Basic Industries Disadvantages of Shares

Basic Industries Disadvantages of Shares

Basic industries Disadvantages of shares in the basic Industries

(1) Many of the sources of supply and overseas production are in underdeveloped countries with unstable governments with the ever-present risk of political upheaval.

(ii)The heavy capital expenditure in developing sources of supply, research and overheads.

(iii)Over-capacity, depressing prices, which so often persists,

(iv)The possibility of nationalisation of steel, Britain's basic heavy industry,

Conclusion

Consideration of the advantages, especially the dependence of all other industries on the 'basic' section, may lead you to conclude that the basic industries should form the largest percentage, after the consumer goods, of your portfolio. Such a percentage would be in the vicinity of 25% as against 35% for the consumer goods.

The leaders in basic industries are: Textiles: Courtaulds textiles - chemicals - paint concern. Largest in man-made fibres. Coats, Patons and Baldwins (wool). Paper: Bowater Paper Corporation and Reed Paper, Steels: Two groups (a) mainly sheets and plates, Steel Company of Wales, John Summers (also metal sections); (b) heavy steel and pipes, Stewarts and Lloyds (steel and iron tubes), South Durham Steel and Iron (pipes and plates), Dorman Long (plates, structural sections and beams), Colvifles (heavy and medium plates and sections mainly for ships, and sheets). United Steel, the most important of all, makes all types of steel apart from tubes and wide strips, and manufactures stainless steel, plates, rods and bars.

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