New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1910-08-07
ALLAWAY'S REVIEW.

Sensational weakness az the oeSlnnlng
of the week-at the weeks end strength.
bu. duluess. Only spectators Of lesser
calibre are attempting anything. The
public's aloofness becomes every day
more pronounced-and the significance
of it clearer.
From this time ACKNOWLEDGEMENT
so. perhaps-sanely so. beyond any
doubt-strength in the stock market
must depend upon intrinsic value, de-
pend upon certified facts IL is not
proba bIe-it is scarcely possiole-that
any general buying movement can aP-
pear in the market as whole. Inere
will have TO be basis-specifc reason
for the buying of anything This Is nat
ural enougfl-anytling else would be
innprudent. exceedingly difficult OF de-
fence. That the market is full of stocks
exceedingly cheap is certaiH-is not DIS
puted by pre-eminent bears Thus we
seem approaching a market period
wherein money can be made cniefy'
not only. through the CONSIDERATION OF
specific OBSERVATION-DISCLOSURES from the
market as a whole. And, pursuant 70
this view, II will be among the purposes
OF this review to analyze and present
what seem to be exceptional as current
investment opportunities
In such a list appears the first pre-
ferred stock Of the Erie Railroad Com
pany. On January 1st, 1900 Eries IN
terest bearing debt, including the Penn
syIyania Coal collateral bonds. was in
round numbers S17S,O0U,OOo On June
80. 1869, ii stood at 1871 ,Ooo,oOo.- an in
crease of IS millions in nine years Inc
AZ millions Of per cent first preferred
stock. 10 millions Of 4 per cent second
preferred stock and liz millions OF COM
mon stock remained unchanged Dfvf-
dends commenced with IL per cent on
first preferred stock in 1901. 3 per cent
in 1902. 31b per cent in 1903. such dtvt-
dends requiring So, S31, 392 and leaving
s12059. PAL of earnings above first
charges Of those three fiscal years.
For the next three fiscal years. 1901
19O5-19O6, full dividends Of per cent
were paid OH first preferred stock. re-
auiring s., IA, 0SS, and leaving Of the
three years earnings above first charges
IS, 22S,113 For the fiscal year 1901
eO3, 6jS. or three times the arno-nt re-
quired for 4 per cent dividends on the
first preferred stock. yet only > per cent,
or 1891, SiS. was paid. leaving S4,945,S10
and no dividends have been paid since.
The Erie company has had in the last
nine fiscal years the proceeds OF S3S.-
100000 increased interest bearing debt,
and has also had S25,OO00O of earnings
remaining undivided, after paying So
$50. 32S in dividends on first preferred
stock and 81, 92O, 600 on second preferred
stock. making a total of Ss3.OO0,000, less
discount on bond sales, which has been
available for improvements and addi-
tions to the property. Gross earnings
for the year ending June 80, 1909. were
$50. AL 1852 and net charges S10.O1I. 500,
leaving a balance Of S3.092,646
For the fiscal year ending June 80.
1910, gross earnings approximate soo,-
100000, while net first charges should
not exceed SIC, 100000. Improvements
and additions to the property are practi-
caIly completed and in use. Expenses
of operation and maintenance may.
therefore, be reduced 10 a minimum
ratio.
There is thus, no reason why dtvi-
dends on the first preferred stock may
not be resumed.
They are now three and one-half years,
or S1.Ooo.0oU. in arrears The contract
of reorganization creates an obligation
to pay these arrearageS before dividends
can be made on the second preferred.
About S14.O00.O00 of three year 8 per
cent. notes become due next April. and
nxlIll h8lll L-ria -
cent notes fall due next December The
Public Service Commission has recently
authorized the issuing of S3OOOOuu
twenty year per cent. collateral trust
bonds. which may be sold at not less
than SI1a. and proceeds applied 70 the
notes falling due in April. 1911. and to
the completion of improvements and ad-
ditions These new IS are good bonds
and cheap al the price named The prop
erty is earning 100000 more than re-
uuired to cover interest thereon Th5
margin of safety is large.
In such a margin Of safety lies that
which makes Erie first preferred attrae-
tive-for Erie first preferred Is bound
eventually TO return TO dividends-ex-
pressing here the Judgment of no less an
authority than Charles Barrett, the emf
nent financial analyst. Erie first pre-
ferred is representative of a list that Is
fairly long of shares (whatever the
course of the general speculative mar
keD sure to give wholesome account OF
themselves. In such a list are issues Ike
Denver and Nickel Plate among the radl-
roads, Brooklyn Rapid Transit Of rhe
fractions, and Rubber and Vulcan De-
timing among the industrialS. These
are all earning money beyond what v
shown in their quotations They have
not been overwhelmed by incessant Sc
curity issues. In the list. too. are num-
Der of what Wall Street denominates as
Hawley stocks. Chicago and Alton. nota-
bly,. Chesapeake and Ohio may go down
for a good many people have it who
don't need it-but most OF the Hawley
stocks that have been lquidated are at
figures that most ultra bears upon them
did not expect. The Hawley situation
is a unique situation Though dividends
formerly were earned. il they are not
earned now they are cut down. complete
| ~ passed. IL necessary. professional
Wall Street found it difficult to believe
| this of any management. Hawley Is
| surprise. That his policy Is the right
| policy good sense and common honesty
J do MOI TOubt But none the less "