Tabell’s Market Letter – September 07, 1951

, .'J'r' . ., , , ' , ,, -II NEW YORK 5, N. Y l-, 15 Wall Street DIGBY 44141 PHILADELPHIA 2, PA 1410 W41nut Street PENNYPACKER S5977 LOS ANGELES 13, CALIF. SAN FRANCISCO 4, CALIF 550 South Spring Street 165 Montgomery Street MADISON ,2)2 SUTIER 12700 ', ), i, TABEll'S MARKET lETTER 1(' , ,I ,' -,, Last week I issued a balance sheet of the technical condition of ';the market citing both favorable and unfavorable technical factors. It would appear that the clue for present policy is contained in the (,;two fac tors re-quoted below. One is favorable and the other unfavorable. ,',I t ',', FAVORABLE ,Y,I, ,',,' A great many secondary issues have very strong long term technical patterns. In some cases, they have been under accumulation for two , years or more and indicate substantial price appreciation eventually. They have done little marketWise, are showing excellent earnings, and are yielding 7 to 10. They also appear to be in an excellent de- fensive position. ',', .f. ;;', , ',,– ,,,'' UNFAVORABLE On the pOint and figure charts, the great majority of the issues that have led the market have about reached their objectives. , , They must re-form accumulation patterns at these or, more likely, ,, lower levels. For the market to carry forward, new leadership ', , mus t be found. ,, The market leaders of 1951 have been the oils, chemicals, ethical '- 'drugs and rubbers. They have been bought, particularly in the earlier e ;,.,stages, by larger investors, both institutional and private. Recently a , more speculative element may have entered the picture. These companies have ,' /been extremely popular because of their excellent growth outlook, but at 'ipresent prices it is possible that they have more than adequately discount- ,, ,ed this favorable potential. In any event, from a technical viewpoint ,most ,,',of these issues have about reached their long term upside objectives and ,'appear in need of at least a consolidating period if not a technical ;' 'correction. Even the most favorable situations become temporarily over; 'bought at times. 'e'.' , On the other hand, there are many secondary issues that have held in ,, ;, narrow trading ranges for several years and appear to be under accumulation i ',In many cases, these issues are just a shade below the quality that would .;,,' ,,make them eligible for inclusion in some institutional portfolios. With the , ; general public in a rather apathetiC buying mood, these issues are neglected, ;,',As a result, they present excellent values. An undervalued issue of medium , '; quality can quite often be a better investment than an overvalued blue chip. The main complaint against issues of this type is usually – They are ' ',,;,so slow. They never move. Market memory, unfortunately, is very short. Som; 1,of the greatest advances in the past two years have been issues against jwhich the same complaint could have been levelled. It takes ti'!le and pa- ,,' ,-, 'tience to build up strong base or accumulation patterns. ''., ', For example, here are a few issues that were formerly in my recom- i'mended list – I,,; PFIZER (on an adjusted basis) held in the 15-20 range for three , years. The recent high was 46 5/8. I AMERICAN CYANAMID was a slow moving issue for almost three years ;,',when it held between 35 and 45, yet two years later it reached 13l. I REYNOLDS METALS not much more than a year ago was still holding in I,;the 18-25 range which it had occupied for three years. The 1951 high is 58.; , WHEELING STEEL back and filled between 13 and 21 for over three ', .- years. It managed to attain a high of 43 1/2 this year. ' SEABOARD AIRLINE R.R. accumulated in the 15-25 area for three years ,,' ',before reaching the February high of 61. Ii UNITED AIRLINES from early 1948 to mid-1950 was available in the ,;approximate 10-17 area. The 1951 high was 310 ', Many other examples could ,be used both in higher grade issues and ,'those of a more speculative category. The secondary issues present, in my opinion, the best holdings in .' t ';todayls uncertain market. My recommended list of issues of this type was ','published in the letter of August 17th. Copies are available on request. ,, 'i,This list will be added to when the occasion warrants. For long term apprei;clation accounts, continue to recommend a 25 invested position in equities i e 'of this type with the balance to be kept as a buying reserve. i,Stember 11 EDMUND W0 TABELL , W m;, This memorendum IS not to be conltrued liS lin offer or olicitlltion of offerl to buy or lell 'f.m a n, mod .. ln may '; /' hllv, an interelt In 10m, or till of the ucurHiel mentioned herein, Th. foregoing material has been preparect br us tiS tI mlltter of inform.s!'n .orly I. bl1ed I upon Information believed ,.lIabl. but not neuuarily complete, is not uaranteed a5 CiCCI/rat. or final, and is not intended to forecl010 In(\iH!n-lMt IrqUlry y .-. ..' ,' . '-'.-. ,-.;…..-.;''-… ;..–;'.r!;–,, ,-..,.,' ,, ',, -,.- ;,', ,,-,-,;,,,'–,.'-;'–;; ''''–;S, !.– ./..;.;- . – ,'.- . ',\', .-X