Tabell’s Market Letter – May 07, 1954

Walston &Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,Id) OfFICES COAST 10 COAi CONNECTFC. BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lETTER i May 7, 1954 1 Both averages reached new high territory during the week despite the fact that in each day from 16 to 40 individual issues also dipped into new low territory and advances and declines for the week were about even. There is nothing in the technical pattern to suggest a change in this selective action. A great many issues indicate higher levelS. Others appear high enough and in need of a consolidation. Still others show no indication of animmediatmove inei ther direction. There are very few. that appear-tobe vulnerable to more than the usual technical corrections. Two weeks ago I reviewed the technical pattern of the steel group and mentioned its improving action. I suggested, in addition to Inland Steel that had been advised for purchase in the 36-40 area last year, that three other steels be added to my recommended list. They were Bethlehem Steel (621/4); Republic Steel (51 7/8) and United States Steel (45 7/8). In the table below are soe earnings and financial comparisons on these four issues. In order to make them comparable, they are stated either in percentages or in the amount of book value, etc. available if 100 of each issue were purchased at approximate present levels of 65 for Bethlehem Steel, 55 for Inland Steel and 46 for U. S. Steel. The majority of calculations are based on the December 31, 1953 reports. PER 100 INVESTED Bethlehem Book Value Working Capital Five-Year Earnings Five-Year Dividends Five-Year Re-Investment 1953 Earnings — 19'53cDlv1dend – – , – — 151.90 64.37 83.71 28.49 I 5522 20.48 ) 6.l6—r New Plant & Equip.19461953 121.10 EARNINGS TREND Inland 92.13 35.66 57.26 33.86 23.40 12.47 '-0.30- 76.56 Republic U.S.Steel 140.11 165.76 59.48 78.84 28.89 66.96 35.06 31.89 43.78 35.07 – 16.74 16.36 7 )6' ,- . – 0.51 126.70 – 174.90 1st Quarter 1954 vs. 1st quarter, 1953 TECHNICAL INDICATION Upside Potential Possible Advance Downside Support Potential Decline 89 75-85 30 58-56 14 131 65-70 27 50-47 14 78 72-78 41 48-44 20 89 60-65 41 43-40 13 Inland Steel is the quality issue in the group. It has a record of earnings and dividends that is less cyclical than the average steel company. It should be held for yield and moderate appreciation over the longer term. Bethlehem Steel also has appeal. It would appear thatfue indicated dividend rate has been increased to 5 annually to yield 7.9. Republic Steel is perhaps the most volatile of the group, but it has a very interesting upside potential. Perhaps U. S. Steel has the most interesting 'technical pattern. The huge post-war expansion program noted above has been financed from- internally generated funds.- This has resulted in a decline in working capitl and has held down earnings because of special reserves. This should result eventually in increased earning power, however. Dividends have been conservative. Most of the issues in our recommended list have Shown good action. Yale & Towne has reached new high territory at 46 5/8 and has broken out of its long trading range. Babcock & Wilcox has reacted from the recent all-time high of 52 to the 48-47 area. I believe it is in a buying range. EDMUND 1tl. TABELL WALSTON & CO. Th.s mllV mernorclndum .s not to bc have In ''''eres' In some construed or III of .,H an one, o sohcllaloon of oers to the securities ml'r',oned herein The lbouryeqOorrgellrnaan,V'suerIc'ullItaretShoHbr e enFropmreptiamreeD final dnd IS 10bvlomuse aWs'll'Istomlla not ,ntended to U&t,Coof o,rfoa.nmyat,D,d)rntnoernIlkyeealIS loreclsc Independent Inquory bscd upon ,nforl1dt''ln believed reliable but not l1eceH,Hlly complete, IS nol qu,Hdn el! d as