Viewing Month: February 1955

Tabell’s Market Letter – February 04, 1955

Tabell’s Market Letter – February 04, 1955

Tabell's Market Letter - February 04, 1955 page 1
Tabell's Market Letter - February 04, 1955 page 2
View Text Version (OCR)

Walston &- Co. NEW YORK NEW YORK STOCK EXCHANGE ANO OTHER LEADING STOCK AND COMMODITY EXCHANGES PHilADElPHIA lOS ANGELES SAN FRANCISCO LUGANO ISwwldl OFFICES COAST TO CQASr COlNECTE'c;. BY DIRECT PRIVATE WIRE SYSTEM TAB ELL'S MARKET LEnER February 4, 1955 The Dow-Jones industrials failed in their first attempt to penetrate the January high and break out on the upside of the 412.47 – 385.65 area in which the average has held since the first of the year. Tuesday's high was 411.63. The rails also failed to better the January high and still remain in the month-old trading shelf bounded by 147.73 high and 137.00 low. Based on the action of individual issues,it would appear that the odds favor an ultimate upside breakout of the trading ranges in both averages. Looking at the market from the longer term point of view of intrin- sic values, it must be realized that a great many issues, at present price levels, are no longer on the bargain counter. For the past seven or eight years, stocks were grossly undervalued in terms of earnings and dividends. The rise of the past sixteen months has gone a way toward correcting this undervaluation. As measured by many better-grade stocks, the market is about normally valued at present prices, earnings, dividends and money rates. Any sharp price rise from these levels without a comparable rise in earnings and dividends would result in ultimate overvaluation. That is why a resting period at this stage would be a favorable development. Of course,all stocks have not discounted the favorable potentials and there are a great many issues that appear attractively pricedat present levels.This letter has attempted to draw some of these issues to your atten- tion.This has resulted in a recommended list that is reviewed periodically. As this letter is read by individuals with varying investment or speculative objectives, the investment quality of the list also varies con- siderably. The main reascnfor my recommendations has been long capital appreciation with a few issues mentioned for their generous yield and fair appreciation prospects. Each individual must decide whether each issue meets his indiVidual investment or speculative requirements. I have decided that the list is too lengthy and have eliminated twenty-seven issues. These are listed at the end of the letter. The reasons for the elimination are varied,but mainly because the issues eliminated have about reached their upside objectives on my technical work,or else have failed to perform as creditably as expected. Most of the issues eliminated show a profit. A rough approximation shows 390 points profits as against 15 pOints loss. The issues eliminated can be replaced by issues marked buy in the list below Price Fresent ST 0 CK Rec.om. Price Yield J.,dvice Abbott lab. Alleghany Corp. Allegheny Ludlum Allied Stores Allis Chalmers f.merican Chain Amer.Encaustic Amer. Potash & C Amer.Radiator ,mer. Tel & Tel f.SSOC .Dry Goods Balt.& Ohio Black &, Decker Blaw-Knox Bucyrus Erie Burroughs Celanese Celotex . Certain-teed Chain Belt Chic.& East.Ill. , Cities Ser. w.i. City Pruducts Colgate-Palm. Columbia Broad. Combustion Eng. Cutler Hammer Consol.Nat.Gas 40-45 33/4 3333-30 30-33 '7 40 14-16 150 26 23-25 39 22-23 15-17 31-37 20 1530-35 18 38 37 60 30-33 11-5 57 25-27 485 43 55 77 38 12 72 24 175 28 3 57 28 38 25 24 29 26 48 24 51 36 60 88 61 62 – I, 4.1 4.6 5.4 5.2 6.5 5.8 2.8 5.3 5.1 5.7 2.6 34.35 5.3 4.0 2.1 5.2 4.8 5.2 4.2 39 6.9 4.2 2. 6.2 4.8 4.4 Buy for slow 60-70. Hold for then 17-1 Hold for 60-75. Hold for 72-77. Hold for 90. Hold for 35-34. Hold for 17-19. Hold for 100-120. Hold for 27, then 43. Hold for income and 200. Hold for Hold for Hold for 5250. Hold for 4550.BuF 26-25. Hold for 42-44. Hold for Hold for 31-34. Hold for 31, then 44. Hold for 29, then 41. Hold for 65, then 80. Hold for 32. Hold for 76. Buy for income. Hold for 75-100. Hold for long term growth. Hold for 83-87 Hold for long term over 1)( Hold for 40-45. -2- Thus, cash flow earnings (net plus amortization and depreciation) were about 8.05 per share as compared with reported earnings of 2.30. The comparable figures for the past five years are tabulated below Reported Net Earnings Cash Flow Earnings 1950 1951 1952 1953 1954 7.07 5.40 3.37 4.40 2.30 9.14 7.54 7.03 9.49 8.05 The ability to maintain cash flow earnings at such a high rate is newencouragiDg rat..f-., QLoperations in 1954 andthe heavy burden ofreloCclting anCistarting up Thus that the normal earnings of the company in the future will be considerably above both the reported net of 2.30 per share for 1954 and the reported net of 4.39 per share for the average of the past ten years. Starting in 1955, the improved efficiency of the new units and the . reduction of relocation and starting up expenses should, together with im- proved business conditions, result in much better earnings figures. VJhire the accelerated amortization will reach a peak in 1955 and hold down reported earnings for a few years longer, this will be largely offset by above average growth in stainless and other alloy and specialty steels. Stainless steel use in the past has doubled about every ten years since it was introduced in 1920. Military and atomic applications are increas- ing rapidfY. Use of stainless steel as an exterior building material, re- placing materials such as masonry, is growing as witness the three all-stainless steel skyscrapers in Pittsburgh. Future growth is also expected from wider usage by such industries as automotive,electrical equipment, aircraft, chemical and consumer durable goods. Allegheny's interest in new metals led it to form, jointly with National Lead, the Titanium IVletals Corporation of America which produces titanium metal sponge and ingots at Henderson, Nevada. Production is about lay, b\lt ;isgrowing .. ThiolL imp.o.rttqt (utUj'sL sour.c.e . of-revemie,-llut the compariy fs not looking to this aspect of its opera- tions for substantial earnings for some time to come. Allegheny Ludlum produces melted and rolled zirconium and also has done work on rare earth combinations with steel. The company also has a 35 interest in Continuous Metalcast, which owns rights to the Rossi continuous casting process. The stock should be of interest to the investor who is interested in long term growth. While it is selling at almost twenty times reported earnings for 1954, it is also selling at roughly only ten times average earnings for the past ten years and only five times cash flow earnings. It has paid 2.00 in dividends since 1943, plus occasional extras and stock dividends. It sold as high as 61 1/8 in 1946 and at 52 1/8 in 1951. It has sold higher present levels in five of the past ten years. It is one of the largest factors in the stainless steel industry and because of an aggressive research program, it has two processes, continuous cast- ing and hot extrusion, wh'.ch are still in the early stages of develop- ment, but could have important commercial possihilities. For the longer term, it has an interesting potential in titanium and rare metals. The technical pattern on thestock is quite constructive. The ability to move out of the long 26-39 trading area suggests an interme- diate term 75. Over the nearer te)'m, the pattern.is.also.constructive. The out of the trading area late last year to reach a high of 45 3/8 in December. It has been resting and consolidating since that time in the 39-45 range. Ability to reach 46-would indicate a near term 50-55. There is good downside support at 39-37. Therefore, it appears that the stock has an upside potential of thirty points or 70 over the foreseeable future as against a risk potential of eight pOints or 17. Purchase of this equity is advised for those interested in long term growth. EDMUND TABELL WALSTON & CO.

Download PDF

Tabell’s Market Letter – February 11, 1955

Tabell’s Market Letter – February 11, 1955

Tabell's Market Letter - February 11, 1955
View Text Version (OCR)

Walston E,- Co. 'EMBERS NEW VORK STOCK EXCHANGE ANO OTHER LEADING STOCK ANO CQMMQDtly eXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (S.,I,Id) OffiCES COAST TO COAST CONNECTEr. BY DIRECT PRIVATE WIRE SYSTEM MARKET LEnn February 11, 1955 The industrial average has now passed its January peak of 412.47 and has now reached new high territory at 416.55. The rails have failed so far to better the comparable high of 147.73, but are close to the the technical pattern suggests that they will confirm the break-through in the industrials shortly. h failure to do so would be disappointing. The upside objective on the industrials for the next phase of the advance ap- pears to be 425 and an upside breakout by the rails would indicate 152-155. If these objectives are reached, at least another consolidating period wleocutlidVity-wiolrldecro.n..t,'lhnsueh. as been true for the past five – y-e–a-r-s,-.e0xt-remes-e- -,- ALLEGHENY LUDLUM STEEL CORPORATION Statistics ALLEGHENY LUDLUM was reviewed in this letter about a year ago and Current Market 45 the common stock recommended for Current Dividend 2.00 purchase at the then current leve Current Yield 4.5 of 32. Since that time the stock has out on the upside of Notes Payable 29,556,000. the 26-39 area in which it had Preferred Stock (shs.) 81,346 – 1. held since mid-1952 and has reach Common Stock (shs.) 1,689,360 ed the highest 'price level since 1951 when it sold at 52 1/8. This Sales, 1954 170 million is despite the fact that earnings Sales, 1953 241 million for 1954 were sharply below 1953. The lower earnings of 1954 were Net Fer Share-1954 2.30 largely the result of reduced de- Net Per Share-1953 ,4.40 mand for speCialty steels in the first nine months of the year. Mkt.Range,195l-1955 52 1/8-25 1/8 Thelbulk of Allegheny's output is — – – in A Cumulative Convertible F'fd. less, silicon, alloy and tool (no par) redeemable at 102.50 through steels. Sales weakness in these Nov.l,1955 – higher-grade steels was due to- At 102 thru Nov.l less prior to Nov.l.19bl into 2.08 common shs. the defense stretch-out and reduced output of automobiles, appliances and farm equipment. Another major factor was the widespread move toward liquidation of invento- ries, both in the hands of ultimate users and in supply channels. Because of their high value per ton, alloy steels offer a ready target for pur- chasing agents anxious to slash their dollar values of inventories. However, just as alloy steel makers were hardest hit by inventory reduction in 1954, so their recovery is expected to be most dramatic in 1955. This is evidenced ty 1. the 01 gain in ea as compared rnings with 76in1 the fourth quarter of 1954 when Allegheny earned in the corresponding period a year earlier. E.J. Hanley, company presiaent, told the stockholders and directors on February 3rd that demand has improved for all products and particularly for flat, rolled steel where facilities are operating at near capacity levels. He stated that there is every indication that operations for 1955 will be substantially better than in 1954. Earnings have also been affected by heavy accelerated amortization- charges. The company spent roughly 96 million,since 1946 in plan-t ex- pansion and improvement. This is equal to nearly t60 per share of common stock and makes Allegheny Ludlum virtually a new and more efficient company. This has resulted in heavy charges for depreciation and amortization. Cer- tificates of necessity are held covering 55 million of new facilities of which about 65 may be amortized over five years. During 1954, deductions for accelerated amortization totaled 6,156,319. Had the company elected – to forego accelerated amortization and take normal depreciation on facili ties necessary to national defense, net earnings after related tax adjust- ments would have been increased by 1.19 per share of common stock. Total charges for accelerated amortization, normal depreciation, depletion and plant retirements during 1954 were 9.8 million or roughly 5.75 a share. , II

Download PDF

Tabell’s Market Letter – February 18, 1955

Tabell’s Market Letter – February 18, 1955

Tabell's Market Letter - February 18, 1955
View Text Version (OCR)

…. F – — – – – – Walston &- Co. t.4EMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCI( AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO IS.,',Id I OFFICES COA'iT TO COAST CO't..lNECTfC BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER February 18, 1955 Individual issues showed most of the price movement during the past week. The rail average approached, but failed to penetrate, the January high of 147.73 and the industrials held below the previous week's high of 416.55. While continued selectivity is expected, I believe an upside penetration by the rails is a probability and such action would most likely carry the general market higher. The Dow-Jones 65-Stock Average, which is a combination of the industrial, rail and utility averages, has recently shown the most projections of the three averages. Its upside po- tential is 165 as compared with a present level of 152.41 . . ' ..As youknow,Lhavebee.n very – -for oil equities. -Their technical patterns are excellent and I believe se- lected oil stocks will witness a price advance similar to that experienced by the steel stocks over the past year. In fact, I recently suggested sWitch ing steels, recommended last hpril, into Oils. This suggestion still stands. Am0ng the Oils, I have mentioned in letters and wires Atlantic Refi- ning, Cities Service, Kern County Land, Lion Oil, Mission Corp., Shamrock Oil, Sinclair Oil, Union Oil, Warren Petroleum and also allied to oil situations such as Montana-Dakota Utilities and Northern Pacific. I still believe these and other selected oil equities are attractive. All of the issues mentioned above are American oil companies. It might be interesting to examine the Canadian oil picture from a technical Viewpoint. Of course, a very substantial part of the prospective future stake in Canadian oil growth is held by subsidiaries or affiliates of large American companies such as Amerada, Gulf, Texas, Tidewater,Standard Oil of Ohio, Continental, Phillips, Shell, Sun, Socony Vacuum, Union Oil, Delhi and Standard Oil of California. The largest single interest is Im- perial Oil, controlled by Standard of New Jersey. Imperial has almost half of the proven oil in Canada. Other large units are British American Oil (in which Gulf Oil is reputed to have a large stock interest) and McColl- Frontenac (controlled by Texas Co) . . ' Besides the.se..,larger .units,…there are Canadian independent oil and gas companies and various land and royalty companies. The situation of many of these companies is such that little short of a miracle will be needed to give the investor a profit because they lack all or most of the basic requirements for success. There are, however, maybe forty or fifty companies that have competent and reputable management, proven oil and/or gas reserves, cash, sound financial structure and promising land holdings. A package purchase of a number of these com- panies should work out very favorably over the longer term. I have selected two and nfocr addition to my IFIC PETROLEUMS, recommended LTD. list. They are CALGARY & EDMONTON CORP. The technical patterns of the Western Canadian oils are very interesting. In most cases, the highs were reached early in 1952 and the past three years have been spent in building up what appear to be re-accumulation patterns. In other words, the speculative short term purchasers of these equities at the boom prices of 1952 have gradually sold out of Canadian oils and they have been bought by those mainly interested in the long term potentialities of selected issues. Whether this gradual re-accumulation pattern is completed is not certain. A longer time period may be needed but the base patterns already formed are substantial. For- example, & Edmonton reached a high of 19t in early 1952. By mid- 1953, it declined to 8.'- Most of the been done in the 10-16 area. It is now selling at 16 1/4. Technically, an upside peqetration to 17 would indicate the longer term of the next few years. An equally interest- ing potenhll is present in the Facific Petroleum technical pattern. The stock reached a high of 15 in early 1952 and subsequently declined to 6t. Most of the past three years have been spent in the 7-13 area. The stock is now selling at 1,1 1/2. An upside penetration to 14 would indicate-19 followed by a long term 36. It must be stressed again that these indi- cations are for the longer term of the next several years. There is nothing in the immediate picture to justify these objectives. However . selected Canadian oils should be a part of the portfoliO of those interested in substantial long term capital appreciation. EDMUND W.TABELL WALSTON & CO. . ' / ,,-

Download PDF

Tabell’s Market Letter – February 25, 1955

Tabell’s Market Letter – February 25, 1955

Tabell's Market Letter - February 25, 1955
View Text Version (OCR)

Walston &- Co. MEt.48ERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMt.400ITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,t,ld) OFFICES COAST TO COAST COlNECTfC BY DIRECT PRIVATE WIRE SYSTEM TAB Ell'S MARKET lEnER February 25, 1955 The decline in the London stock market has caused consideraLle ner- vousness in our markets. The London market (as measured by the Financial Times index) has dropped from an early February high of 198 to 177 or 10. The London market started its rise in mid-1953 and has advanced from a low of 112 to 198. It is now back to about the October 1954 level. This would be equivalent of a drop to about 370 on the Dow-Jones industrial on a per- centage basis and a decline to about 365 on a time basis. However, the drop in the London market has been brought about by a situation that is more or less isolated as far as we are concerned. The England I s redIscount rate was raised from- 3 1/2t-0 7 4 1/2– – increase in the rediscount rate and the curb on time credits were enacted to cut down the pressure of home demand for consumer goods. This demand has brought about inflationary price increases that have caused exports to drop and imports to increase and thus disturb the balance of trade. No such situation exists here. An increase in our discount rate could be brought abuut by a desire to curb a runaway stock market on the upside. Unless the market advanced sharply, it would hardly seem necessary to raise our dis- count rate at this time. My intermediate term technical indicator signalled a sellon Thursday at 410. The last signal was a buy in January around 387. This present signal may not be too important as the pattern of the indicator makes it appear possible that another buy signal could be given at around present levels in about a week or so. There is support at 400-395 in the Dow-Jones industrials. It would appear that, after a possible mild decline or con- solidation, selected 'issues will continue their advance. – The DEPARTMENT STORE group was one of the leaders of the 1942-1946 upswing. Allied Stores, for example, rose from a 1943 low of 6 1/4 to a 1946 high of 63 3/8 or over 1000. Other reta.l store issues had similar price advances. Of course, there was a reason. Wage earnings were high and tthneer–esewlleerre- no bf acountosUmmoebrileosr or applianc soft goods – es or r-ea-pea other hard goods -a-rrarvest-Tl1e – paalv;ta-eirlna-bclhea. nSgeod – .- from 1946 until recently. Increased competition from discount houses and higher costs lowered profit margins and although sales increased, earnings did not keep pace. There are some signs that this condition is changing. The pent-up demand for hard goods has been at least partly satisfied and a larger portion of the consumers income is being spent on soft goods. Branch store expansion into the suburbs is offsetting the declining sales in the big city stores. These factors, combined with a better control of costs and a favorable economic climate, could result in a more favorable earnings picture. Since 1946, the department stores have done little marketwise. In most cases, they are selling below the 1946 highs. During the past eight years, however, they have built up substantial potential base patterns that indicate the possibility of substantial price appreCiation. The pat- terns vary with different stocks. h few are noted below ALLIED STORES (55) The upside penetration of the 36-48 area indicates an intermediate term 78. The longer term indication is 98. The recent high Was 60. 1946 high was 63 3/8. ASSCCIhTED DRY GOODS (27 7/8) The upside penetration of the long 12-25 base is very constructive.The intermediate term indication is 44 and the long term indication is 64. The recent high was 30. The 1946 high was 36. FEDERATED-DEFT.STORES-(57) Has been one of the better acting stocks in the group. Its recent high of 59 1/4 is considerably above the 1946 high of 35 3/8. The nearer term indication is 67 and the longer term ob- jective is 82. MARSHALL FIELD (34 3/4) is quite a distance below its 1946 high of 57 7/8. It has held in the 20-38 area since late 1946. An upside penetra- tion (if it occurs) would indicate 57 followed by a longer term 72. MAY DEFARTMENT STORES (36) This stock slightly bettered its 1946 high of 35 at the recent high of 37 3/4. hbility to break out of the 28-35 area was constructive. The longer term objective is 63. Nearer term in- dication is not clear. EDMUND VI.TABELL WALSTON & CO.

Download PDF