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SECOND SESSION.

TUESDAY AFTERNOON, APRIL 16, 1908.

The Association met in Huntington Hall, at 2 P. M., President HARTSHORNE in the chair.

The PRESIDENT. The meeting will please come to order. The first paper on the programme will be the one which was omitted this morning on account of lack of time. The author is the Vice-President of the E. H. Jacobs Manufacturing Company, one well acquainted with the financial side of cotton manufacturing. We had great pleasure in listening to him in a very interesting paper on The Evolution of the Lug Strap, at the Washington meeting. I beg to introduce Mr. W. IRVING BULLARD of Danielson, Connecticut, whose subject is Cotton Mill Stocks as Investments,

Mr. W. IRVING BULLARD. Mr. President, Gentlemen. This paper which I am going to read to you I have been preparing for two years. Prior to my interest in the E. H. Jacobs Manufacturing Company I was connected with several financial publications, being at one time bond editor of The Wall Street Journal. At that time I saw the vast opportunity to say something about cotton mill stocks. This is the first opportunity I have had to say it since then.

COTTON MILL STOCKS AS INVESTMENTS.

W. IRVING BULLARD, Danielson, Conn.

Cotton mill stocks are attractive investments because of stability of market value, large dividend returns, liberal margin of earnings over dividends and high ratio of liquid assets to capital stock. The seasoned textile stocks compare favorably, from every market viewpoint, with the better class of railroad and industrial stocks, and in many cases, the book value and quick assets back of the "textile” place it in the same class with the stronger industrial and railroad bonds, without a limit on the investment return as in the latter securities. Cotton mill stocks are a first and only lien on an industry of great economic power producing one of the fundamental necessities of life, capable of limitless expansion and very much under capitalized. This is the only industry that has not been subjected to consolidations, trusts and combines, or had its stocks watered to the last degree.

In many states, cotton mill stocks are exempt from taxation, and return to the investor a very much greater income than could be secured from any other form of investment, with the same security of principal. These securities are inherently safe and while the dividend return may fluctuate from year to year, because of the extra dividends paid during periods of prosperity, the average annual dividend return will be vastly more than could be secured from any other form of conservative investment. Cotton mill stocks are conservative investments because of the ample margin of earnings over the dividend requirements, the low capitalization as compared with replacement value, the conservative allowances for depreciation, the very large actual net assets which represent the security of the principal, and the highly efficient management characteristic of the cotton industry.

HISTORY OF THE INDUSTRY.

Nearly all of the older mill corporations started as partnerships or close corporations, but in the division of estates and sub-divisions, into the second and third generations, the necessity for a more diversified ownership was created, because many of the successions were either unqualified or incompetent to carry on the industry and then it became necessary for outside interests to take the management. Col. HENRY LEE of Boston once said, that it was three generations from shirt sleeves to shirt sleeves, and this has proven true a number of times. One of the largest Massachusetts cotton mills was formed as a close corporation, and, in three generations, there is but one stockholder who holds over $15,000.

There still remain relics of the former individual and family control and ownership of cotton mills. B. B. and R. KNIGHT control a large number of Rhode Island, Massachusetts and Connecticut cotton mills, the stock of which never comes upon the market and the earnings of which we never hear of. It is only a question of time before this form of ownership will be entirely abandoned and corporate control exercised. It only takes a generation or two to eliminate family ownership and close corporations in times of progress like the present.

The general public has no realization of the economic development of the textile industries during the past century. Cotton manufacturing differs from any other textile and in a greater degree from the fundamental industries, because of the relatively low ratio of the price of the raw material to that of the manufactured product. That is, the cost of labor forms a greater ratio of the cost of goods than any of the textiles. Therefore, engineering work, either as applied to the devolopment of power, inventions of machines, and construction of mills, has necessarily been more vital than in any other fundamental industry. It has been conceded that the economies, both as to the character and quantity of the product of the cotton mills, have been expended to such an extent during the past few years that their aggregate, in the improvement of the cotton manufacturing industries as a solid fundamental industrial proposition, has not been appreciated by laymen, who have associated the prosperity or adversity of a particular mill stock as a result of fortunate or unfortunate times of the purchase of raw material and by the sale of finished goods.

The original motive power of the cotton industry, was human energy; then water power, which has been an exceedingly useful factor since the introduction of cotton manufacture. As mills grew, requiring more power, and in the cutting away of forests, reducing the summer flow, two causes attributed to the necessity of introducing steam power in connection with the water wheels. Then came the introduction of the more economical type of steam power with high pressure compound engines, which reduced the cost of steam power to such an extent that transportation rates on raw material and finished commodities loomed up as the important factor when considering the site for new factories.

The recent development in the electrical transmission of power has given a high value to water power, which would have been commercially worthless except in connection with existing mill properties. For this reason the values of undeveloped water powers have recently increased and become an important asset for the corporation owning them. I shall not attempt to trace the development of the motive power, but just consider, gentlemen, the tremendous reduction of the cost for energy per horse power fifty years ago, when the water-wheel was supplemented by steam power, and today when you can transmit energy from a number of water powers to a factory site most favorable from a transportation and manufacturing standpoint. I know of five generators representing energy from a group of

STATISTICS RELATIVE TO COTTON MILL STOCKS AS INVESTMENTS.

[blocks in formation]

*101

Amoskeag,
Androscoggin,
Bates,
Border City,
Richard Borden,
King Philip,
Dartmouth,
Dwight,
Great Falls,
Laurel Lake,
Mass. Cotton,
Lawrence,
Pacific,
Pepperell,
Sagamore,
Troy,
l'nion,
Whitman,

1831 $5,760,000. $3,720,691. $1,425,000. $21.30
1860 1,000,000. 1,123,864.

16,559.

24.91
1852 1,200,000.' 1,376,361. 117,565. 41.87
1880 1,000,coo. 333,598. 500,000. 37.50
1871 1,000,000. 502,174.

541. 32.62
1871

1,500,000. 851,765. 150,431. 25.65
1895 600,000. 685,105. 470,529.

82.50
1841 1,200,000. 1,299,219. 735,740. 103.94
1823

1,500,000. 960,000. 338,603. 21.33
1881 600,000. 184,251. None. 28.24

1,800,000. 1,431,600. 2,160, 763. 41.30
1831 1,250,000. 787,000. 500,000. 25.27
1853 3,000,000. i 6,332,854. None. 550.00
1899 2,556,000. | 1,628,487. 117,940.
1879 900,000. ! 355,693 607,899. 48.53
1814 300,000. 474,294. 2,816. 335.00
1879 1,200,000. 584,044. None. 46.co
1895 1,500,000. 945,411. 474,245. 29.76

Total Average Book Capitaliza-
Dividends Dividends Surplus

tion per Par Value.
8 years.

8

years. (Per Cent.) (Per Cent.) per Share. Spindle.

126 15.75 $64.59 $10.76 $100. 75 9.37 112.38 13.93

100.
130 16.25 114.61 14.61

100.
119 14.87 33.35 12.SI 100.
12.62 50.21 10.37

100.
1682 21.25 56.78 II.10

100. 158

19.75 114.18 5.00 100.
TOO 12.50

108.26 5.45 500.
117 14.62 64.00 11.36 100.
†1901. 23.75 37.08 10.03 TOO.
50 6.25 79.53 14.13

100.
I 22

15.25 62.96 12.50 TOO.
I 24 15.50 2,110.95

1,000.
158 19.75 63.71 10.27

100.
85
10.63
39.52
9.80

100.
189 23.62 794.90

6.31

500.
183 22.87 48.67 10.89 100.
5812

7.25 63.02 11.35 100.

$16.00

10.00
35.00
23.50
20.00

6.00
66.00
I 2.00
12.00
14.00
5.00

8.00
320.00

12.00
30.00
67.00
35.50
8.00

1839

* In addition to which a 25 per cent. dividend was paid.

100

66

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