’WARE OF THE SALESMAN

Sun (Auckland), Volume II, Issue 479, 8 October 1928, Page 12

’WARE OF THE SALESMAN

CHOOSING INVESTMENTS

DIFFICULTY OF SELECTION By “Noon Call” Quick to take advantage of the improved financial position of the country and the increased capital available for investment, company promoters have been active over the past year. With the market for recognised Stock Exchange securities sustained at a comparatively high level, New Zealand has proved a rich field for the enterprising share salesman. The past 12 months has seen several large issues of shares and debentures offered in both new and old-established concerns to the New Zealand investor. At the moment several attractive propositions are on the market, and it is safe to predict that the next 12 months will see a big bid made by company promoters for the surplus capital that is bound to accrue with the continuation of the healthy state of the markets for the Dominion’s primary produce. Another factor that is going to play a big part in investment circles in the near future is the growth of invest-ment-trust business. This class of business, allowing as it does opportunity for the small investor to participate in the advantages accruing through a wise spread of holdings, previously only possible for the capitalist, has made substantial progress in both England and America during the past decade. In New Zealand, apart from one or two more or less private concerns, it was little heard of until within the last three months, during which two large trusts have been formed in Australia. Both are now seeking support in New Zealjmd. When considering investment trusts the question of the personnel of the directorate and management is one of paramount importance.

With the wide selection available at the moment it is not to be wondered that the average small investor is at a loss to know where to place his capital to best advantage. It is seldom possible for him to follow every phase of the market. Advantage of Gilt-edge Stocks

For those desiring to cut risk of loss down to a minimum there is no doubt that gilt-edge stocks listed on ’Change offer the best proposition. The holder is assured of a steady return, although there is no chance of increased dividends in the future but, against that, the risk of loss is negligible.

Banks, insurances and, in fact, any sound industrial taken up on the advice of a well-established member of the Stock Exchange have proved reasonably satisfactory in the past, in the majority of instances bringing in substantial returns to the investor who has been prepared to hold over a period of years.

It must be remembered that all companies listed on 'Change have been passed by the committee as being run on lines satisfactory to the small holder and offer, in the opinion of the Stock Exchange advisors at the time of examination, reasonable prospects for success. In addition, most progressive brokers make it their business to keep in touch with the financial progress of such companies. Another point to be remembered with regard to scrip taken up on the advice of a member of the 'Change is that it is imperative that members, if they wish to do any good, should build up a connection of satisfied clientele. This is not possible where the broker’s advice is found to be unreliable.

Of course, there are many investments offered outside exchange circles which turn out very satisfactory. In fact, the greater number of new companies are floated without the aid of members of the exchange, one of the principal reasons being that members are rather chary about giving their names to new concerns on the grounds that experience in the past has proved that, while prospects at time of flotation may seem all that is desirable, subsequent management and maladministration frequently prove a serious check to progress. Shares in such instances naturally fall below par on the open market, and the displeasure of the holders reverts to the broker who advised signing up.

Company Promoters’ Propositions Regarding the many propositions offered by company promoters to-day the writer is not prepared to make any individual comment. Certainly many will turn out quite satisfactory. On the other hand, as in the past, so now, there are some that will prove but sinks for the surplus capital of the guileless investor. The latter point has been proved over the past 12 months, the writer having in mind the scrip of one concern issued with a highlypainted prospectus which, while efforts are still being made among the ranks the general public to write up the balance of the authorised capital at par, cannot be unloaded by regretful holders at a 50 per cent, discount. Many other instances of a similar nature could be cited where investors have bought on the advice of a commission salesman without making considered inquiries in circles qualified to give advice. Shares in new concerns certainly have an attraction, offering as they do the chance to get in on the ground floor on what shows prospects of becoming a very satisfactory profit-mak-ing concern. In making a selection the investor has only two or three rules to guide him. Firstly, he should secure the advice of an established broker regarding the past history of similar ventures, and get his opinion on the prospects of the present one. The progressive broker is in touch with every important factor operating in the financial and commercial circles and can generally give a very sound opinion on the prospects of any new concern. Secondly, the standing of the promoters and the provisional directors must be considered. Thirdly, the question of negotiability is one of vital importance. Unless the prospective buyer can see a continued steady demand for the class of scrip he is investigating it is fallacious to go further. After all, money placed in investments, to the average investor, should merely be regarded as capital placed at short call to be withdrawn whenever opportunity for greater return presents itself. The writer could quote numerous instances of concerns floated with glowing prospectuses over the past year or so where the scrip, due largely to the fact that the public have not gained confidence in the class of business engaged in as profit producing cannot be overloaded now at a big discount. The investor who signs on the “dotted line” solely in response to the plea of a commission salesman or, even after a perusal of the well-written prospectus, without seeking advice in circles competent to give it is looking for disillusionment and generally gets it. NEWSPAPER PROFITS During 1927-27 “Truth” and “Sportsman,” Ltd., showed a net profit of £45,652 against £43,758 for the previous year. After providing for the preference dividends, the directors declared an ordinary dividend of 12* per cent for the year, they carried forward £12,656, against £11,78*6 brought down.