The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1923-01-29
STOCK
SEEN AS GOOD
RISK
George E. Roberts, National
City Bank Chief, Says They
Are Safe Investment.
By w. s. COUSINS,
Copyright, 1928, by Cosmopolitan
o. NanuS

factor in the rehabilitation of the
railroad systems of the United
States?'
l put the question to one of the
foremost economists in America,
George e. Roberts, vice president
OF the National City Bank, one of
the largest reservoirs of credit in
this country. He pushed aside a
number Of important documents on
his desk at 81 Wall street, and
answered:
by all means an enlightened
public opinion, leading eventually
to the removal of a number of
handicaps under which the roads
are operating at the present time.''
How do you feel about railroad
securities at the present time, and
would you recommend their plIr-
chase by investors?"
Il would, most assuredly," Rob-
erts answered. IT believe there are
golden opportunities for profit to
investors who use proper discrim-
ination. in their selection"
Explains Valuations.
Roberts but recently returned
from an extended Western trip,
during (which he made a special
study Of new problems in railroad
operations and finance.
"A great deal has been said re-
Gently" he remarked, about the
matter of valuation of the railroad
property of the country and a great
deal of confusion has arisen as to
its significance. We still hear
about watered stock and the neces-
sity for earning dividends thereon.
AS a matter of fact, the Inter
state Commerce Commission has
taken no cognizance whatever of
the outstanding stock and bond is
sues of American railroad corpora
tions in arriving at their published
figures on valuation. and most
economists believe that they have
by no means been flattering to the
railroad companies.
Yet, what do their published
figures show? They show that,
for the leading trunk lines of the
country, the actual property valua-
ton is sufficient to cover all out
standing bonds and preferred stock
at par and leave 100 cents on the
dollar for some of the common
$40 a share in the listed market"
But suppose that the carrier
systems, as a whole, were unable
to make things go and it became
necessary for the Government to
take them over" | asked, where
would~the common stakeholder fit
in?"
I'm any such an eventuality the
listed stocks of railroad companies
should be gobbled up in quick
time, not by investors, but by
Spectators who would have an ex-
cellent opportunity to make some
quick profits; for the assuming of
railroad properties by the Govern
ment would double and triple the
value of some Of these outstanding
common stocks.
For this reason, the Government
surely would not repudiate it's own
figures on valuation of railroad
property, and even IL it shaved them
down to a considerable extent, much
higher values would be realized for
the stocks to which ! have re-
ferred."
How about such roads as New
Haven, st. Paul. Erie, and others,
which are having hard shedding at
the present timer"
These are what you would call
main trunk line systems and must
of necessity be the first to recoup
themselves under conditions which
we have theoretically been discuss
Ing" said Roberts.
unfortunately, figures for some
of the big railroad systems prior to
1900 are not readily available, and
1t Is, therefore, impossible for them
to 1refute all this talk about watered
stock, but from studies which / have
made, ] am convinced that the out
standing stock of the leading rail-
road systems represents larger
portion Of real money actually paid
in than people generally believe.
Let us take one example:
Cites Example.
1.-THE Chicago, Milwaukee and st.
Paul company in 1900 had out
standing $21s,74s,5o0 of common
and preferred stock and bonds of
which $47,000,00O was common
stock. It's total capitalization, in
Guiding bonds. is now 372,177,855,
of which $116,34S,200 is common
stock. Sixty per cent Of all its COM
mon stock has been sold since 1900,
ury. This company has paid no
dividends upon either preferred or
common stock since September,
1917. The arrearages on these
dividends In five years amount to
more than all the common stock
issued prior to 1900.
There IL II good deal of mis-.
apprehension as to the provisions
of the Esch- Cummins law. While
it suggests ga per cent as a rea-
sonable rate of earnings for the
railroad systems 1t makes no guar
antee whatever TO individual roads.
1t helps the smaller roads, how
ever, by taking the excess earnings
over 5h per cent from the strong
roads and creating a fund from
which the weaker roads may Dor.
row for building up their equip
ment. If the law is repealed it
will hurt tho weaker roads more
than it will help the strong ones
| Railroad managers are only hui
| man and they cannot accomplish
| the impossible. At the present time
we hear a great deal about Govern.
ment operation of the roads, par.
| ticularly from sources outside OF
the roads themselves. 1t may even
tually happen that even the railroad
managers also will embrace the doc.
| trine of Government ownership, and
| then the big problem will he thrust
upon the country for solution
Then we would be facing a fact in
stead Of a theory. But I feel hope
1 u Il