Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-04-18
INVESTMENT TRUST
PORTFOLIOS GAIN
Analysis lust Published Does
Not Take Recent Profits
Into Account.
BY CHARLES F. sPEARE.

Special Dispatch to The Star.
NEW YORK, April 18-The most
striking feature in an elaborate analysis
that has Just been published of Ameri-
can investors trusts of the manage
ment type, covering the calendar year
1929. is the extent of the depreciation
in the portfolios of these companies
compared with their showing at the
end of 1928.
This reflects, of course, the heavy de-
cline in securities in the months Of
September, october and November, OF
which a portion was recovered before
the end of the year. However, the
situation on December 81 was that 81
of the reporting companies were carry
ing their securities at $3.50, 767 ,445 be-
low cost. The effect of this was TO
produce a net loss for the IL months
by these corporations of 81 per cent
on the capital invested.
Picture Has Changed.
Fortunately these same investment
trusts, and as many more classified as
trading corporations and finance COM
panies, can show quite different pic
ture today. With the rise In the last
three months in all of the stocks APP
pearing prominently in the portfolios
of the trusts ma ority of them have
not only recovered a large part of the
shrinkage experienced last year, but
quite a number are now able to show
security values in excess OF cost. This
has brought up the price of their
securities to the figure at which they
were sold to the public. There are,
however, many of them whose market
quotations continue to be listed de-
cidedly below what is known as liquidat-
ing value.
Emphasis has frequently been placed
in these articles on the unusual feature
in all investment trust reports for 1929
Of the high proportion of profits from
sale of securities represented by the
total income for this period. This is
fully Substantiated by the figures APP
pearing in the O'Neill analysis which
shows that such profits in the COM
panies listed were well above the in
terest and dividend incomes from their
portfolios.
Many Take Profits.
For instance, 81 concerns of the gen.
eral diversified investment trust type
took profits last year of sac, 1910 902,
compared with their strictly income
revenue OF $26 1908, l56. Again 1t is
found that % finance, trading. man
agemert and holding companies had
profits from sales of securities of $64,-
50S, 387, as against SOL ,296,758 from
dividends and interest.
In the case of one prominent mem
Der of this group the ratio of profits
from securities to income from invest
ments was about three to one. In an
other il was IS per cent more in the
one item than in the other. One of
the largest aggregations of capital EN-
ployed in the investment trust business
showed total income of $31 735, 149, of
which $17,609,94 was derived from
profits from securities.
The only group showing greater
income from interest and dividends
than from security profits was that
represented by 10 specialized invest
ment trusts whose direct return was
about so per cent greater than that of
increment on securities held.
Margin of Earnings.
Another suggestive feature of the
analysis was the high coverage of in
terest on the debenture bonds issued
by the trusts under review. This
amounted to nearly nine and one-haH
times interest requirements. In spite
Of the fact that the margin of earn
ingS over bond interest is so large there
is probably no group of fixed interest
securities in the market that has been
so sluggish as investment trust deben-
lures or continues to sell on such a high
yield basis. This is equally true of
their non-convertible preferred stocks.
They have failed to advance in SYM
pathy with practically every other cor
poration group of similar shares.
Copyright, l9So)