Tabell’s Market Letter – February 06, 1953

, I Walston Hofflll011 c.. Goodwln ',- , ,,-''' ,–,',-,)….- ,I,', ',' H' ',,-;', ',' ,,, ,,,,, , – ,;.'. , , ' . , '…. ', i –'F',,-'0.', ;,,- ',,;',,p.. ,',-'-''0,, oIeoprdeed — , NEW YORK 5, N, Y 3S Wall Street PHILADELPHIA Z, PA 1420 Walnut Street DIGBY 44141 ( PENNYPACKER 5-5977 I1'- ABELL'S MARKET LETTER ; LOS ANGELES 'l, CALIF 550 South Spring Street MADISON 93232 SAN FRANCISCO 4, CALIF 265 Montgomery Street SUTTER 12700 ,,' The market declined to lows 282.14 on the Dow-Jones industrials and 107.58 on the rails and penetrat d the January lows of 284.29 and 108.42. ;,' his confirms that the intermed te trend has been down since the January -' highs of 295.06 and 113,94. Supp should be met not too far below present-' levels. In the industrial a I, I would expect 277-275 to be the next ;, ,' support level. This would be an I oximate two-thirds correction of the c;' thirty-two point rise from the October lows. The down count indications on;' my graphs also point to about ths level. In addition, this area is a good\; support pOint as it is just about the level of the October, 1951 high of ,',' 277.51, the January 1952 high of1276.26 and the August 1952 high of 281.47,,, The decline might halt at 281, but 277-275 appears more logical. On the i;; rails, it would appear that 105-103 would be the support level. ' However, as I have mentioned many times before, the action of the aver- ;;, 'sm; idiCri1rmeOe;htpesi; i;; ' Would concentrate on individual issues and suggest the purchase of issues ; in my recommended list at the buYing levels outlined in recent letters. , WARNER BROTHERS, now selling at 13 3/8, appears to' be an interesting ' issue for long term capital appreciation. There are already three moving , ptcture issues in our recommended list for capital appreciation over a pe- ;,- rlod of six months or longer. TheI se issues are Columbia Pictures, Paramount-,' P tctures and Universal Pictures. 1I believe Warner Bros. can also be added to the list of recommended issue. ;;. f– i' Stockholders of Warner plan of reorganization to Bros. split whiel l be asked on company into February 17th to ratify a two units. One unit will iT- ' be called Warner Bros. Pictures and will take over the production and dis- F'' tribution of the company's domestic film business and all the foreign as- i' ; sets. The other unit will be the IStanley Corp. which will control all the f , ' theatres and miscellaneous assets of the old company. Each holder of pre- ,,' slmt stock will receive, for each share held, one-half of one share of ,', each of the new companies. Therefore, a holder of 100 shares of present k'' , Warner Bros. will have 50 shares lof Warner Bros. Pictures and 50 shares of; – Stanley Warner Corp, If the stockholders ratify the plan, the reorganiza- '; tLon will be effective as of February 28th. — Some idea of the value of the Inew securities can be gathered from the ii,,,;- sale of the personal holdings of 'the Warner brothers in Stanley Warner 1' Corp. The brothers were obliged o sell their interests in either of their ;; t10 holdings by a Consent Decree Igoverning They chose to retain Warner Bros.1 Pictures the and break-up sold the o ir f s the tock c ompany, in Stanle y ii'-'' '- Warner Corp. for 11.12 a share t,o the Fabian interests. Based on the pric,;, oJ'13 for the old stock, this would indicate avaluation of about 15 for i-, the new Warner Bros. Pictures. nhs would appe-ar to be a very reasonable – ', price. Most of the earnings of Wa!rner Bros. in recent years have been ' C ontri but e d by the picture clompany. The pro-forma earnings statements ', recently released for the two new, companies indicate that the picture com- –,,' ', pany earned 2.86 a a share in the same share in 1952 while the theatre period. When !dividend action is company e taken on arne the dnewonplyic6-Ji,,-i ture comany, it is possible that, the dividend may be increased from the ' c,- present for the ljil paid theatre on the old company. The price company appears nigh based on paid by the earnings of 6FJaibaianshianrete. r ests How- Y,fft ever, the balance sheet shows that Stanley Warner has a book value of ap- ; proximately 30 a share representd largely by cash or by real estate 1J, h;;.ving a market value very close o depreciated book value. ;i. From a technical Viewpoint, there is no way of telling the indicated , ',- ps,ttern of each of the two new companies. However, the technical formation i', of' the old stock is favorable. Th'e indication is 28-32 if the long poten- ,' t1al accumulation area between 10'1 and 16 is penetrated on the upside. ,; Based on the improved outlook ,for new television films and the sale and ;-; rE'ntal to TV of' old films, the new Warner Bros, Pictures should be an inte, !I-' resting holding for long term appeciatlon and income. The Stanley Warner 1\ Corp., at approximately one-third the realization value, should also prove ,- , – interesting for long term capital gains. Advise purchase of old Warner ,'- BI'OS. at present market of 13. EDMUND W. TABELL ,', E.e'brua ry 6, 1953 WA rsTON & CO. ii, , his memorandum is not to b. construed in 'In offer Dr solicitation of offr' to buy or selt lInY securities From time to lime Wahlen, HoHman & Goodwin may I/k – tlave u Interast In some or all of the securities mentioned herein. The foregOing material has bean prepoIIfed by us ,51 II matter of Information only It is based il, upon information believd reliablfl but not neceu4rily complet., IS nol ;uaranfd as accurate or fiMI, .and is not intended to foreclose lndependel'1t inqUiry, — l , ' – ', ', ,'-' —jj,,,i!'i;;c,-,–,'''—';'''-'-''';',i'''''''''' -,,,–, '''-,' ,,'—-,'- ' '– ,-, , '; -' ,, — ,, ,,'-,,- ,e;';' ,- ,-',e,', -,,,,,;,, , I