Tabell’s Market Letter – July 25, 1952

r-.-./ .'. .' -,.,' ,–.—-' Wolston.Hoffl110n &GoodwinT' .',–, —— ,–,' —'Y 't,1,-, , IIf- NEW YORK 5, N. Y. PHILADELPHIA 2, PA. LOS ANGELES '3, CALIF. SAN FRANCISCO 4, CALIF. r',7', 35 Wall Street I!;,' r,; OIGBY 4411 1420 Walnut Street PENNYPACKER 55977 550 South Spring Street MADISON 93232 265 Montgomery Street SUTTER 12700 l TABEll'S MARKET lETTER J'' , ,- r— The ten-month trading range between 277.51 and 254.70 in the Dow- –, !- ' d,, Jones industrial average was decisively penetrated on Thursday when an in- '–' 1tf tra-day high of 280.05 was reached. The rails and utilities closely approach- f. ' ed their former highs. .' Ii; I would not attach any great significance to the upside penetration. F;,, At the best it signifies a continuation of the selective markets of the past year with issues with favorable prospects moving higher while others remain II dormant and still others work lower as a result of unfavorable trends of '. ; earnings and outlook. The volume pattern does not indicate a wide upswing at t; this pOint. Not only volume but the number of advancing issues and the num'.' (', ber of new highs has decreased on each rally since February, 1951. At Thurs';.. h day'.s high of 280.05, the industrial average was about 1 above the Septem' 1,- and January highs of 277.51 and 276.26. Yet the great majority of issues are ; below their individual highs reached ten or six months ago. The new highs i-ti e'- the average were largely the result of strength in a relatively small number ;', of issues. The upside penetration by the industrials may result in further' , rise to the 285-295 level but the indications are that such a rise, if it b' occurs, will.be extremely selective. As 2..1ways, the action of individual .-c' ofI issues is more important than the averages. There are a sufficient number ;;' individual issues with vulnerab Ie patterns to sllggest continued caution at . i,;; this stage. , Z' LONG TERM INVESTMENT I continue to advise a 100 invested positiori,' , in accounts concerned majnly with income and longer term appreciation re- ;, gardless of intermediate term fluctuations. However, at this stage of the ' .i, market pattern, would concentrate holdings in undervalued issues with deW; fensive characteristics. Twenty issues of this type were listed in the '; ,,i letter of July 11th. AMERICAN TELEPHONE . & TELEGRAPH () is the world's largest non- ,' governmental commercial enterprise. At Friday's close of 153 7/8, the stock' to, was selling at about its average price for the past ten years. The 9 divi' 1 dent gives a yield of over 5.8. Gross operating revenue has increased frorii ' 1,107 million in 1939 to 3,639 million in 1951. Vast growth continues. '.. ii' Technically, for the past five years, the stock has held in a narrow trading 1/, range between 138 and 163./The present pattern has an initial upside pot en..,; \ tial of 173 followed by a possible price over 200. The jiownside 'potential / i' ap-peaTs-to lte1-lt6-1lhl-wH-h-good-supp.orL,at around -150 ./The stock has reach-;- ;, ed the upside potential several times in the past while paying the 9 divi-, Ie dend. The 1929 high was 310. The 1937 high was 190 and the 1946 high was .,' r' 200. It would appear reasonable to expect that AT.& T. could sell closer \) 'C- to 5 yield basis. The stock would yield 5 at 180. Despite the numerous ; , denials, it is possible that the stock might be split in the future. The ' ' 1'1 fact that there are over 1 millibn shareholders with the vast majority hold,, ;' ing small lots of stock would cppear to make this a feasible operation. A ;'–' ,; 4 for 1 split with the possibility of a 2.25 to 2.50 dividend could move '.' rI, the stock to the 200 level. There is also j;he possibility of a distribqt p..'i(n ' to ;t('c'cholders of the Western Electric subsidiary. American Telephone cortr-,' mon stock appears to offer fair appreciation possibilities together with ex', ;, cellent defensive qualities and a good yield. It is an interesting purchasEr ;', at this stage of the market pattern./It is added to my recommended inves.t- l 0', ment list. I' ,– ;;, CAPITAL APPRECIATION In risk accounts concerned mainly with capittt (,;, appreciation over a six months period, I continue to advise a 50 to 75 !!f; ii-' liquid position. The market has a technical pattern that suggests the possi-.. i-' bility that it is in a distributional phase. There are a large number of in.-, I. dividual issues that appear to be in a vulnerable pOSition in the event of ';' I',' unfavorable news developments and a sizeable portion of capital appreciation' !i; funds should be in liquid form in order to take advantage of possible buy- '. r,(, ing opportunities. . U Offered by prospectus only, I', which is available on request. 6'- EDMUND W. TABEL WALSTON, HOFFMAIj & GOODWIN rI, ' July 25, 1952 I' , ,, This memorandum is not to be corntrued as an offer or lolicitlltion of offers to buy or sell any lecurlties From time to time Waldon, Hoffman & GoodWin may han an interest in lome or all of the securities mentioned herein. The fOfegoHuiI malerial has been prepared by us as a matter of information only It Is based It- upon Information believed reliable but, not necenarily complete, is not ;ulIranteed liS accurate Of fInal, and is not intended to foreclose Independent inqUiry 0.'- . -,/,'7 'J'.;- — ,;.t.',-'—-;.–;- ''. .'—-7 .'-'-.– .,.'- ,li7'—- .–'.,. '.—- —'t .t ;'..-'.'';'—,. 7 – ' -s.-;; '.;' -;-'-,-.,.– .,.- –'- – ….4