New-York tribune., 1920-12-25
Seaboard Air Line Preferred

Ouestson-Very recently purchased out
eight 400 shares OF Seaboard Air Line pre-
terred Tor long pull at prices ranging
from - to l3. did so on the basis Of
the belief that inasmuch the new trans
peVtatlon act permitted railroads to ha We
rates that would net them 5ls to per
cent on their appraised valuations I,
Mo1Iu oe reasonabie to assume that the
preferred stocks of railroads. such as Sea-
board would likely sell 10 or 20 points
hlgher when the general move in rails
taxes place The price Of 10 seems to be
believe every year the stock has touched
20 or higher, and as I wanted to buy out
risht some railroad stock at price which
would give me several hundred shares |
could und no other stock, ii seemed
which offered so good chance for an
or 10 point move if held for a couple or
lose any money on my purchase? 1t Is
ho' TOO tats to s,t out If take a little
1883. Would vou advise such Il course? Is
there any Likelihood of this road going
INTO receivership? Should nots the new
RS Il Numinins act help this road am
N a position to keep my funds tied up In
adYance.-A. B. C.
Answcr-The Seaboard Air Line is
one Of the roads Of poor credit. 1t went
tnrouTn recelvership a few years ago.
and was reorganizcd. Its present cap4-
tailzatlon is $2s, ,S9i 400 non-cumulativo
p per cent preferred and $3 ,0l9 400
common stock. Its funded debt is
Sl27 24S,595, and it guarantees SIS
$4,000 of bonds and has obligations
amounting to $l,993,o0o Of controlled
and affiliated companies. 1t Will
therefore be seen that the road is
we'll supplied with mortgages. Under
the gos guaranty the com
pany received an amount which, af-
ten payment of charges, was eQuiva-
lent 20 l.52 per cent on the 4-2 per
e. Preferred fer 1913 and 1919
Since August 81, 1920, when the road
has been operated Independent y,
gross earnlngS-- as we'll as net earn
'Hgs, have shown increases. Thus, al
lowing fpr other income, charges
etc, net income for the year ende.
December 81, 1920. would be equiva
lent to LAC per cent on the % per
cent preferred and nothing on the
common stock This is based on earn
October 81, 1920, after allowing for
estimated seasonal variations. Net
operating revenue for Sep .ember, 1929,
was Sal9,319, against a deficit of $37 :
6l2 for September, 1919. October.
1920, showed $597 $40, against $234,-
fl3 for October, 1919. If the company
earns net 100000 a month it VII.
mean 1920 900 The guaranty
amounts to $s.?2oo25. SO it will be
seen that unless there IS cons iderabl G
improvement the earnings viii! not y.
suIilcIent TO cause any very hulish
feeling on the part of stockholders
Much depends upon the p.opcrty vai-
uatlons upon which rates are to be
based in order to return 5As per cen.
or per cent. We cannot attempt to
say what the road will be able to ac.
comp!ish. The new rates must be
given a chance before we jump to
conclusions. 1t is our opinion that til
~aads will get square deal, bu'
where road is as heavily mortgaged
IS this one we cannot look Lpon the
stock as ANYTHING but pure specu
lation. 1t depends upon your position
as to whether you should hold your
stock. If you can afford to spccu ate
and believe the road will improve
under the new legislation you may be
rewarded.