Research and Wall Street SYDNEY B. SELF Wall Street Journal, New York, N. Y. HEMISTS generally know v e r y little about Wall Street and probably do not like it much. Wall Street, p r a c t i c a l l y speaking, knows nothing about chemists but is very fond of them. Chemists are no doubt wise to stick to their test tubes for it has been said that a man cannot serve both God and Mammon, but Wall Street-that is, the f i n a n c i a1 community-has good reason to like the chemist. T h r o u g h r e s e a r c h the chemist has created what is today one of the most stable and a t the same time one of the most forward Iooking industries in the country, which produces mounting profits and generous extra dividends. Although there are a few wild animals running around Wall Street seeking whom they may devour, most of the financial community is composed of decent fellows whose job is to find safe and profitable places to invest the s a v i n g s of t h e i r clients. Since these clients include investment trusts and insurance companies as well as individuals, their funds comTRADING FLOOROF THE NEW YORE STOCK EXCHANQE prise a good part of the savings of the Copyrighted by and printed with the permission of the New Y o r k Stock Exchange nation, and the problem of placing them where they will grow is difficult. normal. Research is the‘primary cause of the difference beMen of finance probably do not fully realize the value of research, but they have a clear vision of its results as reflected tween the two groups. There has been no single major product that has pulled us out of the last depression as the autoin the satisfactory earnings of the chemical producers and the action of their stocks on the exchange. Chemists, on the mobile did after the 1921 depression. Research workers in other hand, in their concentration on the immediate job perall fields, but most notably in chemistry, have developed new haps do not always appreciate the financial value of research methods, new technic, and new products that have made obbut, since money makes the wheels go round, industrial resolete a large part of the old routine. Industry has not yet search must in the final analysis justify itself in income accaught up with the advances made in the laboratory during counts. the depression, and the public is still farther behind. Further expansion of the chemical industry should come as some This, research has certainly done. However theoretical or of the more recent products of laboratories attain greater intangible it may appear to the uninitiated, the record of the general use. security markets shows clearly that the great industries leading in research work have also led in the recovery from the The leading chemical companies this year have reported depression and stand first in stability. earnings well ahead of the boom time profits of 1929. This record showing in earnings has been achieved in spite of the A few years ago many serious people could be found who fact that the average of chemical prices is still close to the believed that America had finished growing. “We are lowest Ievels in history. It has been made possible directly growing old,” they said. “There are no more frontiers and as a result of research which has improved technic so as to cut no new industries to pull us out of the slough of despond.” costs, found new uses to increase volume, and developed new They could not see, down in the depths of 1932, that research products when the older ones began to approach a t least would open new frontiers not only in one but in a hundred temporary limits in profits. industries. Competition is keener than ever before. Not only must costs be lowered and more efficient and better ways of doing things be found, but new products to widen markets LET us look at the record of the chemical industry in the must be developed. Since the black days of 1932 some comstock market. Has research paid? Leading chemical stocks panies and some industries have come back to peaks of prosover the past few years have done relatively much better than perity even higher than in the old boom days and are looking the general run of stocks. forward to a still brighter future. Other companies and inTable I shows the action of leading chemical stocks on the dustries that have stuck to the old ways of doing things and New York Stock Exchange since 1932 in comparison to the have depended on natural recovery to bring their business Dow-Jones averages which reflect the action of the market as back have not recovered even to what used to be considered a whole as revealed by a group of leading stocks. 9
C
INDUSTRIAL AND ENGINEERING CHEMISTRY
10
According to the table, in the first three years of market recovery, chemical stocks advanced from 1.3 to 4.2 times as much as the general market average. From March, 1935, to November, 1936, the advance was not as striking although most of the stocks in the chemical group held their own in spite of the large advances they made earlier in the bull market. Four out of nine of the stocks in the table did better TABLE I Company
-PriceJuly,
1932 31E/s 451/z 7'/1 48/4 22a/4 148/r 101/4 16'/~ 16a/4
March, 1935 1081/* 129 36'/1 18 72 88
Ratio of Rise to
% Rise Dowfrom
1932 243 172 386 278 390 293
Jones Av.
Price, Nov.,
1936 346a 241 77 168/4 132 180
VOL. 29, NO. I
earnings available for dividends of most of the leading chemical companies are also close to or above record levels. Table I1 shows the record of dividend payments of a group of leading companies in the chemical group since 1929. Stocks marked with an asterisk have been split up since 1929, and past dividend payments have been adjusted to the present number of shares. Air Reduction was split three for one this year; Dow Chemical was split five for one in October, 1929, and one and one-half for one in July, 1934; Monsanto Chemical was split two for one in July, 1929, and two for one % Rise Dowin April, 1934.
%2:zf
from
1935 220 87 111 -7
Jones Av.
OF THE eleven companies listed, all but one, American Cyanamid, which was caught in the middle of a major expansion p r o g r a m , p a i d common d i v i d e n d s t h r o u g h the depression. Five of these companies, Air Reduction, Dow l?i:/: 173 i:g 19348;f:O % 1.5 C h e m i c a 1, du Pont, Hercules Powder, and 1.3 1041/z 134 Monsanto Chemical, paid larger dividends in 1936 than in 1929. Union Carbide's recent declaration of 80 cents quarterly also places it than the average market in the past year. (American Cyahead of the 1929 dividend rate. Air Reduction, DOW,and anamid and Dow were not included because figures were not Monsanto paid out more in 1935 than in 1929. Allied Chemical has maintained the same rate for many years. available.) Atlas Powder, du Pont, Hercules Powder, and Monsanto Mathieson, in the heavy chemical group, has not recovered to 1929 levels. C emical all did better than twice as well as the market averOn the whole, the best dividend records have obviously ages in the recovery. Union Carbide and Air Reduction kept been made by the companies leading in research. Air Reducwell ahead of the general advance. Allied Chemical and Mathieson Alkali, which have not laid as much emphasis on tion, while undoubtedly fortunate in its industrial position, research as some other companies and deal mainly in heavy has kept in the forefront by its research staff. chemicals, just held their own with the general market. Allied Chemical has had an excellent financial record for Commercial Solvents, which did about twice as well as the the past fifteen years although it has not been a leader in reaverage in the first period, has fallen behind the market dursearch, but, in comparison to du Pont which was about the ing the past year because of particular circumstances affectsame size as Allied Chemical in 1921, its record is less brilliant. Allied Chemical this year paid around $14,000,000in common ing this company. Aside from stock market appreciation, the long term individends; du Pont paid well over $60,000,000. It is true vestor has fared well in chemical securities, receiving a fair that a t least half of du Pont's income is currently coming income through the depremion and record dividends in this from its General Motors investment, but its chemical income is also running far ahead of 1929 and far ahead of Allied year of recovery. Incidentally, although the new tax on unChemical's. General Motors, too, is an outstanding example distributed income has affected dividend policies this year, of the utilization of research to its fullest extent by a great corporation. TABLE I1 DOW,Hercules, and Monsanto are among the 1936 1935 1934 1933 1932 lg31 lg30 lg2' leaders in research, which has benefited stock$ 2 . 5 0 $ 1 . 8 3 $ 1 . 5 0 $1.25 $1.00 $1.50 $ 1 . 5 0 $ 1 . 4 1 Air Reduction* 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 holders materially through the widening and Allied Chemical Atlm Powder American Cyanamid i:::$:!E g:: :;2: diversification of their business. Hercules is Commercial Solvents 0.80 0 . 8 5 0.60 0.60 0.60 1.00 1.00 0.80 perhaps the outstanding example; if this com2 . 2 0 2 00 1.66 1.33 1.33 1.33 1.33 1.20 Dow Chemical* 6 . 3 0 3.45 3 . 1 0 2 75 2.75 4.00 4.20 5.92 pany had depended only upon i t s o r i g i n a l du Pont Hercules Mathieson Powder. Alkal! f:f: i::: i::: powder business it would not be making record Monsanto Chemical* 3.25 1.50 1 . OB 1 . 0 0 0.61*/4 0 . ela/, 0 . 618/4 0 . 6 2 earnings today. Air Reduction
Allied Chemical Atlas Powder Commercial Solvents du HercGes Pont Powder, Mathieson Alkali Monsanto Chemical 441/n Union Carbide a Showing effect of stock dividends.
2.30
156
lt:
jii
~~~~
Union Carbide
1.8 1.3 2.9 2.1 2 . 92
2.4 1.0 1.2
0:
7:;;
::::9:;:
::igl/z
i:::
1 . 2 0 1.05
1.75
2.60
2.60
2.30
R E C E I V ~November D 30, 1936.
AERIALVIEW
OF THE
PLANTOF EASTMAN KODAKCOMPANY, ROCHESTER, N. Y .
