STUDIES IN SECURITIES 
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More important than these investments of demonstrably sound 
value upward of $100 a share including $20 equivalent in affiliated 
companies is the equity in the railroad for Union Pacific common 
stock. The system of 9,647 miles reaches into the developing Pa- 
cific Northwest and Southwest and to and from Omaha or Kansas 
City has an average 380-mile haul of freight as a basis for earning 
power. Management is able and in 1926 reduced the expense ratio 
after six years above 70% down to 68.59% bringing the pre-war 
ratio of 60% or less nearer into view. 
As an investment, Union Pacific common compares favorably with 
not a few bonds, in particular as it has the elements for specula- 
tive advantage to come. 
United States Steel Corporation 
The common stock of the United States Steel Corporation, which 
in 1901 was considered to have no equity at all in tangible 
assets and indeed was only 30% covered by the par value of 
securities of the consolidating companies, in 1927 received a 40% 
stock dividend, which capitalized less than 20% of the surplus 
earnings meanwhile accumulated. Thereby, the management re- 
sponsible for making the world’s foremost enterprise what it is 
indicated a belief at last in the fitness of the property to give the 
owners greater returns, having stated a year previous that a stock 
dividend when paid ‘‘would add to the amount of cash dividends 
on common stock if and when declared, and might possibly, in 
times of depression, interrupt their continuity.’’ 
Distribution of $203,321,000 additional eommon stock, bringing 
to $711,623,500 the total issue, is from a surplus, undivided and 
appropriated, of $823,502,000 beginning this year. Allowing for 
the $25,000,000 provided at organization, such surplus is $206,752,- 
900 less than balance of earnings shown in 2534 years. This 
amount was written off in reduction of property investment ac- 
count, against which in addition $722,026,000 balance in reserves 
was built up. Property was carried at $1,298,000,000 in 1901 with 
9,425,000 tons ingot capacity, while following $1,525,000,000 actual 
expenditures the valuation was $1,667,000,000 in 1926 with 23,177 - 
000 tons ingot capacity. Taking to be in fact segregated surplus 
the $81,183,000 in sundry reserves other than for insurance and 
the $50,143,000 inventory reserves, the total equity on the basis of 
a highly conservative plant valuation was $1,463,162,000 at De- 
cember 31 last, or $205 a share for the newly increased common 
Stock. 
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