Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-06
PORTFOLIOS SHIFT
AS STOCKS DECLINE
Investment Trusts Weed Out
Issues When Dividends
Are Omitted.
BY CHARLES F. sPEARE.


NEW YORK, November 6.-There are
three tendencies in current investment
trust affairs that today operate for and
against the market for securities. These
are the shifting character of the port
folios of the management trusts as
stocks with poor future are Weeded
out and replaced with those having bet
ter prospects, the liquidation OF some OF
the management trusts and the oper-
atoms of the fixed trusts of various
types.
It is expected that when the Decem-
Der quarterly statements of the man
agement trusts whose stocks have been
listed are published, they will show
decidedly different character than that
of the last two quarterly periods. Not
only have some of these trusts been
adopting the same policy as that car
ried through by individuals in taking
their losses in order to reduce their in
come tax payments, but they have been
substituting stocks with a future for
those that have plainly indicated that
they were overexploited last year and
will be long time regaining their favor.
Effect of Dividend Cuts.
This accounts for some Of the weak
ness in shares that we're represented in
nearly every investment trust portfolio
last year. 1t is rather significant that
out of the list of 100 stocks that were
most widely purchased by the invest
ment trusts half dozen have either
reduced or passed their dividends in the
last few months. This has, under the
provisions OF investment trust holdings,
automatically eliminated them from
portfolios of both management and
fixed trusts There are nearly a score
more in this group of 100 the continu-
alton of whose dividends at the present
rates is now subject Of active discus
sion.
Only one large investment trust has
so far proposed liquidation. An increase
in this tendency would obviously bring
additional supplies of prominent stocks
into the market. Undoubtedly, arrange
ments could be made for taking up por-
tons Of the portfolio at, or under, the
market by other trusts or groups of
bankers. Where liquidation of the trust
has been under consideration, one OF
the difficulties involved has been that
of disposing of the frozen" part of the
portfolio. This frequently represents a
high percentage of the total assets
owned. An analysis of the portfolios OF
a large number of trusts reveals the
fact that, while they purchased many
marketable securities, they also involved
themselves in situations that will re-
quire a long period of time to work
out successfully.
Fixed Trusts.
The present popular form of trust is
of the faxed" type. There are var1a-
lions of this. Practically the only pub
lie demand that exists today for So
called investment trust shares Is. for
those of companies that sell their
stock against certain prescribed units
of shares in a diversified list of Ameri-
can securities. This has resulted in
concentrating buying demand on
groups of so-called blue chip" stocks
and has held them above the market
while the general average Of stocks has
been sharply declining. Lately there
have been indications OF a lull In the
demand for fixed trust shares secuIl-
ties. This has been reflected in the
weakness In the stocks in their port
folios. -
This situation is somewhat due to the
fact that dividends on popular members
of these selected groups have been re-
duced or passed and to the fear that
changes Of the same sort may a1ect
other members of these groups. Conse-.
uuently, one of the strong supporting
factors in the market in the last few
months, namely, the buying by the fixed
trusts, has been modified. One OF the
weakest of the speculative industrial
stocks lately. H. an issue that stood
tenth in the rank Of the 100 most widely
distributed issues in investment trust
portfolios.
New fixed trusts are being organized
every week. For the most part they are
designed to take advantage Of tempo
rary conditions in the stock market. One
recently announced limits its terms OF
operations to two years, during which
It expects to show a substantial appre-
citation on the shares now placed in its
portfolio. Another trust which has been
under consideration for nearly six
months and may soon be projected, has
the novel feature of a fixed trust set
up" with the stocks to be purchased
those of the management trusts whose
current prices range about Is per cent
under their present liquidating value.
Copyright, 1900