Walston &Co. – – – – I n c ….;. Members New York Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Sw,h.dj OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LmER March 1, 1957 AMERICAN CYANAMID COMPANY statistics Current PrJ-ce..–,, 71 , ,. Current Dividend –3.00' Current Yield 4.2 Funded Debt 33..5705 CCuumm..CCoonnvv..PPffdd.. Common stock 94,750,000 152,129 shs. 10,2579.,911050 shs. shs. Sales-1956 Earned Per Share-1956 500/6 51 4.21 ,279 Mkt.Range 1957-56 79 1/2 – 61 Called for redemption March 29,1957 This letter has often pointed out the inherent growt-hpotential -in- the-..che-..,…,.. – -i' mical industry. The high- profit margins, heavy re- search expenditures, new product development and- other factors which cha- racterize the industrY,have resulted in a truly amazing growth trend over the past ten years resulted in high price-earnings and low yields for most lead- ing chemical companies. Des- pite the long term upward Convertible into 2 &hs.common Exclud i ng 1.08 non-recurring income. trend, 1956 was a poor year tfhoer pmroesstspurroedoufcehresa. vyUncdoemr– petition and higher costs, profit margins narrowed and priced, declined as much as m30any chemical from thei r stocks, which had been fully bull market highs. A notable exception to this rule was the stock of American Cyanamid Company which, …of-.79 1/2. The reason for this small decline is easy to find since Cyana-mid was one of the few companies to show an increase in net income in 1956 and, more significantly, a well-maintained profit margin. Most interesting, despite the fact that the stock has declined far less than that of any other chemical company, it is still,at current levels, the cheapest in relation to 1956 earnings and the highest yielding of the six major chemical stocks. The management has announced that a two-forosnhearsepholiltdeirss. under consideration, subject to approval of the common Current Current PiE Yield Ratio ;f After Tax Pft. ;f Chagge in Per Sh.Earn. Margin 19'3b 1955 1955-1956 1947-1956 Amer.Cyan. Allied Chern. Dow Chern. (1) Du Pont Monsanto Union Carbide 16.9 18.6 2251..42 2127..27 4.2 8.8 8.6 3.5 3.4 23..70( 7.0 9.6 13. 6 8.4 10.2 )15.7 (2) 182..88 3.1 7.1 8.1 9.5 3.3 11.0 11.8 .J. 0.6 (1) All figures for 12 months ended November 30, ,-1956, (2) From operations. Excludes General Motors dividends. (3) Estimated. t 184 t 38 f- 89 t 232 t- 50 45 -. The above table presents some comparative statistics on American Cyanamid and the other five major chemical producers. As can be seen in columns 3 and 4 above, Cyanamid was the only chemical producer which was able to increase its 1956 profit margin over 1955 results. It was also the only chemical company, with the exception of Dow, to show a large increase in per-share earnings in 1956 over 1955. Actually, increase in dollar net was much higher than shown in the above table, but some dilution was effected by the issuance of stock in connection with the ThIS letter IS not. and under no Circumstance'! IS to he construed as, an offer to sell or a solicitatIOn to buy any secUrities referred to herem The information contained herein lS not Iuarllntced as to accuracy or completeness and the furnishing thereof IS not, and under no lS to be construed as, a representabon by Walston & Co Inc All expresSIOns of OpinIOn are subJect to change without notIce Walston & Co, Inc, or any Officer, Director or Stockholder thereat, may have un Interest In the securities mentioned herein ThiS market letter IS Intended and presented merely as a Jeneral, Informal commentary on day to day market news and not as a complete analYSIs. Add.tlOnaimiormatwn l\ith respect to any securltles referred to herem WllJ bc furmsbcd upon request. 'VN 801 -2- acquisition of the formica Company. The table above also shows that Cyanamid has the best ten-year growth record of any of the six companies with the exception of DuPont. Despite this impressive statistical exhibit, the current market capitalizes Cyanamid's earnings at a lower rate than that of any other company and the current yield is significantly higher than that available from any other chemical company. Surely all this makes the stock worthy of investor attention. Part of the reason for Cyanamid's growth may be found in the fact that it is the only chemical company with a large percentage of sales – more than a third – in the expanding ethical drug field. In addition, its-geographical and marketing diversifcation — not more than 10 of non-drJlgi'lalesgoto caJ1YQJleind)lstr'Y—rendersit lessvlllrrerableto,.- – nappenIn-gs ina particular -The company-has thlrty-s-ix domestiC and Canadian plants and is divided into eight producing divisions and a research division which does basic research on all product lines. A full description of all of Cyanamid's product line would require more space than is available in this report, but it includes a wide line of chemical and drug products with significant growth potential. Among them are agricultural chemicals, bulk pharmaceuticals, industrial chemi cals used by the paper, petroleum and metal processing industries, antibiotics, miscellaneous ethical drugs, organic chemicals, dyes, explosives, resins, pigments and plastics. New product development plays an important part in the company's sales and a few special products are worthy of note. The Formica Company, acquired in 1956, manufactures an impor tant plastic widely used in the home furnishings field. Formica is understood to be a relatively high-profit-margin item. A new plant is now being constructed in Pensacola, Florida, to manufacture Creslan,a new acrylic fiber which is said to be superior to many of the old acrylics now on the market. Acrylonitrile, of which American Cyanamid is a major producer, is used not only in textiles but also in the plastics and -synthetic rubber fields. The-drug subsidiary, Lederle Laboratories, produces aureomycin and the broad-spectrum antibiotic, tetracycline. -Despit-e- Cyanamid'sterr1fic rate–C;reXpansion andproJectea 'high—– rate of capital expenditures, it is not expected that any new financing will be required over the next few years, thus insuring that all growth in net will accrue to the benefit of the common stockholders. Current cash and working capital position is unusually strong — even in-a field where a strong financial position is normally taken for granted – thus underscoring Cyanamid's ability to finance its growth internally. Based on all available projections, per share earnings for 1957 could be significantly better than the 4.21 shown in 1956. From a technical point of View, the stock has a long term objective of 140 with a first objective of 90-100. Strong support is evidenced at 65, thus making the stock a suitable purchase at current market levels. American Cyanamid is recommended as the most suitable representation in the chemical industry at this time and as an investment quality stock offering moderate yield and above-average growth potential. EDMUND vI. TABELL WALSTON & CO.INC. AWTamb

— – Walston &- Co. Inc. Membe1's New Y01'k Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (SwH…landl OFfiCES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER March 8, 1957 After rising the first three days of this week, the market declined on Thursday and Friday and finished the week just about where it started. Volume of trading was light in both directions. Although it would be possible for my technical indicator to give a sell signal within the next two weekS, it would be highly improbable, and probabilities thus favor an extension of the current rise into the 480-500 supply area. The more im- portant question will be, after this rally runs its course, whether the February low will again be tested. There would appear to be an even 'chal'lc of-t-hois-taking place, al though what-may be regarded as close to their lows. As has been the case, it will be necessary to concentrate on individual issues where values and technical factors seem to support the possibility of higher prices. Issues of this type should show the best action on any near term rally and should be the least vulnerable in any decline which may take place. Our entire recommended list will be reviewed next week. Below are a few short comments on issues that are especially attractive for long term purchase at this time. Officials of two companies on our list have recently issued extreme ly bullish forecasts for 1957. ALLEGHENY LUDLUM STEEL (61) recently esti- mated that 1957 sales should better 1956 revenues of 286 million. The company earned 4.04 per common share for 1956 with an additional 3.00 cash flow arising from depreciation. The above figures do not include earnings of Titanium Metals Corporation of America which could eventually add sizable earnings potential to Allegheny Ludlum. stock has an initial technical objective of 75 with support at 55-52. BRISTOL MYERS' (46) officers recently predicted an increase in 1957 net income to around the 3.75-4.00 per share level vs. the 3.55 shown in 1956. Sales should rise from 92 million to around 100 million. The largest part of the 1957 advance will comLfr9m .tJrQprietary producj;s aSBUfferin -aria-other new'pr6pr-iefary items will be int-roduced by mid-year. Bristol Myers has an initial ebjective of 50-55, followed by a long term 85. There is support at 40-37. – COPPERWELD STEEL (33) has acted well since our original recommen- dation, but indicates much higher levels over a period of time., First quarter results should be equal to last yearls, but improvement should be shown in the second quarter due to a scrap prices and in the third quarter the company's expansion program should begin to bear fruit. The stock has an objective of 47 followed by a long term 68. There is support at 30-28. CRUCIBLE STEEL (31) has just issued its annual report and showed earnings down to 3.51 per common share from3.63 in 1956 due to the steel strike. Cash flow per common share was some 6.60, including some 4.4 million accelerated amortization. On a normal depreciation baSis, earnings would have been in the neighborhood of 4.10 per share. The long term objertive is 70-75 with support just under current levels at 30-28. EAGLE PICHER (44) continues its expansion and diversification program. Most recent acquisition was the Chicago Vitreous Corporation, the second largest manufacturer of porcelain frit in the United States. A large part of the business of this company is in the field of station construction, which should 'benefit substantially from the road building program. Eagle Picher'S 1956 earnings were 5.47 per common share, excludIng non-recurring items. Technical objective is 61-86 with support at 41-39. – TIMKEN ROLLER BEARING (91) showed earnings of 9.00 a share,some- what less than those anticipated for 1956. The main reason for net being less than originally was a poor third quarter brought on by the steel strike. This factor will, of course, be eliminated in 1957 and earnings should show considerable expansion as automated bearing plants become more important in the company's future. The long term objective is 200 with support just under.current levels. I.

'I I i J;;L! ' Walston &- Co. – – – – – I n c . – – Members New York Stock EXchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE Sw,,,.,,d I OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET LETTER 15, 1957 Further patience will be required,but the stock market is slowly grind- . ing out the pattern that I suggested over a year in my article publish- ed in the Commercal & Financial Chronicle dated December 29, 1955. To quote in part – Certainly, it seems highly improbable to expect in 1956, the same rate increase in activity that was witnessed in 1955 or to expect the s rate of advance in the stock market that was experienced in 1954 and r955. The rate of business increase in 1955 was two or three times the long-term- rate while the stock market has advanced almost 100 in 27 months. A conti- nuation of the present rate of-advance in the stock market would mean a pri level of about 1500 in the Dow-Jones Industrials by 1960 which seems a bit fantastic even to a confirmed bull like myself.Breadth-of-the- market action indicates that the market shows signs of waning upside momen- tum despite the fact that the averages are advancing to new highs. This div gence usually indicates either. a decline or a long consolidating period.The action of the various averages also tends toward a somewhat cautionary atti tude after the turn of the year. Actually, the market as a whole has made – little headway since July 1955 (high 490). A few stocks have had sharp ad- vances while the bulk of the market has moved sideways.All of the varied technical approaches confirm the fundamental findings that the bull market has reached a mature stage. If this turns out to be the case, the market will follow one of two possible correctionary patterns before the long-term advance is resumed. One possible-pattern could be a sharp 1946- type of 25 or so followed by a re-accumulation area. This could carry the industrial average back to the 400-360 area. The other possible pattern could be a 1951-1953 type of consolidation with the average hold- ing in a broad trading area while individuaJ issues and groups adjust piece meal with some groups declining while at the same time other issues and groups are advancing but eventually the whole market correcting any tempo- rary overvaluations. A study of the graphs of over 1,200 individual issues suggests that the 1951-1953 pattern is the more probable one. At the present moment,many individual issues indicate the possibility that they are forming distribu- tional tops that may need some more time to complete. In most instances, these issues are ones which have advanced-very sharply in the last year or two and are selling at very high'price-to-earnings ratios and extremely low yields that are based on possible future earnings and d'.vidends rather than on the present. They could be quite vulnerable in the event of a change in the high investor confidence prevailing today. On the other hand,there are also quite a few issues today that have been more or less neglected marketwise and are still selling at fairly rea- sonable price-to-earnings ratios. Issues of this type would suffer little marketwise in the event of a general decline and might even move against the trend if fundamentals favored their group. The broad economic pattern and the more intelligent approach to invest- ing that has prevailed in recent years, favors a possible piecemeal read- justment over a period of a year or so rather than a sharp decline. – I believe the 1956 range will be 520 high and 430-420 low as against a pre- sent price level of 485. 1956 should be a year of extreme selectivity. In the of present conditions, it is hardly necessary to change the above fourteen-months-old forecast except in timing. The range in the Dow- Jones Industrial since July 1955 has been 524.37 high,reached in – April 1956. The low was the Eisenhower heart attack low of 433.19 in Octo- ber, 1955. The most recent low was 453.07 reached last month. . Friday's close was 474.28. This is a relatively narrow twenty-month tradin range of 17. It compares with similar consolidating periods like the 18 trading area of-thirty-six months duration in 1946-1949 and the 18 trading range of twenty-eight months duration in 1951-1953. If the time element of the two previous consolidating periods is applied to the present market,the averages could continue to hold in roughly the 524-433 range until October 1957 or July 1958. ThiS, from a technical viewpoint, would be a very cons- tructive development. It would set up a long resting and re-accumulation area with the possibility of an upside breakout to a new and higher price plateau. usThll, market letter IS not and under no circumstance., IS to he construed as, an offer to sell or a solicitatIOn to buy any referred to herem. The mformatlOn herem IS not to accuracy or cumpletenes& and the furm'hlnl thereof ll not, and under nu Clrcumstames IS to be as, a representatIOn hy Wal;tun & Co, Inc All expressiuns of opmlOn are subJect to change Without notLce Walston & Co. Inc., or any OfflCer, DLtcctor ur Stucl..holJer thereof, may an mterest m the seeuLltLe. mentIoned herem ThIs market letter 10. mtended dnd presented merel a general, mformdl commentary on ddY to day market news .md nut as a complete anahsls. AddltlOnal mformatlOn WIth respect to any seeulltles referred to herem WIll be furmo.hed upon request 'VN 301 e – — .- -2- It is entirely possible that, during this period, the market might work moderately lower to further correct the segments of the market that advanced too rapidly over the past twenty months. However, most of the vulnerable situations have been pretty thoroughly corrected as witness the 20-30 decline in various blue chip growth issues. Any further weakness, when, as and if itoccurs, should not be disturbing to the long term investor. It should be welcomed as presenting an excellent buying opportunity because the fundamental economic pattern is extremely favorable over the longer term. As I have continually stated, individual issues will continue to outpace the general market. Reprinted below is my complete recommended list. These issues have been discussed in previous letters. They are recommended for substantial long term capital appreciation and not necessarily for near-term price movement. Present Price Allegheny Ludlum 62 Amerada Petrol. 112 Amer.Cyanamid 76 Bell & Howell 38 Bristol-Myers 47 Calgary & Edmonton 27 Carborundum Corp 43 Carrier Corp. 58 Champlin Oil 26 Columbian Carbon 45 Copperweld Steel Crucible Steel 30 Eagle Picher 45 -Eastern Airlines 40 Fansteel Metal. 48 Food Machinery 58 Dynamics 60 'General Electric 56 I General Rwy Signal 30 Gulf 120 Hewitt-Robins 40 Intern11 Nickel 105 Petrol. 49 Johns Manville 48 Joy Mfg. 64 Kansas City South. 68 Kennecott eopper 109 Magma Copper 76 Martin, Glenn L. 41 Masonite 30 MN aitn1e1r aDl si s&t iCl lhee mr s. 27 28 North.Natural Gas 55 Northern Pacific 42 Petroleums 20 Pan-American World 16 Panhandle East Pipe 51 Penn Dixie Cement 36 Pittston Company 64 Rayonier 29 Richfield Oil 66 Royal McBee 33 Sperry Rand 21 Sunray Mid-Cont. 24 Sylvania Elec. 41 Tennessee Corp. 52 Timken Roller Bear. 92 United Airlines 31 U.S. Steel 59 WYaelsete&rnToPwanceific 56 29 Price Recom. 16 103 67 42 37-35 16 60-58 24 50 31 30-29 24r2 45-44 51 50-48 56 19 107 25 90 34 50 23 85-83 130 75 38 46 32-30 48–47 40-39 11 12 46 39-37 45 4038 75-74 31 25-24 25 49 50 96 40-38 65 73 18 Yield 3.2 1.7 3.9 2.6 3.4 0.4 3.7 4.1 3.8 5.3 6.2 5.3 4.9 2.5 2.1 3.4 3.3 3.6 4.5 2.1 5.0 3.5 2.9 4.7 4.4 5.9 6.4 4.0 5.7 0.7 3.6 4.7 4.5 5.0 3.5 3.3 1.9 4.8 5.3 4.2 3.8 5.0 4.9 4.7 15..46 5.1 5.3 5.2 Comment Buy-Holdfor substantial appreciation. Buy-Hold.Long term potential 180. attractive issue in chem.group. Buy-Hold for substantial appreciation. Recently made new high.Continue hold. Hold for objective of 35-38. Continued retention is advised. Excellent vehicle for long term growth. Buy-Hold.Intermediate objective 37. Price action slow.Hold for income. Excellent for both yield & cap.gain. for substantial appreciation. Buy-Hold .Selling at -only 8 times' e-rnings Price action slow.Patience required. Continued retention is advised. Excellent lit growth.Buy on weakness. Hold for intermediate object.of 70 Hold for long term growth. Buy-Hold.Excellent lit pattern. Continue to hold for long term gain. Buy-Hold for substantial appreciation. Continue to hold for long term Hold for intermediate objective of 60. Hold for income and appreciation. Hold for intermediate object.of 75-80. Price ation may be slow.Hold -for income. sharply.Near support.Good yield. Buy-Hold for substantial lit appreciaticn Near support. Lit pattern very strong. Underpriced at present levels. Lit pattern gaod.patience required. Hold for long-term growth. Buy-Hold.Very strong lit pattern. One of the better rail patterns. Hold for intermediate object.of 25. Price action slow.Patience required. Buy-Hold for very stl' on g l!t pattern. Continue to hold for long term gain. Long term objective over 100. Price action slow.Patience required. Hold for income. Buy-Hold. Excellent l,ang term pattern. Price action slow. Patience required. Hold for long term gain. Buy-Hold.Near strong support level. Excellent long term growth pattern. Buy-Hold.Excellent long term pattern. Price action slow.Patience required. Continue to hold for long term gain. Has reacted sharply.Near support level. Near support level.Continue to hold. EDMUND W.TABELL vJALSTON & CO. INC.

r' J. 1' Wdlston &Co. Inc. Members New Y01'k Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Sw,ed.,dl OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM MARKET LEnER March 22, 1957 The tradipg area in which the stock market has held since 1955 is pe haps best illustrated by the price action of the new Standard & Poor's ind of 500 Common St … cks which is now issued on an hourly basis. This average composed of 425 industrial issues, 25 railroads and 50 utilities. The ind is based on more than 90 of the total market value of all common stocks listed on the New York Stock Exchange and, therefore, is the most complet I average available on an hourly and daily basis. The price range of this average for roughly the past fifteen months (since January 1st, 195n) has been 49.74 high (reached on August 2nd) and 42.39 low (reached .last rr.onth rn.February 12th). If we include the last twenty-one months range (from is-not muc-h-w1der ;''The41'1gh-was -tlTesame749. 7ir;-infd ' the low was 40.80 reached on October 11th, 1955 after the Eisenhower heart attack decline. Today's closing price on the Standard.& Poor's 500-Stock Index was 44.06. Perhaps a few more figures on the price ranges of the various compo- nents of the Standard & Poor's Index mig,.ht be interesting July 1955 July 1955 Jan'. 1, 1956 Today's to date high to date low to date low Close 425 Industrials 25 Rails 50 Utilities 53.28 37.57 33.93 43.04 28.93 3v.57 44.86 28.93 31.15 46.92 29.34 32.46 The earnings on these indices are also interesting. On the tasis of earnings for the twelve months ended October 31st (complete December 31st earnings are not yet have the following data 425 Industrials 25 Rails 50 Utilities iEarned 12 mos.Oct.31. 3.58 3.94 2.22 Price Today 4E.92 29.34 32.46 PiE Ratio 13.1 7.4 14.6 The dividends for 1956 and yields based , – – – , – Dividend-1956 -, 425 Industrials 25 Rails 50 Utilities 1.95 1.87 1.54 46.92 29.34 32.46 4 .4 6.4 4.9 These indices appear to be the most scientifically constructed of thE various stock averages. By using electronic equipment, an index of hourly fluctuations of 500 stocks comprising over 90 of the market value of all common stocks listed on the New York Stock Exchange is quickly compiled. Each stock is weighted for the number of shares outstanding and the index reflects the influence of each company represented' and makes it relatively simple to adjust for splits, stock dlvidends,etc. As the indices are close approximations of the actual average prtces of listed issues,they do away with the confusion in the minds of the public caused by the statement that the market is up or down eight pOints while a perusal of the list of indivi dual issue fluctuations on the same day shows a much lower rate of advance or decline. For the above reasons,this letter from now on will refer to the gener market in terms of the new Standard & Poor's indices.Hourly revisions of these indices are distributed on a nationwide basis on the American Stock Exchange,Commcdity News Service and Cotton'J.'icker York, the daily range is-published in-the N.Y.Times, N.Y.Herald-Tribune and Journal of Commerce in the morning and in the N.Y. World-Telegram in the afternoon. The range is also published in many out-of-town newspapers. It is my opinion that the S & P 500-Stock average will remain in the 21-month range of roughly 50-40 for 6 months to a year longer prior to an upside breakout to a higher price plateau. In the meantime,individual issues will continue to show above average action.In our list of Special Recommendations in our quarterly The Techni- cal Outlook (available at your nearest Walston office) we list 12 issues , (plus 1 in registration)that I believe are currently They are Allegheny Lud.Steel,Bristol-Myers,Carrier,Champlin Oil,Copperweld Steel,Eag Picher,Hewitt-Robins. Glenp Nat' Ga ,Sy'van1a and T;;lmkminnnRCl cOlltmm,fneletn lW(, IS ofTelMartip Northern n'l \'ccurllcy or to construed as, completeness and the faUnh'mshmtgo sell or n s to buy uny Flee Director or Stockholder thereof, may hy & Co, Inc All C'I(preSSlons of Opl111on nrc subJect to chnllge Wit hnnevwes nanndInnteorteasst Imi ctohmepaleectcut Ittes menAtidodnIetdIOhnearleminioTrmhinStlmOanrk…..eItthlertetsepreIcSt mtoteanny SCnCnlir I In1WtH' commentllry on dny to day market s)ted upon request WN 301 ,,

-W–a–lsIntocn.-&-Co..; Membe,'s New YOTk Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Swa,I.d) OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER March 29, 1957 There was a better undertone in the past week's market with up- side volume tending increase slightly. Volume indications on our long term breadth-of-the-market gauges are slowly beginning to show improving action. It appears that the market is beginning to show de- finite signs of waning downside momentum. Many stocks that formerly had vulnerable patterns have suffered severe price declines over the past year and the number of issues that need further substantial cor- – -rectiM- is ainlin1Sfllng. dB'eTnotmean'ari- immediate-Droad all advance, but rather a further continuation of the broad trading area in which the general market has already held since July, 1955. Some stocks are still in need of further correction and others– need further time to consolidate. There are, however, a growing num- ber of issues that are beginning to break out on the upside of long trading areas. Issues of this type will show the best action over the next six months or year while the remainder of the market corrects and consolidates. HOUDAILLE INDUSTRIES, INC. Statistics Diversification has teen a Current Market Current Dividend Current Yield 18 1.00 5.6 popular policy in many companies over the past few years. Too often, however, corporate Funded Debt 12,954,000 diversification has been pushed too fast, coupled with a rise- 2.25 Cum.Pfd.Stk. 190,000 shs. in common stock prices far be- – – -C0mmon- S-tock- ,-337 -normal– expect-a-t-i-ons c of — Sales, 1956 75,423,565 Earned per Sh.-1956 2.02 earning power. Many times, however, a company can be found where a diversification program Mkt.Range 1957-53 18 3/4 – 12 has been carried forward on a sound, intelligent basis and plus 5 stock dividend. where the common stock is most moderately priced relative to potential earning power. Such a company, we believe, is Houdaille Industries, Inc. Houdaille started its corporate existence as a major supplier of a wide line of auto parts. As it became evident that this line lacked growth potential and was becoming increasingly unprofitable, a concentrated effort was made to do two things (1) to drop unprofitable lines, and (2) to expand to new fields where capital could be put to more profitable use. This program has been carried forward over the past few years and the results have been truly impressive. At current levels, however, the market price of the stock apparently fails t. reflect the changed complexion of the company. Most of this diversification has been carried on under the aegis of Mr.-RalpI1F. Peo and a capable young executive team.- Mr; Peo hadbeen president of Houdaille until 1946 when he left the company to form Frontier Industries, Inc. In 1955, Houdaille and Frontier were merged and Mr. Peo and his assistants returned to Houdaille, which later changed its name from Houdaille Hershey Corporation to the present title. Without going into th2 history of all the various acquisitions and mergers which made Houdaille what it is today, it to break the company's sales into three major fields. They are auto bumpers and bumper hangers, (2) construction materials and aggregates and (3) air- craft parts. Other divisions which do not fall within these three classi- fications have been added and while many of them have a significant growth potential, they do not now bulk large in , sales or earnings. i market letter IS not, and under no cIrcumstances is to be construed as, an offer to or a SOhcltntlOn to buy any referred to herein The mformation conuuned herem IS not guarnnt('cd us to accuracy or completeness and the (urm;hmv thereof l'l not, and under no circumstancc;'! /8 tobcconlltrucd as, II rCprCllcntntJO) hy Wnlston & Co. Inc All expressIOns of opinIOn are subject to change wLthout nobee W …lston & Co, Jnc, (lr OULcer, Director or Stockholder thereof, may have nn Interest In the securities mentIOned herein ThiS market letter 18 Intended and pre!.entcd merely as a general, Informal commentary on day to day marhet ,,,,news lind not as a complete analysLs AdditIOnal informatIOn wIth respect to any aecuntles referred to herem wilFbe furlllshcd upon request WN 301 – io -2- The most interesting field in which Houdaille is now engaged is the construction materials field. Few people realize either the profitability or growth potential of this field. In many cases, due to a depletion allowance and other favorable factors, a profit margin as high as 10 after taxes is obtaiLable on construction sales. The Federal road building program and the expanding highway network will entail a terrific increase in new road construction and in repairs to existing roads. Houdaille appears in an excellent position to participate in the above mentioned trends. Houdaille's construction materials division produces crushed stone, gravel, sand and concrete. These products are utilized mainly in road building, but are also used in the commercial and residential construction fields. The first construction materials company to become a part of Houdaille – was Bu-fGalo Crushed .s-t0ne .. Thre ,..mone com– panies in this field were acquired during 1956, including one company in upstate New York and two in northern New Jersey. Houdaille now has thirty- two construction materials operating units located mainly in upper New York state, northern New Jersey and eastern Pennsylvania. All of these units are in excellent condition to benefit from extensive turnpike repairs in the areas served. million has recently been put into expansion of this division with more slated to be spent. It is felt that ultimately the construction materials business will become by far the most important facet of Houdaille's operations from a profitability standpoint. The second major portion of Houdaille's business is the production of auto bumpers and bumper hangers. This is now the only auto equipment item which constitutes a major part of Houdaille's sales, and it has many qualities which make it superior to the average auto parts supply tion. Among these is the fact that bumpers 'ire constantly becoming larger and more complex units, thus allowing for full capacity production even when over-all aut0 production declines. It is felt that Houdaille will maintain its sh'l.re of this market over a period of time,and thatsales should grow at a faster rate than auto production due to the increasing size of bumpers. –'A third maJor product-nne in 1;118 HoudaHle pic-rure hydraulic components which the company sub-contracts for major aircraft producers. This line appears relatively attractive in view of an expanding defense program. In 1956, Houdaille earned 2.02 per common share, an increase from 1.79 in 1955. Profit margins increased substantially as unprofitable lines were eliminated, and net after taxes was up 11 with sales down 11. Subtracted from earnings were more than 800,000 in nonrecurring items in connection with the disposal of machinery and a change in depreciation practice. This amounted to 63f per share. 1956earnings, it will be noted, included results on a large part of the pro fitable construction business for only part of the year,since three com- were acquired during the period. On this basis, 1957 earnings should reach at least 2.50 per share on a greater number of shares outstanding and could well substantially exceed this figure. Thus, current prices mark the stock at only nine times 1956 earnings and 6-7 times anticipated 1957 earnings. Dividends will probably continue at 1.00 per share, affording a yield of 5 that may be supplemented by stock dividends. Over a period of time, earnings should continue to increase as a result of growth in the present construction division and aided by fur- ther acquisitions in this profitable field. — – From a technical point of view, the initial upside objective over the intermediate term is 33 with a much hgher objective over the longer term. Strong support is encountered at 16-15. The stock is as an excellent speculation on the ability of an astute management t9 substantially increase earnings over a period of time. EDMUND W. TABELL II AWTamb WALSTON & CO. INC. I ft /f !, i' . at.