Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-08-02
INVESTMENT TRUST
ISSUES ANALYzED
Comparison Made Between
United and American Foun-
ders Based on Reports.
BY CHARLES F. sPEARE.

NEW YORK, August Enough time
has elapsed since the publication Of the
six months report of the United Found
ers' Corporation and of the American
Founders Corporation to permit of q
careful analysis Of the financial position
and portfolios Of these two interrelated
investment trusts" Having done this,
the question with the Todd per cent of
American Founders shareholders who
exchanged their holdings for United
Founders, on the basis OF three shares
of the one for two of the other, is
whether they made good bargain.
ThiSwas evidently in the mind of the
cashier of a small bank In Northern
New Hampshire, on whose desk the
writer found report Of the United Cor
poration the other day, and who asked
as to the feeling In Wall Street toward
its stock.
Investment Favorite.
The old American Founders Corpora
ton has been favorite in New England
of a large body of investors and has
held about the same position in its
class as does Atchison among the rail-
roads, American Telephone 81 Telegraph
OF the public utilities and United Fruit
In the industrial group. It was a pio-
neer in its field and received much of
its early financial support from New
England capital, to which it was ex-
tremely good over a period of years in
providing high rate of return on the
amount invested. Latterly, however, the
distribution became more national in
scope, so that today there are about
10000 shareholders in the United
Founders Corporation throughout the
United States.
In the past few weeks United Found
ers stock has been under pressure
About 100000 shares were sold on a TO-
point decline from 1884 to 1917, com
pairing with the high for the year of "a
A considerable part of this has been
traced to New England investors, who
presumably were among the original
ana satisfied holders of American
Founders Corporation stock, but had
become puzzled shareholders In the
United Founders Corporation,
Ratio Of Decline.
The ratio Of decline In American
Founders stock has been about the same
as that IN United Founders. From a
market standpoint the position of the
shareholder who made the exchange is
about the same as that of the ut1depos-
tied stock. An analysis Of the two re-
ports, however, clearly indicates that
from the investment point Of view there
Is a decided difference, and that In
making his exchange the holder Of
american Founders Corporation shares
mas given up an investment issue for
one in which the contingent element is
quite prominent. Slow but general ap-
probation of this fact has been develop
ing, and out of 1t has arisen no small
part OF the liquidation in United
Founders.
The reports indicate the difference in
the policies of the two companies to-
ward immediate or future earnings, in
mat those OF American founders In the
half year were about per cent per
annum on the capital invested In the
securities and in other income assets
compared with around 4 per cent for
United Founders.
An even greater difference Is to be
found in the more LIQUID character of
the American Founders portfolio than
in that possessed by United Founders.
The former is in true sense an in
vestment trust Its holdings are widely
diversified, so much so that In order to
carry out the terms of the indenttlre
which compel holdings in 400 different
issues, the list of bonds is stretched out
to include many 81 900 and $4,000
units. In the United Founders port
folio there are almost no bonds listed,
but enormous blocks Of stocks which
represent major partnerships in cor
porations which, from the standpoint of
actual ltquidating value, are difficult to
assess at their true worth.
Yield Is Substantial.
The high common and dividend for
eign bonds and stocks give a substan-
tial average yield to American Founders.
Large participations In common stocks
and warrants in rlon-productive securi- |
ties were taken by United Founders last |
year at the height of the bull market. |
1t is assumed, of course, by the United |
Founders management that eventually |
the appreciation on these securities will |
more than offset their present failure |
to contribute earnings to the company's |
treasury
The two corporations, representing |
the largest aggregation of investment |
trust capital under one management in |
the United States, are typical of oppo- |
site SCHOOLS of policy in investment |
trust affairs. 1t may be that in time |
those Who were induced to part with |
American Founders stock, which had |
had an almost uninterrupted rise for |
years, and to take in exchange United |
Founders stock, which deprecated in |
market value nearly 10 per cent be- |
tween March and the latter part of |
July, may be fully satisfied with their !
bargain. The picture was considerably |
clouded for time after the United |
Founders report was published. 1t has |
grown brighter with the events that |
have taken place in the past "a hours |
in the banking and investment world |
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