Tabell’s Market Letter – April 30, 1954

,- – 1…——— Walston &- Co. MMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,'wlaodl OFFICES COAST TO COAST CONNECTEC. BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER Aprli 30, 1954 The stock market action of the past week again illustrates the point that, since 1949, the buying and selling of the professional long term in- vestor has been a much more important price movement factor than the trading of the short term speculator. It has been the reason why the market fails to move as a unit and why, despite the sharp advance in some issues since Sep- tember, the general market is not vulnerable except for possibly the usual technical corrections that are always to be expected. The selectivity and discrimination has been based on the reasoned findings of the analyst rather than on the unreasoned hopes and fears of the short term trader. Purchases and sales have been based on the long term outlook rather than what the marketmay-donext-weekorcnext-month.o – —.-.—- Take the example of two rail stocks, Southern Railway and Pennsylvania. If you had bought Pennsylvania at the 1949 low you would have paid about 15. It is now selling at about 16. If you had bought Southern Railway at the same time you would have paid 13 (after adjusting for the 2 for 1 split in 1953). It is now selling at 50. Does this mean that Southern Railway is too high and Pennsylvania is very cheap Let us examine a few earnings fi- gures for the two railroads. If you purchased both stocks at today's appro- ximate prices of 50 and 16 you would be buying the following for each 100 invested in each issue PER 100 INVESTED SOUTHERN PENNSYLVANIA Earnings 1949-1953 Dividends 1949-1953 Re-Invested 1949-1953 1953 Earnings 1953 Dividend 76.44 21.00 55.44 23.26 5.00 71.90 32.81 39.09 16.86 9.00 GROWTH Average 1949-1953 earnings vs. 1937-1941 325 -I– average earnings — –.. ..,.– —- – – o ! . .– – – —— Except for the fact that Pennsylvania has paid a bit more in dividends, both issues are selling on-a relatively equal value basis despite the fact that Southern is at a five-year high and Pennsylvania near a five-year low. When the growth factor and a possible dividend rise are taken into consider- ation, Southern seems the more attractive. This is borne out by the techni- cal patterns of both issues. But, you may say, the market is very high. Westinghotlse Electric as an example, has advanced sharply and has reached a newall-time high. Let us take Westinghouse in 1945 when it was selling at an average price of about 33 and compare it with Westinghouse today at 72. Again this is based on 100 invested in each issue PER 100 INVESTED Book Value Fiveyear earnings Five-ear dividends Five-year re-investment Present Earnings Present Dividend 1945 76.95 26.70 15.75 10.95 6.10 3.00 TODAY 59.90 32.34 13.16 19.18 7.70 E 2.80 E Dece-m- b-er 31, 1.9-5-3- bal-an-ce- -shee-t. E — -E-s t- im a- ted-…….. — f o r 1954. With a possible dividend increase in the offing, Westinghouse is not overvalued compared with 1945, despite the fact that it has reached a new high. From a technical viewpoint, it has reached its upside objective and may be high enough for the moment. It is possibly in need of a consolidating movement for quite a period of time. However, it is not vulnerable and shoulc move higher after a new pattern has been formed. I believe the advance will continue to be selective. The leaders will continue, for a while, to be the growth issues and investment issues that are bought by institutional investors and larger individual accounts. Before the speculative cyclical issues join in the advance, a speculative public following must be built up. This usually happens at a later stage of the advance. EDMUND vi. TAJ;3ELL HArSTON & CO Tht m… mor1odum IS not to be construed as an offer or sollcltallon of offers to buy or sell any securities From t,me to me Walston & Co, or any pHlner Ihtcof md hd'l.' .1n Interest In some or all 01 the secuntles menltoned nCHCln The foregOing malerlal has been prepared by us as a mailer of In/ormation only It 1\ b.led IIPon ,n/ormat,on belIeved relIable but not neeard'f complete, IS not o;Iuaranleed as aurale or fInal, olnd IS not Intended 10 foreclose Independent l'IqUlrl – ,,-