Viewing Month: July 1955

Tabell’s Market Letter – July 01, 1955

Tabell’s Market Letter – July 01, 1955

Tabell's Market Letter - July 01, 1955 page 1
Tabell's Market Letter - July 01, 1955 page 2
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Walston &Co. t.4EMBERS NEW YORK STOCIC EXCHANGE ANO OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO ISw,,,,,I,,d I OFFICES COAST TO COAST CO4NECTEC BY DIRECT PRIVATE WIRE SYSTEt.4 TABELL'S MARKET LETTER july 1, -1955 The stock market, as measured by the Dow-Jones industrial average, reached new high territory during the past week at 456.11. However, the other two averages failed to confirm the advance with the rails unable to better the June 23rd high of 166.10 and the utilities still below the – high of 65.75 reached four months ago. The failure of the utility aver- age to move ahead with the industrials is particularly disturbing. In the past, the utility average has usually topped out several months before the general market. The inability of the utility average to reach new high territory, with a declining rate of volume and of ad- vatJcing issues…..in markeT; leads to-fhe'corfcluslon thatfne market may be slowly losing its upside momentum despite the attainment of new highs by the industrial average. This action has caused me to be somewhat csutious about the market over the intermediate term despite the fact that the long term outlook remains distinctly favorable. It is entirely possible, however, that some correction or consolidation may occur before the market moves much above the recent highs in the averages. – Many individual issues continue to indicate higher levels over the longer term and in some cases, for the nearer term also. A review of the issues in my recommended list follows. \le have dropped three issues from the list. BALTIMORE & OHIO, originally recommended at 23-25, -was dropped because at the recent high of 50 3/4 it had reached its 50-55 upside objective. It is suggested that profits-be taken in the other two issues. RAYTHEON, originally recommended at 10-12, is now selling at around 22 and has been as high as 25. WESTERN MARYLND, originally recommended at 18-25, has dropped sharply from 44 to 34 because of court disapproval of the re- capitalization plan designed to satisfy accumulated dividend arrears on the first preferred. This may delay the plan for a long while and .price action may. would profits on of the list should be held. They all indicate considerably higher for the longer term as noted below. In the event of a general market de- cline, they would meet support at the buy levels mentioned below. It is not at all certain that these buying levels will ever be reached before the upside objectives are attained. I'.llsl!hany c OJ'P , Lud.Steel Allied Stores Allis Chalmers Amer. Chain hmer. Encaustic T. i.mer. Potash B Amer. Radiator Amer. Tel & Tel Assoc. Dry Goods Barber Oil Black & Decker Blaw-Knox . Bucyrus Erie Burroughs Add. Calgary & Ed. Celanese Certainteed Chain Belt Cities Service City Products Coca Cola Colgate Palm. Combustion Eng. Consolo Nat'l Gas Price Recom., '3 3'/1 33-30 384548 30-33 7 40 14-16 150 26 59 3922-23 15-17 1631-37 15 30-35 38 13272 60 45 25-27 Present Price -Yield 1,0 58 61 35 4.9 75 5.3 41 6.1 14 5.0 79 2.5 27 4.7 183 4.9 3630 4.8 3.6 70 25 – 24.89 36 56 34 279 18 24 2.1 29 4.3 46 5.4 54 3.7 32 6.0 137 3.6 58 52 69 4.3 34 4.4 Advice HQld ror 12,then 17.BUY at 8. Hold for 85.Buy at 50-48. Hold for 98. Buy at 5753. Hold for 90. Buy at 6660. Hold for 587 Buy at 38-35 Hold 17-19. – Hold for 10. Buy 75-70. Hold for 45. Buy at 22.- Hold for 175-173. Hold for at 30. Hold for 80-115.Buy at 58-54. Hold. for 135. Buy 62-58 Hold for lo-ng term 52.Buy 22f- O. Hold for 47-50.Buy 35-33. Hold for long term 45.Buy 30. Hold for 36. Buy at 15. Hold for 34. Buy at 20. Hold for long term 49. Hold for long term78. Buy at 6. Hold for 81.Buy at 51-48. Buy for income. – Hold for 200. Buy at 125-r20. Hold for 73-100.Buy at 55-5C. Hold for 82-92. Buy at Hold for. 50-52. Buy at 30. 1 – Price Recom. Present Price -2- Yield ,.dvice Continental Motors 10 10 Corn Products 2J 29 Cornell Dubilier 21-22 33 Cutler Hammer 5r 72 Dow Chemical 38-40 58 ser-'OIndus-tr4.es 33—. . Eagle Picher Co. 35 Fansteel Metal. 22-24 30 General Mills 69 77 Great North.Rwy. 30 42 Greer Hydraulics 12 14 Hall Printing 1617 22 Hewitt-Robins 25-30 36 Industrial Rayon 45 58 Int. Tel & Tel 18 28 Jaeger Machine 27 32 Joy Manufacturing 47 53 Lion Oil 35 52 Magma Copper 75 84 Merck & Co. 20 24 Mission Corp. 38 42 M-K-T, pfd. 55 90 Chemical 93 142 Montana-Dakota Uti1. 26- 29 New York hir Brake 1822 25 New York Central 20-21 45 Northern .Pacific .,, 59 Otis Elevator -. 39 70 Pacific Petroleum 11 . 12 Pan-Amer.World Air. 11-13 20 23- 43 Parke-Davis 3235 44 Penn. Salt 45-48 53 Pfizer, Chas. 28-32 49 Pullman 51 64 Haybestos Man. 42 53 Robertshaw Fulton 21 33 St.Joseph Lead 40 53 Simmons Co. 36 43 Sinclair Oil 46 59 Sylvania Electric 35 48 Tungsol Electric 28 31 Union Carbide 63- 100 Union Oil of Cal. 4550 55 United Fruit 47-50 59 United Mer. & Mfgrs. 19 22 United Shoe Mach. 50- 49 o ,Vanadium 44 Warren Petroleum 25-28 48 Western Auto 25- 28 Western Pacific 55-60 69 Yale & Towne 45 70 6.0 Hold for 18. Buy 10-8.- 4.1 Hold for 447 Buy at 27-24. 6.1 Hold for 41-54. Buy at 27-25. 4.2 1.7 Hold for 120-140. Buy at 60-58. Hold for Buy at Ho Idfor . -Buy,at.,JU,-39-;- 14..37 Hold for 61 to 77. Buy-at 32-30. Hold for 49.-Buy at 26-24. 39 Hold for 110-125. Buy at 65. 572 Hold for 48. Buy at 35. Hold for speculation. Hold for 29-41. Buy at 19. Hold for 85. Buy at Hold for 79. Buy at 49-47. Hold for 31-33. Buy at 24. Hold for 4052. Buy at 30-27. Hold for 75-150. Buy at 48-4'5. Hold for 90. Buy at Hold for 200. Buy at 75-70. Hold for 34. Buy at 22. Hold for 56. Buy at 37-35. 6.6 Hold for 124. Buy at 90-85. 1.8 Hold for growth. Buy at 130-120. 3.4 Hold for 45-60. Buy at 28-25. 6.2 Hold for 34. Buy at 4.4 Hold for 70c Buy at 42-39.- 3. fo.r95;1l6…..B.uy at L7-72. 4.5- – . 0.8 Buy as long term speculation. 4.0 Hold for 27-45. Buy at-20-18. 4.7 Hold for 57.- Buy at 38-36. 3.2 Hold for 52-56. Buy at 43-40. 3.5 Hold for 69. Buy at 48-45. 2.8 Hold for Buy at 45. 6.3 Hold for Buy at 57-52. 6.6 Hold for 72-97. Buy at 5.6 Hold for 4046. Buy at 2825. 5.7 Hold for 57-95. Buy at 4944. 5.8 Hold for 7196. Buy at 4.4 Hold for 6589. Buy at 4.2 Hold for 65-68. Buy at 44-41. 4.0 Hold for 45. Buy at 28. 2.5 Hold for Buy at 9-90. 4.2 Hold for 76-95. Buy at 50-45. 5.5 4.5 Hold Hold for for 86. Buy at 26-36. Buy a5t5-529.. 5.1 Hold for 100. Buy at 45-40. 3.2 HC!ld for.,.57. 4.2 Hold for long term 70-r5.Buy 40. 5.7 Hold for 36. Buy at 26-25. 4.3 Hold for 104. Buy at 63-60. 4.3 Hold for 105. Buy at 60. EDMUND W. TABELL VlALSTON & CO.

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Tabell’s Market Letter – July 08, 1955

Tabell’s Market Letter – July 08, 1955

Tabell's Market Letter - July 08, 1955
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f Walston &- Co. MEMBERS NEW YORK STOCK EXCHANGE ANO OTHER LEADING STOCK AND COMMODITY eXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO ISw,'wldJ OFFICES COAST TO COAST COt.4NECTfC BY DIRECT PRIVATE WIRE SYSlEt.4 TABELL'S MARKET LETTER July 1955 In a series of rather wild featuring some of the better- grade equities, the Dow-Jones industrial average moved over a wide area during the past week. At Wednesday's intra-day high of 471.15,the average showed an advance of twenty points on the week. At Friday's close of 461.18 the gain had been cut down to roughly te n points. In a continuation of the divergent action noted in last week's letter, the other two averages did little marketwise. The utilities were practically unchanged from last week's close, but the rail average was almost-four points lower at the week's closirf level of 157.65. In line with this unfavorable action my intermediate term -s1gnallea–abuy -late '1n-May— reve-dect -1tspa-ttern and gave a sell signal on Thursday. Just how far the market can decline at this juncture 1s problematical. No serious distributive tops have as yet been formed. There is an initial support level in the industrial average at the 450-445 level and another support zone at 435-430. If either of these support zones are reached, the subsequent action of the average must be watched closely for signs of a distributive pattern. rail average has held in the 163-155 zone Since mid-April. A penetration of this three-month- old trading area would indicate 170-175 on the upside and about 145 on the downside. The utility average has also held in rather narrow trading area for quite some time. A decline to 63 would indicate a probable 60-59. When, as and if a correction occurs, it will most likely be as selective as the recent advance. HEWITT-ROBINS (35) whichha-s been on our recommended list for some time has just introduced a new type of moving sidewalk that can go around corners and carry passengers in two directions. This new design promises to clear the way to increased mechanization of pedestrian traffic at airports, large shopping centers, railroad terminals and subways. Three of the new conveyors will be installed in the new 10 million air terminal to be built at Dallas-Love Field at Dallas, Texas. They will carry passengers and their baggag. -fromthe-ticket -oJ'..Lice. to-plan.es -ano-bring-ilcoming-passengeJ-s-fromthe planes into the terminal. The total length will be 1,406 feet, more than twice the combined length of all other passenger conveyors currently in operation. One of its main advantages is its ability to carry passengers in two directions. This is possible because it can turn around and travel in a continuous circuit. I continue to like Hewitt-Robins as an interesting holding for substantial long term appreciation combined with a good immediate yield of 5.7. JOY MANUFACTURING (51) is another favored recommendation. Virtually all product lines of Joy are currently experiencing good demand.This is also true of the company's foreign business,with both exports from U.S.factories and operations of foreign subsidiaries running at a volume above earlier estimates. Contributing in a major way to the increase in foreign business is heavy demand for construction equipment, conveyors, mining machinery and parts. Illustrating the firm's success in diversification is a growing backlog in oil field drilling equipment and a gratifying rise in demand for the products of the newly acquired Baash-Ross Tool Division,supplier to the oil and gas drilling field. Reflecting the development of taconite iron ore, the company is supplying special equipment to drill this hard rock for blasting. To meet the growing requirements for mineral exploration and development, Joy has increased facilities in its contract drilling department, which is operating at– record levels. Demand is strong – for the new-continuous mining machines and the accompanying new extensible belt conveyors. The long term technical pattern is most encouraging on Joy and there is near term support close to the market. BLACK & DECKER (71) originally entered our recommended list at 39. On Thursday, the directors approved a recommendation to stockholders for a two-for-one split to be effective as of October 1st. Much higher levels are indicated on my technical work on this issue. Buy on minor price declines. Recent high was 73 1/2. EDMUND W. TABELL WALSTON & CO. – —

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Tabell’s Market Letter – July 11, 1955

Tabell’s Market Letter – July 11, 1955

Tabell's Market Letter - July 11, 1955
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Walston &Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,h.do,d) OFFICES COAST TO COAST BY DIRECT PRIVATE WIRE SYSTEM EDMUND W. TABELL INSTITUTIONAL LETTER July 11, 1955 'I have found it increasingly difficuTt- in-my weeklyletter-to-discuss investment problems and individual securities that will be of equal inte- rest to the individual investor and to the institutional investor. Since my weekly letter was originally written with the viewpoint and problems of the individual in mind, it seems wiser to continue the weekly Tabell Letter along that line and, in addition, to publish another letter directed to the needs and requirements of the institutional investor. This new letter will not be published at regular stated intervals. It will be issued as the occasion warrants with probably two or three mailings each month. It is quite evident that the stock market is no longer on the bargain counter. On the Central Value basis (average ten-year earnings on the Dow- Jones industrial average capitalized at twice the yield on AAA bonds) the industrial average has a central or normal value of 380. At last week's high of over 470,the average was 23 overvalued. This is not a radical 'overvalua- tion as compared to the 1927-1929 period, but is the highest over-valuation we have had since the 1937-1940 period. Increase in earnings will undoubted- ly carry the central value higher in 1956, but this may be offset by higher bond Undoubtedly, central or normal value will be around the 600 level or higher in the 1958-1960 period, but present price levels are more than adequately discounting this probability at the present moment. – From a technical viewpoint,the picture is not entirely clear but cer- tainly indicates a -cautionary attitude is necessary. Despite the spirited advance in the Dow-Jones industrial average, the breadth-of-the-market action is not encouraging. Both the 10-week and 25-week indices of volume and ad- vances and declines (compiled by Market Action,Inc.)are acting in a manner somewhat similar to 1946. Both advancing volume and the number of advancing issues have been declining in the face of an advancing market average. On the 10-week indices this divergent action started in Januar'y. On the more impor- tant 25-week index,the downward trend started on April 22nd.Another unfavor- able factor isthe inability of the utility average to reach a new high since March and the relatively poor action of the rail average. All of these unfa- vorable factors could be reversed of course,but this would have to happen rather shortly.There have been no signs of increasing liquidation pressure (a rise in the declining volumeand a rise in number of declining issues)but unless the loss of momentum changes very soon,such downside pressure may occur. In the past,a rather important market decline has occurred from three to six months after the 25-week volume indices turned down. Three to six months from April 22nd would be July 22nd to October 22nd. From my point and figure charts,however,it is difficult to envision an immediate decline of sizeable proportions.No important distributional tops have been formed as yet.The immediate downside potentials are a maximum of 430 in the industrials (now 460),145 in the rails (now 158)and 60-59 in the utilities (now 64).Of course,the patterns could broaden and the market must be watched closely for that possibility.For example,a decline to 430 in the near future followed by an advance that failed to reach a new high and then a decline to below 430 would indicate a clear downtrend. Until that occurs .- and a top pattern is formed,there is no way of telling how much of an inter- mediate term correction could occur.In my opinion,and this is purely guesswor I doubt if any decline in the next year would carry much below the 380 level and I would not be surprised if the 400 level held. When we look at individual issues,there is even more divergence. While a few groups appear fairly vulnerable,there are an equal number of groups and issues that indicate substantially higher levels over the longer term. Thus, it would appear that any correction will take the form of a 1951-1953 type of decline rather than 1946-1949. In 1951-1953,quite a few groups de- clined frharply at the same time that others held steady or aven advanced. In 1946-1949,particularly in the early stages, the entire market declined. Present policy for institutional investment should be extremely con- servative. Some groups and issues should be definitely avoided. In this category I would include ,defense contract issues of all types such as air- crafts,machine tools, electric manufacturing,etc. For immediate purchase would concentrate on undervalued groups with a minimum of downside risk. In this category I would include retail stores, oils, drugs, natural gas, food chains, airlines, textiles,etc, . I 'RDMUMDTh,s memo,,,ndum II not to be construed as an oHer. or sollC!tailon 0 oHeri to buy or 11 HI ad.' Frlib,; mbuayedhauvpeonaniniIQntremrellst'tQn,n bseolmieve edor reallllabotfe tbhuet sneocturnde,ceelulmlrelltlyl.ocnoemdplheetree,inis nTohte gfUolrlerlglonitneegd 115 red,..b; uS as iii & Coof or any part .nformdtIOt'1 noenr lytherIeIo f, 11 Liltllfltended to foredos!! Independent ,nqulfY

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Tabell’s Market Letter – July 15, 1955

Tabell’s Market Letter – July 15, 1955

Tabell's Market Letter - July 15, 1955
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Walston &- Co. MEt.iBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Swle'I..d) OFFICES COAST TO COAST BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER July 15; 1955 After reaching new high territory last week the industrial average de- clined to reach an intra-week low of 454.82 on Thursday. Action later in the week halted the decline and the market reached an intra-day high of 463.15 on Friday. The decline,however, has not yet been of sufficient proportions to correct the overbought condition indicated by our intermediate term sell signal of last week. No serious distributive tops have yet been formed and would continue to expect any decline, if it occurs, to be extremely mild and extremely selective for the time being. Would continue to pursue policy of taking profits on strength in trading accounts, however. … . .!'' —2' For the investor who is interested in sound, long-term growth in valuE rather than day-to-day price fluctuations, the CHEMICAL INDUSTRY FACTS recently published by the Manufacturing Chemist's Association should prove interesting reading. The book attempts to trace the past growth of the chemi- cal and drug industry, describe its present operation,and examine the poten- tial for growth which seems to lie ahead. It would seem that this growth po- tential should be the direct concern of the man with capital to put to work. For instance,as the book pOints out, sales of chemicals and allied products have increased nearly five-fold in the fifteen years from 1939 to 1954, from 4,340,000 to more than 20 million. It is also pointed out that this growth has been amply reflected in the growth in market value of chemi cal company stocks. In 1939, the New York Stock Exchange listed 89 chemical issues with a total market ,value of about 6.4 million. In 1954, 125 issue, were listed, having a total value of 24.2 millions. There are reasons for the above growth. The main one is that the chem'- cal industry, like other true growth industries, does not depend on outside markets; it creates its own markets. This is accomplished by constant re- search and development which renders existing products obsolete, by creatin new products and,therefore, new demand. The following facts are quoted from the book Out of a total of 8,000 chemicals listed in the 1952 Merck index, -anaiIthllritat1ve-cannog-o-f chemrcals -prodUced-commerClaTly, -2-;9-0Dara- not- appear in the 1940 ness is attributed edition ….Between to chemicals which 80 and 90 of all were not available farm chemical ten years ago. b9u0si- of today's prescriptions are for medicines An especially dynamic example is the that case did of not titan exist 15 ium. As l yea ate rs as ag1o9.3, Funk & v As late a as gn1a9l4l9' s, Dictionary the annual defined it production as in an element the United having States no was imonployrt2a5n t USE ton, S . . Today, production is more than 5300 tons per year and new uses are constant y being found for this metal in aircraft parts, alloys, chemical processing equipment and pigments. Furthermore, according to the book, this pattern can be expected to continue. An authoritative chemical industry source expects chemical sales to more than double by 1960 and to multiply five-fold by 1975. Specific branches of the industry are expected to grow even faster as indicated by the table below which gives estimated 1960 demand for various products. It will be noted that the table is adjusted for inflation by using 1950 dollar in both columns Sales 1952 in 1950 dollars- 1960 Est. Plastics Fibers Medi-cinals – All Industrial Chemicals 1.0 10.73 8.0 2.8 2.6 1.8- 16.4 The estimates outlined above are only a few of the figures in the Facts Book which should be of interest to investors. The entire picture – pa1.nted by the book is one which should reaffirm our faith in the growth -of the chemical industry in particular and the economy in general. Perusal of this book gives ample reason to consider chemical shares as a prudent means of participating in long-term growth of a dynamic industry. ANTHONY W.TABELL WALSTON & CO. The book can be obtained for 1.00 from the Manufacturing Chemists' Assoc.,Inc.,Cafritz Bldg., 1625 Eye Street,N.W., viashington, 6, D.C. I,

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Tabell’s Market Letter – July 22, 1955

Tabell’s Market Letter – July 22, 1955

Tabell's Market Letter - July 22, 1955
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Walston &Co. MEMBERS NEW YORK STOCK eXCHANGE AND OTHER LEAOING STOCI( AND COMt.40DIT'I' EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,hedd) OFFICES COAST TO COAST CO'lNECTE'C BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER July 22, 1955 During the past half month, the market has moved back and forth over a wide trading area with pronounced strength in some individual issues ac- companied by drifting weakness in others. Breadth-of-the-market action continues negative if not unfavorable but, except for a relatively few groups, no wide distributional patterns have been formed. This leads to that while the market may be in. the .pr.ocess. of forming a . top, more time 'may be -needed-before the patfe-rn is completed. Whether or not the June-July highs of 471.15 in the Dow-Jones industrial average and 164.59 in the rails are bettered during the next month or two is problema- tical, but undoubtedly individual issues will reach new high territory. Continue to advocate taking profits on strength in capital gains accounts. There is no reason to disturb long term investment holdings. Quite a large number of issues in my recommended list reached new high territory during the past week. Among the leaders was LION OIL which reached 651/8 on news that a merger with MONSANTO CHEMICAL was voted by the Board of Directors of both companies. The basis of exchange will be 1 1/2 shares of new Monsanto common for each share of Lion Oil. Since both stocks are on my recommended list, retention is advised for longer term growth holders. Lion was first recommended at 35 and Monsanto at 31 (adjusted). ALLEGHENY LUDLUM STEEL was strong on a favorable earnings report. Second quarter earnings were 2.32 per common share which compares with 447 in the second quarter of 1954. Earnings for the first six months of 1955 now total 3.69, compared to 1..01 in 1954. Provision for accelerated amor- tization for the past six months was equal to 2.06 per common share. This stock was originally recommended in the 33-30 area and has almost doubled at the recent high of 59, but I still advise retention for an objective of 8p and WESTERN MARYLAND reac hed rater reacted to 45 -1;2. In -my hlg.h territory dll.ring the week. 48 lener of July-1st I suggested taKing 3/8 profits on strength on Western Maryland because court disapproval of the re- capitalization plan might indefinitely delay plans to satisfy accumulated dividend arrears on the first preferred. However, recentsttrength indicates the possibility of some new arrangement and if not already sold would re- tain for an upside objective of 50-55 followed by a long term 63. JOY MANUFhCTURING continues to show impressive market action and reached a neVi high at 55 7/8. It appears that earnings for the first nine months of the fiscal year ending September 30th might compare favorably with the 4.08 earned for the entire 1954 fiscal year and that 1955 fiscal year earnings might be upward of 5.50. Continue to advise retention of this stock. Both intermediate and longer term indications are favorable. PAN-AMERIC,N WORLD AIRWAYS continues to be my favorite stock in the airline group despite the fact that its price action has been exceedingly slow. However, both the earnings and technical background appear favorable and I believe this issue is behind the market. Ability to break out on the upside of the 22-19 area would be a very constructive technical development. The department store group continues to show very favorable relative strength action and most issues in the group indicate higher levels. ALLIED STORES and ASSOCIATED DRY GOODS are on my recommended list and are eligible for purchase. Other issues in the group,including GIMBEL BROS., also have favorable My recommended list is quite lengthy and it might be advisable to take profits on two issues that are acting rather sluggishly on the rela- tive strength graphs. Suggest switching out of ALLIS recommended ' at 45-48 and now 74, and F'ULLMAN,INC., recommended at 51 and now selling at 66. EDMUND W. TABELL WALSTON & CO.

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Tabell’s Market Letter – July 26, 1955

Tabell’s Market Letter – July 26, 1955

Tabell's Market Letter - July 26, 1955
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—– Walston 5- Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Swamld I OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM EDMUND W. TABELL INSTITUTIONAL LETTER July 26, 1955 The following comment from a recent issue of Business Week aptly ex- presses the thoughts of a growing number of financial people. There is a recent trend for stock buyers to look to the froth, and not the fUfldamentals. That is, their purchases are guided by such things as stock dividends and splits, convertible bond offerings, acquisitions and mergers, employee stock purchase plans — and by rumors, however silly — rather than by the investment essentials of earnings and dividends, new products and inventions. Investor confidence is running high and earnings and dividends are in an advancing trend. The important question is whether or not the market is overdiscoounting these favorable trends. Despite the fact that common stock yields are low and price/earnings ratios are high, the evaluation of these factors is still below the ratios that prevailed at the market tops of 1936-1937 and 1945-1946. A recent study by Investographs showed that the DowJones industrial average could reach a top of 573 if the same ratios prevailed today as did in the two past periods of market tops. The interesting study used eight different ratios and yields and was based on estimated earnings of 33 on the industrial average and a dividend payout of 21. The eight ratios used give objectives ranging from 491 to 618. The figure of 573 was an average of the eight. The technical behavior of the market also suggests that the prices of a great many securities are relatively high and also that the general market is gradually losing its upside momentum despite the fact that the averages and individual stocks are continuing to advance. However, a closer study reveals that an increasing number of issues are failing to continue their advance. All of this seems to indicate that the market may gradually be building a top pattern that may take a longer time period to complete and when completed it is possible that the averages may be at a somewhat higher level. What type of decline is probable after a distributional top is formed Will it be a sharp decline similar to 1946 in which almost every stock participated and in which the averages declined 25 Or will it be more like the 1951-1953 consolidation period when quite a large number of issues suffered sharp price declines wh1le the growth leaders held in narrow trading ranges for over two 'years The evidence at hand seems to favor the probability of a 1951-1953 type of correction. A great many growth issues appear in need of a consolidating period. I envision a trading area of roughly 500 to 400 in the industrial average over the next year or two with possibility of 40 of the individual issues declining while 40 rest and consolidate and possibly 20 advance against the general trend. If such a pattern develops there will, of course, be extreme selectivity. This is evident even today. The following groups, for example, appear high enough at the moment- Aluminum, Automobiles, Building Materials, Cement Copper, Glass, Paper, Rails, Rubber and Steel. While these groups appear high enough, they have not yet indicated a downtrend like Air-conditioning, Aircrar Manufacturers, Brass, Electrical Equipment, Electronics and some Machine Tool issues. The following groups appear to have a minimum of downside risk and a fair upside potential and appear suitable for purchase- Department Stores, Distillers, Drugs, Farm Equipment, Lead and Zinc, Natural Gas, Textiles and Tobacco, and other miscellaneous issues. The following issue appears attractive. Price Dividend Yield 1955 Range KROGER COMPANY 42 2.00 4.7 50 -39 1/4 The company is the third largest grocery chain. Dividends have been 'paid since 1902. Earnings have declined because of reduced profits incuffee operations. Acquisitions and accelerated opening of new stores should produce more favorable earnings comparison. The stock is down from a 1954 high of 52 3/4. Technically, there is strong support at the 40-38 level. The stock should be bought on minor price declines. At 40, the yield would be 5. EDMUND W.TABELL WALSTON & CO. Thh memorandum is not to be construed ,as an offer or sollcilatlon 0f offetl to buy or se II any 't U!CUri lei From timedtob times Ws aaldomnat&terCooj otnr foarnmy ahpaorntnoernlythreIIofI,i may have an Interut in lome or all of the sec uri lies menhoned herein The foreqOlng material h,1!U betn t 10 foreclose Independent Inquiry baled upon Information believed reliable but not necenarily complete, IS not guaranteed as accura e or Ina. an II n I 1,1 t. -.-

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Tabell’s Market Letter – July 29, 1955

Tabell’s Market Letter – July 29, 1955

Tabell's Market Letter - July 29, 1955
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Walston &- Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,'wld) OFFICES COAST TO COAST COlNECTfC BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lETTER July 29, 1955 The averages continue to hold in broad trading areas. This is true not only of the Dow-Jones industrial average but the various other averages as well. Tuesday's intra-day high of 471.73 on the industrials was just a shade above the July 6th high of 471.15 and the average has held for eighteep trading days between roughly 471 and 454. Some of the other averages have held in trading areas for even longer time spans. The New York Times 50-Combined stock average (now 315) has held in the 324-309 area for twenty- one days and the New York Herald-Tribune 100-Stock average (now 196) has rangeo.between–199–and 194 for th1rty'-one trad-ing days.- J.n even wider area – – is occupied by the Dow-Jones rail average which has held in the 164-154 range since Two other averages, however, have recently reached new highs. The Dow-Jones utility average has bettered the March high of 65.75 at liJednesday' s high of 66.89. Also, the important Standard & Poor 90-Stock average bettered the July 6th high of 342.91 to reach 347.46 during the past week. The only reason for this discussion of the averages in a market the action of individual issues has been much more important than the action of averages is because the trading areas are now broad enough to indicate the next move, when the breakout occurs, will be of fairly substantial tions. The Standard & Poor has been the only combined dverage to break ou of the range and I would be inclined to aviai t a confirmation by some of the other averages. I would watch the Dow 65-Stock average quite closely for a clew. This average ba s;held in the 169-165 area. Ability to break out of ,this area on the upside to 170 would indicate 174. This would be an equivalent of about 480-485 on the Dow-Jones industrial average as against a present price of 467. A downside penetration to 164 would be of considerably more signifi- cance and would indicate 158 followed of the industrial average, this might by a possible 150. indicate a decline Ttora4n4s0la-4te3d5 into tern followed by a possible 420. If the trading area continues for a longer time, these expanded..,.oll.both the upside — – The copper situation continues very tight whereas three months ago, when we originally recommended Magma Copper at 75, it was dubious whether a price would prevail. It now seems quite possible that the current price will at least prevail and may even rise. Stocks such as Magma and Copper Range, which have great earnings potentials yet to be realized,could be still quite undervalued for longer term holding. Recent price was 86. Dow Chemical has announced earnings of 1.64 for the fiscal year ended May 31, 1955, as compared with 1.42 for the previous year. It would seem, however, that the important thing in the statement is that 73 or 3.23 a share, was charged to depreciation. The President states that figure, which is up from 65 million last year, can be expected to level off in the future and consequently more substantial earnings improvement can be expected in future years. Allegheny Ludlum Steel evidently disappointed the Street by raising its dividend only 101 a quarter to a 2.40 annual rate. In view of the earn- ings projected for the stock, this raise is perhaps overly modest and could be followed shortly by a subsequent raise or by an extra. Blaw-Knox showed earnings of for the second quarter as compared with 67;i for the like period of 1954. I expect this stock to do very little pricewise for quite some time as the company is going through a plant con- solidation program which is currently holding down earnings. 1JJould continue to hold, however, as the- long term indications are very favorable both from a technical and fundamental viewpoint. of a United Shoe Machinery common share compared fworiththe50qt uaa rter shar ended e in May 31st, showed the like 1954peri a net od. The directors will consider listing the stock on the New York Stock Exchange. The stock has held in the 45-54 area for a long time and it appears to be building up a slow accumulation area. EDMUND VI. TABELL 1,oIhLSTON & CO.

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