Tabell’s Market Letter – November 18, 1955

' . , ' '.' J;' i, Walston &- Co.Inc. ' NEW YORK MEMBERS NEW YORK STOCK EXCHANGE ANO OTHER LEADING STOCK AND COMMODITY EXCHANGES PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (SWITZERLAND I , TABELL'S MARKET LETTER November 18, 1955 . -; Statistics AMERICAN CAN COMPANY With the industrial average . Current Market 46 ing at a relatively high price , )Current Dividend 2.00 earnings ratio, it seems wise to ,, .' 'Current Yield '.. . Long Term Debt . 1.75 Cum.Pfd.Stock -( 25;-Par) – – . Common 4.4 65,000,000 – 1,649,332 ' shs. '- 10,885,591 shs. recommend that new equity be limited to high quality stocks.ip companies with long unbroken records of stable earnings and dividends .. adding . to our recommended list, is an JNet Per Share, 1955 Net Per Share, 1954 3.00 (E) 2.53 issue of this type. , American Can is the largest or in the metal container industry ';Sales, 1955 700,000,000 (E) and, together with its principal, . JSales, 1954 652,400,000 competitor, accounts for over 70 '' of the total market. Its al'lnual '. rr…3;'1Mkt. Range 1955-54 49 1/4 – 35 3/4 sales volume ranks it among the ' fifty largest United States in- -; , !',dustrial corporations. Its favorable trade position in a basic industry ., it to maintain a steady, growing volume of sales. At its current price,American Can is selling at about 13 times earnings to yield atrout 4t. On an earnings basis, this is not too far out of line iwith a ten-year average PIE ratio of 12.7 times and from a yield viewpoint,' .;lthe income is extremely generous when compared to a ten-year average 4 ,. yield. This would seem to be a low price to pay for-a company which has '(, lbeen able to multiply sales better than two and one-half times since 1945 ;and at the same time suffer only a small shrinkage in profit margins. , Perhaps the reason that American Can is still on the bull market, is a tendency to regard 1952-1954 re- .' suIts as indrcative of the' company I i-future earn-ing-power -It ;- that this is not the case. In 1954 especially, results were hampered by an , ;iunusually poor crop year and an unusually cold summer which affected be&r During this period,hmerican Can was faced with heavy capital out- . ; 11ays which in 1954 ran to 36 million. As of this writing,a great deal of – rthis capital expenditure has been completed and should begin to be reflect- ed in expanded sales and earnings. This reflection should commence with .'; 1955 earnings which totaled 2.46 for the first nine months and should .. better 3.00 for the year. Further advances are expected in 1956. v .'.! r a t An ion e xpr las e t ssion mont h of o f Ma a nage 5eJ ment J s quart c er on ly fidence dividen in d i the ndi c future ating a was its 2.00 dec laannuai- 1rate.Since,based on 1952-1954 results, this would exceed the normal pay- ;, tout ratiO, the indication would be that Management feels confident that ,.i future earnings will cover the dividend by a wide margin. It is interes'B– f. ;, .'j ing age to of note that,except tin,American Can for has the war years with their never been forced to cut accompanying its dividend shortsince . It is true that kmerican Can faces a number of basic problems. First , of these is the ever-present possibility that the supply of tin may be -, t cut off. It is estimated that ) entire free world, and if the only 20 years J supply of tin exists Far East sources of supply were cut in the off thIs ,j . ; would be decreased to 5 years.To meet this threat the company has organ- ; ;.' ized an Operation Survival. Under this operation constant research is – ..; V ,being undertaken to cut down the amount of tin being used in metal This has progressed to the point where the amount of tin in the average . can has been lowered considerably and in certain specialized uses, such r,',;. as motor oil cans, enamel lining. It tin has is to be been entirely expected that eliminated in the packaging favor of industry an will be !,/'., able to cope with the problem of a depleted tin supply as the need arises. ; il',.'j On the plus With supermarkets contain but also side is the growth in use of all types of packaging. dominating the retail scene, a package must not only sell its product. Furthermore, with high consumer difr- , '1 , 'posable income, the consumer is more disposed to pay a premium for con- W, –; J letter 1.5 not. and under no clrcurntances IS to be eonatMled .., an offer to totll or .. aolicitabon to buy any referred to herein The Information erelft 1.5 not uar.. as to &.eO!uracy or et'lmpietenf'!!!!1 and the (urnlShlng thereof IS not, and under no cU'cuml!ltanees 1.3 tn beeonstf'ued M a representation r Wal'lt,m A C(j. lnf All or 0plnwn an t.ubjt to ehangt!' ',ltil.out notloe Walaton II; Co., Inc., or any Officet', Dlrt!'Ctor ot' thereof. may nve Iln IntRre'lt In the seeuntle mentIOned herein. ThIll market letter it. and -pt'esented merely B.l!I a It'eneral, In(ot'mal O!ommentary on dllY to day market and not a eomplett!' analYSL!ll Adilt.\ona\ Lnfonn&tIOD With respect to any t.unties refened to herein 1IVl1l bot fUrnl.Shed UDOn reql,le!Lt. WN 301 J J. 's . … …..d -2- venience, such as that afforded by aerosol bomb cans for insecticide, shaving cream and other products. – Another plus factor for American Can lies in the inroads which metal containers ,may be-expected -to makeonother-typesofpackaging. Perhaps one of the most important of these inroads may be in the soft drink field. There has been disappointment recently over difficulties which have been encountered by canned soft drinks. In many cases, these have been due to the fact that the product marketed was unknown or even inferior. Another block to consumer acceptance of soft drinks in cans is and has been the excessive cost of a can as compared to a reusable bottle. With the recent general rise in the price of soft drinks, however, this cost becomes a smaller percentage of purchase price and is more liable to be borne by the consumer as a premium for convenience. It is easy to be disappointed by the progress which has been made so far and to forget the fact that development of a pew market is a slow, gradual process. Pn historical comparison would be the growth of beer cans which has taken almost 20 years to reach its current status as the major beer container. It is quite possible that canned soft drinks will enjoy the same slow steady growth. Meanwhile, research by American Can and its competitors is constantly developing new markets which, added together, present sub- stantial growth potential. Among these are the aerosol bombs mentioned above, cans for frozen foods, fiber and metal biscuit containers and a host of others. These and new products still in the development stage .. From a technical-point of view, the present upside objective for American Can is 6-3-70 with excellent support just below the current market at 42-40. The pattern could broaden and point to eventual much higher levels. On this basis, the stock would seem to be an excellent comrnitment for all types of investment accounts. AWT/amb EDMUND 'II. T..BELL vlHSTON & CO.