Many contemporary investors look to the past for insight. This historical look back offers some intriguing information about investments that performed well in decades past.
Closely allied with insurance stocks, which are fairly safe investments, are bank stocks, which share many of the same characteristics with bank stocks. They have an added attraction in that they make money whether interest rates are up or down.
Higher interest rates mean more income while lower rates mean more business. Especially attractive are stocks of New York City banks, which appear to be on the threshold of another major growth under the recently enacted law allowing their expansion into the fast-growing suburban areas of Nassau and Westchester Counties.
And, then, we have utilities as one of the traditionally defensive securities. As a group, growth prospects for the electric utility industry seem very favorable. According to a study in 1959 by Hemphill, Noyes & Co., the sale of electric energy appears to be in a long-term growth trend. Population growth, coupled with automation of industry, the home and the farm, are compounding the increase in use.
Since 1929, the average use per residential customer has increased from 502 kilowatt hours to 3,366 in 1958. Besides, the industry is aggressively exploring new major markets such as the introduction in Connecticut of electrically heated homes on a mass basis.
According to a Barron's story entitled, "Heating with Electricity," by Owen Fly, not one of the 100 split-level and ranch homes in a Bridgeport, Conn., housing project called Palmers Estates had a furnace. Instead of the traditional radiators or hot air vents, the houses were heated by electric glass panels installed in each room. Among advantages listed were cleanliness, even floor-to-ceiling heat, a healthful humidity level—and at a cost promised to be competitive with other fuels.
"Climate control" in the home offers another vast potential market for electric energy because presently only 1 per cent or so of the 50 million homes in the United States have central heating and cooling systems. Even a modest rise in that percentage would mean substantial growth for the electric-utility industry. This growth would assume a stupendous proportion if the industry should succeed in extending "climate control" to industries on a major scale.
Like any other industry, electricity has its problems. Its chief competitor is just as aggressive in exploring market expansion. You must have heard video's charming Julia Mead unrelentingly pleading for "Heating with Gas." The gas industry has been doing very well since winning the crucial Supreme Court reversal of the Memphis ruling which had, in effect, destroyed the long-standing procedure under which a pipeline company could file for higher rates, then collect money according to these rates under bond, subject, of course, to refunds if the Federal Power Commission should so rule. The Memphis reversal was hailed as the end of one of the more serious threats ever faced by the industry.
Among the more attractive gas equities is Suburban Gas, which was the first LP-gas distributor to enjoy a New York Stock Exchange listing. Sales have soared 500 percent in the past decade, with profits compounding at an average annual rate of 40 percent. That is the kind of growth generally associated with electronics instead of the more stable utility companies. Southern Natural Gas is another equity with a brilliant future. In addition to dynamic expansion in its own field, it possesses quite a few hidden values, including its ownership of 172,000 shares of a promising company named Air Reduction.
While the past doesn't predict the future, especially in a volatile place like the stock market, understanding growth industries of the past may help you become a better informed investor.