Viewing Month: October 1955

Tabell’s Market Letter – October 05, 1955

Tabell’s Market Letter – October 05, 1955

Tabell's Market Letter - October 05, 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 (Sw,t…l.nd I OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM EDMUND W. TABELL INSTITUTIONAL LETTER October 5, 1955 In the space of six trading days, the market has completed a full cycle that would normally take one to two months to accomplish. The initial 43.20 decline in the Dow-Jones industrial average from the 489.94 intraday high of Friday, September 23rd, to the 446.74 low of Monday, September 26th, was completed in one day. Only two days were needed to bring about the usual two-thirds retDacement to the September 28th high of 475.13 and only three more days were needed to complete the first testing of the lows at the October 3rd low of 454.85. It is expected that price action will be at a more leisurely pace from here on. The price of a common stock is mainly determined by four factors. These four factors are earnings, dividends, money rates and a very intangible factor called investor sentiment. It is this last factor that causes the industrial average to sell at fifteen times earnings at one time and at seven times earnings at another. It is too early to assess just what damage has been done to investor sentiment by President Eisenhower's unfortunate illness and the probability that he apparently will not run for a second term. Certainly the initial market reaction was violent but, as time goes on, a calmer view may be taken. Business continues at a high level and excellent third quarter and yearly earnings reports are expected together with a large number of year-end extra dividends. Whether these favorable elements in the investment picture will be offset by a possible unfavorable investor psycholocy is still uncertain. Price behavior or technical patterns furnish the best clue to investor sentiment in a given time period. That is why I maintain a very extensive portfoliO of technical work in an attempt to anticipate price movements that might eventually be brought about by a drastic change in investor sentiment. The technical pattern of the market was potentially vulnerable before the unexpected news development of ten days ago. Some other unexpected news would have eventually caused a decline even if the President's ill- ness had not occurred. Now that the decline and the subsequent retracement has taken place, the market is still potentially vulnerable. Recent action of the market has formed a pattern that may turn out to be what the techni- cians call a head and shoulders top. The left shoulder was formed at the July high of 471.73, the head at the September high of 489.94 and the right shoulder at last week's high of 475.13. This right shoulder may take some time to broaden. The left shoulder consumed a time period almost eight weeks. This vulnerable pattern would be confirmed by a decline below the August and September lows of 445.67 and 446.74. In assessing the chances that such a downside breakout will occur, we must turn to other technical gauges of breadth-of-the-market action such as volume, advances and declines, new highs and lows, odd lot trading, and so on. Without going into detail, these indicators are mainly unfavor- able or extremely doubtful and it would appear that the technical odds favor a downside breakout within the next month or so. If such a breakout occurs, the downside objectives would be 430-420 followed by a possible 400-385. Comparable figures in the rail average would be 140-135 followed by a possible If the lower figures are reached, it would mean an erasure of the entire 1955 advance and create an excellent long term buying level. Of course, this potential pattern could change. The most constructive development would be the ability of the average to hold above 445 and work in a trading range between 445 and possibly 480 or so for six months or more. This would form a re-accumulation pattern that would eventually indicate substantially higher levels. Such a development is pOSSible, but the technical indi- cators appear to favor a downside penetration of the August low in the not too distance future. EDMUND If. TABELL W.LSTON & CO.

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Tabell’s Market Letter – October 07, 1955

Tabell’s Market Letter – October 07, 1955

Tabell's Market Letter - October 07, 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 Swa…l.,d I OffiCES COAST TO COAST COt..lNECTfi BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lETTER October 7, 1955 There is nothing new in the technical market pattern. Volume has falle to the level prevailing before the unfortunate news of President Eisenhower' illness. The important pOints to watch are the hugust intra-day lows of 445.67 on the Dow-Jones industrials and 150.14 on the rails. Ability to hold above these levels followed by a long trading area would be constructive. A downside breakout would indicate 430-420 followed by a possible 400-385 in the industrials and 140-135 followed by a possible 125-120 in the rails. There are four factors which make up stock prices, and the price of a given stOCk-at any time-represents the first three of these elements,namely earnings, dividends and money rates are to a great extent,absolutely measurable and if these were the only factors affecting price, price fluctuation would be far less violent than is actuallv the case. It is the fourth factor which makes for a great deal of wide fluctuations. This factor is investor confidence. Investor confidence can represent the difference between a stock's selling at ten times earnings and twenty times earnings. It explains the fact that although corporate earnings generally rose during the period 19461949, the market declined. And it explains to a great extent the bull market of the past year. A dramatic demonstration of the impor-t2nce of investor confidence was afforded by the terrific one-day break in the market following the news of President Eisenhower's Sickness two weeks ago. The public was supremely confident of the political future with the continuance of a Republican administration. When this prop was suddenly removed, prices declined sharply. The most important lesson learned from the market breakwas the great extent to which prices depended on investor confidence of the continuance ofa favorable investment climate rather than on already demonstrated earnings. A further example of this fact is provided by the following table showing the Dow-Jones industrial average and seven leading stocks. The first two e-o'\umns show the-a-v-era-ge-pri-ee–to-earn-ing-s, ra-t-i-es – for-19S4, 0nlya year ago, and the average over the past ten years. The third column estimates 1955 earnings. The fourth column shows the current price and the following two columns show what the price would be if these earnings were capitalized at 1954 and at ten-year average multiples. 1954 lO-Yr. 1955 lve.PIS Ave.P/E Est. Ratio Ratio Earn. Current Price Price At 1954 Ratio Price At 10-Year Ratio Alum.Co.of Amer. 17.4 11.2 3.40 78 59 38 Crown Zeller. 13.3 7.3 3.00 56 40 22 Du Pont 18.0 16.9 9.00 215 162 152 General Elec. General Motors 16.5 8.4 12.6 8.1 2.60 49 13.00 138 43 109 33 105 Goodrich, B.F. 11.0 65 5.50 72 60 36 U. S. Steel 7.9 6.8 6.00 57 49 41 Dow-Jones Ind.Av. 11.9 9.9 36.00 460 428 356 It can thus be seen that,despite the favorable bUSiness picture, stocks COULD sell at lower prices than they are now selling. In many cases, notably Aloca,Crown Zellerbach and Goodrich in the table above, higher PIE ratios than the 10-year average are undoubtedly justified due to improving quality. Still, confidence plays a large part high multiples . It is to measure investor confidence that this office maintains a large portfoliO of technical charts and graphs. When these charts indicate, as they do at this time, that investment odds over the nearer term are relatively unfavorable, the investor should use periods of strength to dispose of heavily exploited commitments and switch to less exploited ones. Examples of such unexploited stocks are shown in the table below.Equally good examples could be drawn from some of the issues in our recommended list. AAmbbeor.tTt oLbaacbc. o 290..95 1161..45 72..0600 7416 6539 8430 Coca-Cola 19.2 20.2 6.50 125 124 143 Confidence is changeable as the wind and it should be recognized as being a large component of today's stock prices . ,…. , Wi

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Tabell’s Market Letter – October 14, 1955

Tabell’s Market Letter – October 14, 1955

Tabell's Market Letter - October 14, 1955
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Walston &Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK A.ND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO ISw,Idi OFFICES COAST TO COAST CONNECTfG IIV DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lEnER October 14, 1955 Both averages declined below August levels and reached new low terri tory on Tuesday at 433.19 on the Dow-Jones Industrials and 144.07 on the Rai average. A normal technical retracement of the forty-two point decline from the October recovery high of 475 would bring the industrial average back to 455-460 area. Thursday's intra day high was 451.30. dicates The .downside p that -the -trena ;en'wehtriachtiohnas of the August been -up since lows by bothavragesn,i)win;. 1953, is now dowl1- The possibility that this might happen is why this letter turned cautious and advised taking profits on strength over the past couple months. The big questions at current levels are First, is the decline abou over; and second, should there now be any change in investment policy The answer to these questions can best be found by drawing a parallel to the action of the market back in 1946. In August of that year the market broke from its May high of 213.36 to about 185, thus signalling a Dow Theory bear market with a decline of about 13. This action was roughly paralleled by the 12 decline from the high of 489.94 to Tuesday's lows. In 1946, the market declined further to a low of around 160, thus completing a 20 decline. Roughly, parallel action in the current market would be a decline to about 390. This is a distinct possibility over a period of time, although some good support can be expected at around the 430-420 level. For a clue as to investment policy, however, the 1946 market must be examined a little more closely. A good example of what may be expected can be afforded by showing the 1946-1949 action of two stocks, Monsanto Chemical and Mack Truck. 1946 High Monsanto Chemical – -21 Mack Truck 38 3/8 1946 Low –l) 19 1/4 1947 High 21-1/4 30 1949 Low 9 1/2 – Mack Truck in 1946 had attracted a great deal of speculative in- terest and shot up sharply in value. At its 1946 low it had lost almost half of its value. In 1947, better than half the loss was regained, but by 1949 the stock had sunk to half the 1946 low and a quarter of the 1946 high. . Monsanto, on the other hand, while it declined almost as much as Mack in 1946, had recovered almost all its loss in 1947 and at the 1949 low was still considerably above the 1946 low. It would seem that the com- parative price action of these two stockS might afford a clue as to what may be expected over the next year or so and as to what policy the in- vestor should follow. The investor who purchases well-situated stocks offering sound value on any further declines in the market will be in a similar position to the 1946 buyer of Monsanto around 13 or 14. The value of his stock will fluctuate and he cannot perhaps expect any dynamic rise,but in the long run he will have made a sound investment. The buyer who attempts to buy over-priced speculative securities at current price levels in the hope he is picking up a bargain will undoubtedly find him- self asbadly paid in the-'20's- for Mack-Truck in late 1946. Investor policy then should be as follows Retain the cash reserve built up. Continue to utilize strength to dispose of overpriced and highly speculative holdings. During periods of weakness gradually use cash reserve to purchase sound, high quality common stocks offering good value. Although the dynamic price action of 1953-1955 may not be duplicated for some time, the investor will have reasonable safety plus a fair return on capital. EDMUND W. T;,BELL vlJ',LSTON & CO.

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Tabell’s Market Letter – October 21, 1955

Tabell’s Market Letter – October 21, 1955

Tabell's Market Letter - October 21, 1955
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Walston &- Co. MEMBERS NEW VORK STOCK eXCHANGE AND OTHER LEADING STOCK AND COMMODITY eXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw,'wl..d I OfFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lEnER October 21, 1955 The market is showing favorable near term action and, with a continuance of excel-lent third-quarter earnings reports, could move somewhat higher to the 465-475 level despite the fact that it has now regained the normal twothirds retracement of the forty-two point decline from the recovery high of 475 to the low of 433.19. Starting in about mid-November, tax loss selling might start entering the picture and cause the usual irregularity and cross currents. Such selling was almost totally absent last year, but could be more important this year. ht the recent lOWS, more than half the listed . -issues weresel.ling mOI'e below.the 1955 – . ' As usual, individual issues will move quite independently of the general market. In our recommended list there are many issues that appear to have support levels quite close to the market and upside potentials of 100 or more. Long term investors should base their buying decisions on the action of these individual stocks and ignore the action of the general marke Below is a summary of my recommended list. vlhile some of these issues have advanced sharply since our original recommendation, I suggest continued holding as the ultimate upside objectives are considerably above current levels and there are support points not too far below the market. In cases where two objectives are mentioned, the lower objective is the nearer term potential followed by a resting period and possible attainment of the higher objective over the longer term. Present !rice Alleghany Corp. Allegheny Ludlum (.llied Stores j,merican Chain 9 56 57 42 Amer.Potash B Assoc.Dry Goods .Bar-ber .0i.L Black &Decker Calgary & Edmonton 92 – 5331-. 3165 Celanese 21 Chain Belt Cities Service Coca-Cora 53 56 126 Colgate-alm. Cornell Dubilier Cutler Hammer 57 33 70 Dow Chemical Dresser Ind. Eagle Picher GeniI Rwy.Signal Hall rinting Hewi t t-Robins Joy Mfg. Magma Copper Monsanto Chemical 53 47 39 2523 37 58 98 46 Mont.Dakota Util. 26 acific etroleum 12 an-Amer.World Air. 18 Raybestos-Man. – 56 Robertshaw-Fulton 28 Sil1'mons Co. 44 Sinclair Oil United Fruit 56 54 Western Auto Yale & Towne 30 61 Price Recom. 3 3/4 33-30 3830-33 40 26 59 3196 3137 30-35 38 122 60 21-22 57 38-40 3223 51617 25-30 47 75 31 26 H- 11-13 42 21 36 417 47-50 25 45 Yield f,dvice Objective 12-17.Support at 4.3 Objective 85. Support at 65.03 2.7 55 -3-9 2.9 0.6 2.3 4.7 3.6 4.0 4.4 6.1 4.3 1.9 5.3 4.6 4.7 6.4 5.4 4.3 2.2 03.89 4.5 5-.4 5.4 6.8 5.4 5.6 5.3 4.9 Objective 98. Support at Hold for Objectiv i e ncome.Support at 120-150.Support a4t 1 t 9. Support at 32-30. — ObJ-eet.80-H5-. Support at-50-4 Object.135.Support at 32-30. Buy for long term specuration. Object.34.Support at 20-18. Object.78.Support at Object.81. Support at 52-58. Object. 280.Support at 125-TIG Object 73-100.Support at 54-5 Hold for il'tcome.Support Object.120-140.Support at 65-j( Hold for growth. Support at 52-pi Object.70-85.Support at 4240. Object.61-77.Support at 36-33. Object.140-150.Support at 50-1 8 Hold for income.Support-at 20. Object.85.Support at 35-33. Object.75-150.Support at 54-5P Object.200.Support at 90. Hold for growth.Buy 'at 43-40. Object.45-60.Support at 26-24. Buy as long term speculatian. . Object.27-45.Support at 1716. – Hard for 'income Support Object.40-46.Support at 27-25. Object.7196.Support at Object.65-89.Support at 53-50. Object.86.Support at 53-52. Hold for income.Support 28-27. Object.l05.Support at 58-55. EDMUND W. T!iBELL WALSTON & CO.

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Tabell’s Market Letter – October 24, 1955

Tabell’s Market Letter – October 24, 1955

Tabell's Market Letter - October 24, 1955
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I r' ; Walston &Co. — —– MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw;I,Id) OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM EDMUND W. TABELL INSTITUTIONAL LETTER October 24, 1955 Technical action has improved somewhat over the past week,helped by the first batch of third-quarter earnings reports and a number of dividend increases. Quarterly earnings, as expected, mostly will be favorable abd will continue to appear until mid-November. The market should continue to show advancing tendencies for the next several weeks. Some of our technical .indicators of volume are beginning to show signs that the decline is losing momentum. On the recent decline, the total downside volume of both the ten and twenty-five week graphs of Market Action, Inc. has failed to exceed the downside volume of the March, May and August declines. This action could change, but until it does, it must be construed as at least negatively favorable. It is possible that the market could rally back to the 465-475 level on the industrials. The rally objective on the rails is not quite as clear. ( This memOfdndvm Ii not to be 051 offer or sohcltation of offers to buy or iell f …f 1JV1e,to a. a & Co matter oj or …ny pMtnef thl'reof, mform'llton only It II may have an ,Meresl In lome or all of the securltlel mellt.oned herein. The ma !ccurate or f,al, and 15 not In ended to foreclosE! Independent 'nq …y bdled upon Information believed rel'lble but not neetHanl.,. complete, . not 9ues.an ee .n

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Tabell’s Market Letter – October 28, 1955

Tabell’s Market Letter – October 28, 1955

Tabell's Market Letter - October 28, 1955
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Walston &- Co. — MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK ANO COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGElES SAN FRANCISCO LUGANO (Sw,I..d) OFFIces COAST TO COAST CONNECTE& 8'1' DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER October 28, 1955 Statistics SIMMONS Current Market Current Dividend Current Yield 47 3.00 6.4 Long Term Debt Cum.Pfd. (100. Common 4,092,000 -.1 15,-000. . shs. 1,158,236 shs. Net Per Share,1955 (E) 5.00 Net Per Share,1954 4.18 Sales, 1955 (E) Sales, 1954 150,000,000 139,110,000 Mkt.Range 1955-45 49 5/8 – 22 COMPANY At the current stage of the market, with the near-term outlook for stcc prices at best uncertain, defensive type equities should be h primary interest to the investor. Among the characteristics of such equities are a high-well covered Y.J-eld, arecord,ofcontinuing earrings and a history of relatively stable price action. When such a record is coupled with excellent long term growth potential, the stock deserves serious consideration. On this basis, the common stock of Simmons Company would appear to have definite attraction at or just below current levels. At the present time, Simmons Company is the leading factor in the mattress and bedding field. Through the use of aggressive advertising and sales promotion it has been able to maintain this position for many years, and despite aggressive competition it still maintains its relative sales standing in the bedding market. The name Beautyrest has over the years become a synonym for quality in the mind of the average householder. In recent years, the company has been having particular success in building up the Hide-ABed sofa to a comparable trade position. Widely separated plants in the United States and Canada, backed up by an extensive warehousing chain afford the company decided advantages in distribution and merchandising. hS a consumer goods field, the bedding industry' is in a particularly good to expand over- the next' few -have tended- to show a close correlation with consumer disposable income and growth of population. Current, the 20-24 age group, the group which determines the rate of family formation and to a great extent the number of new customers for home furnishings, is at the lowest level in a number of years. As the population and the number of new families grows, Simmons will be in an excellent position to grow along with it. In addition to this growth, Simmons offers excellent defenSive charac teristics. Currently the stock sells around 47 to yield 6.4 on the 3.00 dividend rat,'. This dividend is covered by earnings which have averaged better than over' til, past ten years and at no time since 1946 have been lower than 4.10. During this period since 1946, Simmons has almost doubled its book value to close to 50, has reduced funded debt and built up a net working capital of close to 40 per share. Moreover, despite increased costs, profit margins have been well maintained over the past five years. Further opportunity for growth is found in the company's large interest in foreign markets. Over 20 of 1954 earnings came from the rapidly growing Canadian subsidiaries and the company has plants in many European countries and in South hmerica. h new plant in Venezuela has been a recent addition. Another plus factor is the improvement in the textile picture. Although the company's Simtex Mills textile division provides 'only 20 of net sales, its operating results have an important ef.fect on overall profits. Better profits from this source point to a rise in overall mar- gins. Sales for the first half of 1955 were around 72.5 million vs.66.5 million a year ago and earnings improved to 2.35 per common share vs. 1.45. Best available estimates indicate that the company will earn sub- stantially better than 5.00 vs. 4.18 in 1954. FrGm a technical point of view, the stock has a long-term indica- tion of 96 and an intermediate term objective of 71. Good support is encountered at 45-41 where the stock should be bought for high, growing income, minimum risk and long term capital gain. AltEr lamb EDMUND \I.TABELL i.iiil.iL……….na U&ta ..mQ

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