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—- —– -;. – .- —. Walston &- Co. Inc. Members New York Stack Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Swa,ed.,d) OFFICES COAST TO COAST CONNECTED BY DIRECT PIUVATE WIRE SYSTEM TABELL'S MARKET LETTER August 2, 1957 It looks like more of the same. More of the same kind of stock market, that IS, that we have been having for the past fifteen months. More of the same successive little waves of optimism followed by waves of pessimism with the market,as measured by the average not getting very far in either direction. The averages today are Just about where they were year or even almost two years ago. Date Stand. & Poor 500-Stk. Index Dow-Jones Industrials Aug. 2nd, 1957 47.68 505.10 July 15th, 1957 Aug. 2nd, 1956 SAeptfrti.l231r6dt;h-,11'995556- 49.13 49.74 –4458..-8653- — ,- — 'x, 523. 11 523.33 524.37 . vu '.–'''' The recent advance from the February lows after testing, but not passing, the 1956 highs appears to have lost momentum for the time being. From a technical point of view, there have been no signs of important dlstnbutlOn at the recent tops and probably the pre- sent declining phase will halt, at least temporarily, around the 47 level in the Standard & Poor 500-Stock Index and 500 on the Dow-Jones Industrials and will be followed by a con- solidahon and another attempt to penetrate the 1956 highs. Whether or not new highs in the averages are reached is problematlcal and probably not too important at this stage of mar t. From a longer range point of view, I still adhere to the opinion I have held for almos two years. I believe the market is in a broad consolidating area similar to 1946-1949 and 1951-1953. The duration of thIS consolldating phase is uncertain. The 1946-1949 area held fo approximately 40 months while the 1951-1953 phase lasted for roughly 28 months. If we use April, 1956 as the start of the present consolidating area, a 40-month projection would carr to August, 1959 and a 28 -month proj ection would carry to Augu st, 1958. It is, of course, not certain whether the present phase WIll be of shorter or longer duration than the two pre- vious consolidating phases. However, regardless of the time element, it is my opimon that the present consolidating area will eventually be followed by an upside penetration of the area and an advance of equal or greater proportions than the 1949-1951 advance or the 1953'1956 advance. The present consolidating phase has held in roughly the 50-43 range in the S.& P. Index and the 525 -450 range in the D-J Industrials since April,1956. While I expect the averages to remain in these broad trading areasfor some further time,this does not preclude the possibIlity that the averages might reach modest new highs while still re- maining in the broad confines of the trading area. ThIS happened in both the 1946-1949 and 1951-1953 area. In 1948 the averages reached a new high, but again returned to the trading area to broaden it. The same thing occurred in 1952. While the averages have remained in a rather restricted trading area, we all know that many individual stocks have had private bull and bear markets of their own. This will continue regardless of the action of the averages. In my work over the past two years, I ha, tried to concentrate on mdividual issues and have been using the averages as only backgro d There are many reasonably priced issues available. For instance, AMERICAN BRAKE SHC which I mentioned in last week's letter, appears to be a good value regardless of the yields and pi E ratios of the various market averages. Earnings for 6 months on ABK were releas earlier in the week and showed 3.64 a share for first 6 months of 1957 compared with 3. 'n the 1956 period. Allowing for full conversion of preferred by Sept. 30th would bring earn- 'ngs down to 3.37 for the 1957 6-month period as compared with 2.99 in 1956 period. At 52, with at least an anticipated 1957 payment of 2.90, the stock yields 5.5 and sells at onl fibout 8 times anticipated 195-7 earnings of B-. error' in pur report last week in stating that ABK operated at a proflt in every year since 1902 with he exception of 1932. Actually, company has operated at a profit every year. The 1932 deficl was after dividend payments. Actually, a profit of 260,000 was shown in 1932 before divide s. GENERAL RAILWAY SIGNAL (31) also released six months earmngs during the week 957 results of 1. 45 compared with 1. 21 in 1956. Usually, over 6070 of annual earnings pf GRS are shown in the second half, so full 1957 earnings should be at least 3.80 and probably around 4. 00. The stock looks attractive at present levels. EDMUND W. TABELL WALSTON & CO. INC.