed for higher levels, and issues maturing in 1934, although comparatively short time issues, have not yet seen their peak. For your further investment, I would suggest bonds of leading corporations. Such companies as Bell Telephone, Canadian Pacific Railway, Canada Cement, Quebec Power, Shawinigan Water and Power, and others of corresponding rating, afford excellent security, and reasonable prospect for higher prices over a period of time.
Question—Please give me your opinion of the London Canadian Investment Corporation as an investment medium for a hold for several years.—E. R., Toronto, Ont.
Answer—The London Canadian Investment Corporation is an investing company that was launched a year or two ago under excellent auspices. The first annual report, covering operations up to December 31st, 1929, indicated earnings of $22.58 per share on preferred outstanding, and $1.72 on common. This was a satisfactory showing, especially in view of the fact that security markets were acutely depressed during the last two months of the year. No recent report of the company’s progress is available, but it is fair to assume that London Canadian is sharing the experience of practically every investment trust in registering lower earnings as a result of the financial depression which has prevailed throughout the present year. This
company is assured of excellent management, with Sir Herbert Holt as president and several other leading Canadian financial and business men on the Board. When market conditions improve the condition of this company should show an immediate response, but of course when this improvement will materialize we are not in a position to say. The stock has interesting possibilities over a term of years.
Question—As I have about $2,500 cash in savings account which is only drawing a small rate of interest, I ivould like your advice as to how I can invest this money to the best possible advantage consistent with safety. I should like to get a return of at least 5 per cent. I am married with one child. I am in poor health on account of war service. I have $2,500 invested in 1937 Victory Bonds, two endowment policies for $1,000 each, one maturing in 1932 and the other in 1935. Would you advise municipal bonds or industrial securities as an investment for me?—,/. S. F., Kingston.
Answer—In view of your disability, I would suggest only the highest grade bonds for investment. If you enter the industrial market you are bound to assume a moderate degree of risk, for which the higher return does not fully compensate. Long term Government bonds or bonds of the Provinces of Canada or our leading municipalities would suit your purpose. You can get a return of 4O or 5 per cent with absolute safety and can always realize fully on your investment.
Question—May I have your advice, not so much on my holdings as on the future investment programme. I am at present sharing the following securities. $10,500 in 1933 Government of Canada Bonds, $7,500 in 193l>: $ It,000 in 19Jt3: $2,000 in a 6 per cent mortgage: $1,000 bonds of the Avon River Power Company: $1,000 bonds of the Dominion Really Company, $1,200 bonds in Beauharnois Power Corporation: 16 shares of Imperial Oil: 2 shares of International Petroleum: 200 shares of Howey Gold. In the past I have steadfastly invested for security and a fair return. As you see I have a small sun toward re-investment annually. Further more the bonds of Canada are not at (. premium. Would you advise me to invest in some common stock and if so, what? Should I sell some of my government bonds, realizing, and if so, what good bonds would you advise my purchasing in their place? I am a merchant in Nova Scotia. I have $5,000 available for investment and would like to place this money in about five good safe bonds, yielding between 5 Y¿ and 6 per cent. I want to build up an income so that when I leave the railway where I am now employed, I will be in receipt of a comfortable income.—D. W. Hill, Calgary, Alberta.
Answer—In view of your substanL investments in Government bonds A believe that you can legitimately con sider some of our leading common stocks as an investment medium, offering both a fair return in dividends and affording prospects of substantial appreciation over a period of years. The stock market, as you are aware, has been under severe pressure for over a year now, and while we cannot say whether bottom has been reached or not, the fact remains that many good stocks are undervalued on basis of assets and earning power. These may be considered as legitimate investments for the business man who is equipped to assume normal risk. Among the Canadian common stocks which you may consider at present are Montreal Power, Shawinigan Water and Power, Quebec Power, Imperial Oil, Brazilian Traction, International Hydro Electric A, Goodyear Tire common. British American Oil and Dominion Bridge.
With respect to your holdings of Government bonds, I hesitate to suggest that you withdraw even a portion of th’
funds now invested in this group for reinvestment in securities of a lesser grade. For once you step outside the realm of Government and Municipal bonds, you must make some sacrifice in security for the sake of higher returns. Your largest holding is in the 1933, a tax free issue. If the tax exempt feature is not of value to you it would be wise to sell these and re-invest in taxable Government bonds which are available at a lower price. Both 1933’s and 1934’s will be redeemed in three and four years raspectively, but in view of the size of those issues it is quite probable that the Government will undertake a refunding operation and that you will have the opportunity of taking long term bonds of equivalent security in their stead.
On the other hand, secondary bonds as opposed to the primary or Government issues have been depressed for some months in sympathy with the general unsettlement in business and finance. These are available at bargain prices, and may be considered as suitable vehicles for a portion of your funds.
Question—I am a widow and dependent upon the income from my limited investments. I would like to increase my return and was considering some bonds which seem to me to be very attractive. I have reference to issues in the Pulp and Paper Group particularly, which give a very high yield at present prices.
Answer-—In times of economic disturbance such as the present the investor, who has no other source of income than the interest on his investments, can hardly afford to step outside the realm of giltedged securities. Second rate issues, depressed in company with the unsettled market situation, return a yield that appears attractive, but they also present some slight degree of risk, which such an
investor cannot afford to assume. I do j not think it necessary to keep your money in the bank until the economic situation clears up. but 1 do feel that bonds of the Dominion or Provincial Governments only offer you the degree of safety that you should have. The public utility field has been a profitable investment medium for some years and the first mortgage bonds of such companies as Bell Telephone Company, Montreal Power, Montj real Tramways, are attractive. For the present, however, you can ensure peace of mind by confining your commitments to Government bonds, or corporation issues of the character suggested.
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