Tabell’s Market Letter – July 02, 1954

Walston &Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Swlt,.,ld) OHleES COA51 TO COAST CONNECTEr. BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lETTER July 2, 1954 The market moved over a wide range during the past week with the Dow-Jones industrials advancing to a high of 338.78 on Tuesday and declining to a low of 330.68 on Thursday. At present writing, the in- dustrial average has regained most of the week's decline. I expect the market to continue to move in a wide trading area for some time to come. Many issues have reached upside objectives and are in need of consolidation, but there are also many issues that still indicate higher levels. . Below is a brief report on Yale & Towne. This stock has been on my recommended list for some time. It has advanced from a September 1953 low of 31 to a recent high of 49, but has, in my opinion, excellent longer term appreciation potentials. YALE & TOWNE MANUFACTURING CO. Statistics Yale & Towne was founded in 1868 Current Market 45 and has paip a dividend each year Current Dividend 2.50 -A since 1899. While better known to Current Yield 5.5 the general public for its old es- tablished line of Yale locks and Long Term Debt 20,000,000 builders of hardware, it is one of Preferred Stock None the three leading manufacturers of Common (shares) 628,586 industrial fork lift trucks. Because of high labor costs, materials hand- Net Per Share,1953 4.61 ling equipment has been in demand in Net Per Share,1952 4.77 recent years and continued growth in Sales, 1953 109,630,000 this field is expected not only in Sales, 1952 89,010,000 – this country but also abroad. Yale & 1arkeCRanie, 1951-19'54-4-9' 31 – Sowne bas .Bxit.ish, . m'an – subsidiaries. Canadian and GerCompletion of the modernization program will aid in in- A – Including 501 extra which has creasing profit margins and a higher been paid since 1951. level of earnings is anticipated. Prior to 1939, the lock and hardware business was the main source of revenue, but in the past fifteen years the materials 'handling division has become of increasing importance. It now accounts for 65 of volume and is largely responsible for the growth of sales from 17 million in 1939 to 109 million in 1953. The company is the largest factor in the electric lift truck field. These units are powered by electric motors driven by storage batteries. The gas powered truck was introduced in 1949 and the company now handles a complete line of electric, gasoline, diesel and propane powered industrial trucks and hoists. They vary in price from a hand hoist costing 22 to 65,000 ram trucks carrying 100,000 pound loads. They are marketed under the trade names of Yale', manufactured at the larger Yale Materials Handling Division at Philadelphia, and AutomatiC, manufactured at the Automatic Transporta- tion Division at Chicago. The company is one of the three leading manu- facturers of industrial fork lift trucks. Its main competitors are Tow- motor and Clark Equipment. Buda Company (now owned by Allis Chalmers) is also an important factor.. .. The manpower- shortage -during World War II gave impetus to the use of industrial lift trucks and high labor costs and the declining pool of young manpower over the next few years should be an additional growth factor in the materials handling industry. The potential demand for thiS type of labor-saving equipment is far from filled and should continue to expand. This is also true in Europe where the German and British sub- sidiaries are now manufacturing complete trucks. These two divisions, along with Canada, now account for 10 of sales. iThl memorandum I not to bl! construed mlly have an ,nteresl In some or all of based upon ,nformatlon believed relo/lbte IS iln offer or soliCitation of offers to the securities mentioned herein The but not necenarlly complete, 's not buy or sel! any see.,HI',el From me foregOing malenal has been prepMed guaranteed en ,!;,urate or f,al, and IS tonbcyttimUI5enteaWn daelasdtomntoat&tfeorCreo0closoIeIrIfoIarRnmdyeaptpieconHnlenenortnllyhIle,QrluoorfvIS . ,.. -2- The lock and hardware division should also add to earnings. A drastic reorganization in this division has taken place. Most of the high cost operations at Stamford, Connecticut, have been elimiated and two new plants are in operation at Lenoir City and Gallatin, Tennessee, and the plant at Salem, Virginia, has been enlarged. Ex- traordinary expenses incident-to this,moving programwere-over 1 million dollars in 1953. Locks and building hardware account for about 33 of sales. Another division, powdered metals, is now small (2 of sales) but could be of increasing importance. This division is concentrated at Franklin Park, Illinois, and has an interesting growth potential in a new field. Despite capital expenditures of over 24 million (38 per share) since 1947, financial position is good. Ratio of current assets to liabilities was 3.7 to 1 at the 1953 year-end and book value was 65.20 a share. ' Considering its growth prospects, the stock, which sold at a high of 62 in 1937 when sales were 18 million and at 61 in 1946 when sales were 40 million, does not appear overpriced at 45 with 1953 sales of 109 million. Due to decreased government purchases, first quarter earnings were only 71 compared with 1.14 in 1953. However, there should be some pick-ups in the final half. Improvement in profit margins ,in- creased efficlcncy due to modernization program and elimination of non-recurring expenses ,COUld result in earnings of 8 to 10 in the 1955-1956 period. The st-ock-has -a-strong technical pattern. 'The-ups-i(le p'otential – c, of the long 31-40 trading range of 1952-1953, plus the bettering of the 1951 high of 48, indicates a long term uptrend. There is some supply at 50-60 that may temporarily slow the advance, but the long term objective on my technical work is considerably above the 1946 high of 61. There is strong downside support at around the 40 level in the event of a general market decline. EDMUND W. TABELL' WALSTON & CO. –