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TABELL'S MARKET LETTER 35 WALL STREET, NEW YORK 5, N. Y. Digby 4-4141 On May 2nd, U. S. Steel stockholders approved the proposal to split the common stock three-for-one. The stock will be split on May 12th so holders of the stock before that date will participate in the splitup. On the basis of the current market of approximately 72, the price of the new stock will be around 24. Assuming a minimum dividend of 2 annually on the new stock, the yield would be 8.3. Earnings for 1949 are expected to be between 3.50 and 5.00, indicating the possibility of an even higher dividend rate than 2. First quarter earnings, on an ad- justed basis, were 1.66 but it is doubtful if earnings will be maintained at that pace for the entire year. Comparison of the new U.S. Steel stock, at a price of 24,with other steel issues selling around the same price range brings out some interesting points Armco Steel Bethlehem Steel Jones & Laughlin Republic Steel U.S. Steel Approx. Price 24 1/2 30 27 22 24 1948 Earn. 8.00 9.36 12.01 7.61 4.00 1948 Div. .OO 2.40 2.00 2.00a 2.00 Yield 8.1 8.0 7.4 9.1 8.3 1946 High 33 5/8 38 1/4 53 7/8 40 7/8 32 1/2 1942 . Low 7 7/8 16 1/2 17 1/2 13 3/4 14 3/4 a. Plus 4 stock. On adjusted basis and indicated dividend rate. On a yield basis, the new U. S. Steel stock will compare favorably with all the other issues. Considering the fact that it is the outstanding leader in the industry, it appears undervalued on such a basis. It is true that U. S. Steel is selling at a higher price-to- earnings ratio than the other issues but it would also appear that,even in this extremely volatile industry, its, earnings are less subject to Wide swings than the other issues in the list. It is also true that the other issues, if they all returned to the 1946 highs, would show better percentage appreciation. However, U. S. Steel selling in the 20's will have a much larger speculative following than when it was selling in the eighties and nineties. In the event of an upswing in the market, it should be the first issue in the group to sellon a 6 basis. From a defensive viewpoint, it would appear less vulnerable than the other issues in the list. In the highly improbable event that all issues returned to their 1942 lows, U. S. Steel would perhaps show the least percentage depreciation and, due to its relatively better financial condition, maintain its dividend longer and at a higher rate. From a technical point of view, U. S. Steel has a better chart pattern than the other issues for both the long term and for shorter term trading. I advise switching Armco, Bethlehem Steel, Jones & Laughlin, Republic Steel into an equivalent money amount of U. S. Steel. A switch out of some of the other more speculative lower- priced steel equities into U. S. Steel is also advised for those who wish to upgrade their holdings. EDMUND W. TABELL WALSTON HOFFMAN & GOODWIN nThis memOflindUm I, not to b. construed a. an off.r or IOltcitatlon of off.n to buy Of en, curltl. From time to filM Walston. Hoffmu , Goodwin may have an Int.r.st Tn 10m. or all of the securltl mentioned h.,..ln. The foreqoln9 mat.rlal hal been prepared by UI al matter 01 Information onlY'd It Is baled 0'upon Information believed reliable but not necenarlly complete, Is not Quarenteed es aexurate fine I, and Is not Intended to foreclose Indepu ent Inquiry.