Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-04-10
PUBLIC UTILITIES
IN MARKET FAVOR
Group Has Enjoyed Spotlight
of Investment in Re.
cent Operations.
By PRESTON S. KRECKER.
Special pispateh TO The star.


NEW YORK, April l0.-The popu"
larity Of public utility issues has been
one Of the significant characteristics
Of the stock markets for some time.
They seem to have supplanted the
place once held by railroad stocks IN
public interest.
The shift of investment Is indicated,
not only by the increased volume Of
dealings In utilities and the attitudes
to which prices have been bid up, but
also by statistics Of investment COM
pany portfolios. Reports of such COM
panies reveal q marked preference for
stocks Of light and power, gas and
An analysis Of investments Of 90
trusts, with capital resources aggre-
eating one and half billion dollars,
shows that 3I.e4 per cent Of all COM
mon stocks held by them were utilt-
ties and only il.3l per cent were
rails, while the balance Of Ss.SS per
cent was divided among bank and
insurance stocks and miscellaneous
industrials.
Favorable Features.
That demonstrates the popularity Of
public utility stocks Is more than an
investment fad. It Is based on q
combination Of favorable circum-
stances which point to the utilities as
desirable securities. One Of the most
important of those circumstances Is
the protection from condscatory rates
which court decisions have extended
to public service companies. The ma
jority Of those decisions have been
rendered within the last decade prior
to which utility stocks were far from
enjoying their present-day vogue.
Public utility companies for years were
regarded as legitimate victims Of poll
ticians who curried popular favor by
forcing unfair rates upon them. United
States Supreme Court decisions have
changed all that.
The outcome has been that rates
can be established which assure q
reasonable return on invested capital.
That guarantee from confiscation
profits for utility companies. But it
so happens that the use Of power
is expanding consistently year by year.
The Increase in output Of electric power
by American companies was 100 per
cent from 1922 to 1929, or from
10000, 100000 kilowatt hours to more
than $4,000. 100000. Revenue from
sales Of electric service had COM
menSurate ooo growth, jumping oo6 from SGo
in 1929. the latter figure being partly
of electric service aggregated but
$3.50, 9e1, 900.
The enormous increase since pre-war
days has been due partly to natural
growth of industries but more so to
greater proportionate use of electric
power in industry than formerly.
Mergers.
Mergers of utilities have been factor
in their popularity. The speculative
to be merged invariably causes rising
prices to discount" the merger and
many rich profits have accrued to
fortunate SPECTATORS in that way. A
more solid basis Of appreciation iS the
economies in production realized by
large scale operations directed through
a concentration Of management and
capital, together with increased EN-
cheney Of service and, from the con-
sumner point Of view, lowered rates TO
stimulate consumption.
Consistent and growing earning
power has characterized power and
light as well as telephone companies.
An analysis Of net earnings Of corpora
lions in 1929 shows that operating in
come Of 90 telephone companies for IL
months Of 1929 was 7.26 per cent higher
than for the corresponding period OF
1928. The net earnings Of 95 other
public utility companies for the same
period, moreover, were 1886 per cent
higher than in 1923.
Strong public utility companies have
compared with sound banks In that they
make money all Of the time. BY the
same token their stocks are comparable
with bank stocks In desirability.
(ConyriRht, 1901