Viewing Month: December 1957

Tabell’s Market Letter – December 13, 1957

Tabell’s Market Letter – December 13, 1957

Tabell's Market Letter - December 13, 1957
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,- Walston &- Co. Inc. Members New York Stock Exchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE Sw;he,landl OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM I TABELL'S MARKET LETTER December 13, 1957 The Dow-Jones Rail average on Thursday gave the first constructive signal sinc the start of the long decline from the July high of 154.70 to this week's low of 94.91. All during this period the average has been in a definite downtrend channel. Thursday's rally of five points to an intra-day high of 101.05 penetrated the downtrend line for the first in the decline of almost sixty points. A slight further rally occurred on Friday with an in- tra-day high of 102.21. This does not mean a sharp uptrend in the rails, but it probably means a flattening out of the decline and a possible attempt to base out. This will take time. There IS some overhead supply at around 105. The Industrials declined during the week to the 435 support level and closed at 440.48. The overhead supply in this average 'is in 7ntinU'ed crosscurrents '- during the coming week. The most dramatic price movement in the securities market in the past month has been the advance in bond prices. Long term government bonds, for example, were selling at prices to yield around 3.8 prior to the announcement of the cut in the rediscollrlt rate on November 14th. They are now selling at prices to yield about 3.1. The American Tel & Tel 5 issue of 1983 was offered just prior to the rediscount cut at 101.46 to yield 4.9. They are now yielding about 4.45, and are selling around 1081/2. Moody's Cor- porate Bond yield of AAA rated long term bonds was around 4.15. It has now dropped to 3.81. This yield index of seasoned bonds moves more slowly than the new issues. With the probable continued easmg of money rates, most students of the bond market expect higher prices. In a somewhat similar situation in 1953 and 1954, the high grade bond yield index dropped from around 3.40 to 2.85, or about 55 basis points. A comparable percentage drop in yield in the present situation would be about equivalent to 66 basis pOints or to around 3.4. The advance in bond prices has somewhat improved the competitive position of high grade stocks. A further decline in bond yields would accentuate this improvement. A month ago with new bond issues being offered at close to a 5 yield, it was difficult to Justify theO'purchaseof-growth stocks arayield of 2 to–3-1-;-2,- or stable income st'Clc'ks ,',-,. at 5 to 6 1/2 yield. However, if seasoned high grade bonds returned to a 3.4 yield basis, a growth stock like duPont with a yield of over 3 1/2, or an income stock like C.1. T. Financial with a 5.3 yield would be competitive with a new bond issue yielding around 4 but with no chances of capital appreciation except an advance to the call price. Some of the growth groups are beginning to show signs of increasing relative strength. The chemicals and papers are a case in point. There is no immediate indica- tion of a sizeable' upward move, but potential base patterns are forming that may take some further time to complete. The chemicals and papers reached their highs a long time ago. duPont, for example, reached its high of 249 3/4 over two years ago in 1955. The papers reached their highs in mid-1956 and have declined sharply since. Stocks in the stable income group have been mentioned in this letter for the past few months. They include baking, containers, drugs, electronic-TV, finance, food, food chains, retail, tobaccos and utilities. There are issues in other groups that also appear attractive. WILSON & CO. (15 1/4) has clearly outperformed the rest of the meat packing group. Management has done an excellent job in changes in marketing and manufacturing operations and has eli- minated many unprofitable operations and replaced them with highly efficient modern and up to equipment. The sporting the largest 1- sporting goods company in the world, has grown every year since its start in 1931. Sales are close to 50 million in this division and it contributes importantly to Wilson & Company's earnings. The company is concentrating on higher profit margin products. About 40 of the food line consists of pre-packaged products. Wilson & Co. reported 2.19 for fiscal 1957 as compared with 2.83 in fiscal 1956. The drop in net was sup- posedly due to non-recurring expenses in moving plant operations. 1958 results should be considerably better. The stock paid 1.00 dividend in 1957 to yield 6.6. The technical pattern is potentially attractive. It has held in the broad 17-8 range since 1947 and upside potentials are wide. Relative strength in recent markets has been very good. Tax loss sales in other securities could be switched into Wilson & Co. Inc.

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Tabell’s Market Letter – December 20, 1957

Tabell’s Market Letter – December 20, 1957

Tabell's Market Letter - December 20, 1957
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Walston——–Inc. &-Co-.—.–\'-;, Membe)-s New York Stock EXchange NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE (Sw;t,laod) OFFICES COAST TO COAST CONNECT.,!) EY iIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET LEnER December 20, 1957 I Weakness In the automobile and steel groups and continued tax loss selling, brought the Dow-J ones Industrials back to the 425 support level and Standard & Poor's 500-Stock Index to the 39 support level. These support levels haveheld on severalocif) since the October lows. There are only a few more remaining days left for tax loss !'.,llin and if the support levels between here and the October lows continue to hold, it would be an encouraging sign for the traditional year-end rally. The important question is whether or not the bulk of tax loss selling is completed or whether there are still sizeable amounts 19J;–erhanging the market hoping for a stronger tone near the turn of the year. It is also '–interesting to note that dur-ing –this weaknessthe food chains, utilities, etc., gave little ground. The time is again at hand for the annual forecast of the trend of business and the stock market for the year ahead. Enough of these forecasts have already been issued to discern the general pattern of economic and financial feeling. Most forecasts predict a lower business level for the first half of 1958 with a pick-up in the second half. Most stock market predictors anticipate a range within the broad limits of 500 and 350 in the Dow-Jon Industrial average (now 427.20) and 45 and 35 in Standard & Poor 500-Stock Index (now 39. In a recent address to the Association of Customers Brokers in New York, I made the following comment As for the general market, I would expect that the market will experience the usual cross currents in December due to tax loss selling and switching. Because of the downward trend of recent months, the December low will probably be reached late in the month. This will be followed by the usual year-end rally into next year. Just how far this rally will carry is problematical. The heavy overhead supply at 450-470 should prove a pretty substantial upside barrier. I would use such a rally, if it occurs, to lighten hold- ings in unfavorable groups. A testing of the October lows in early Spring is to be expected If business deteriorates no more than now expected, the October low of 416 may hold. If a f'!.rther !he ,400-385..-level p.!obabil!ty. Therefore, in my opinion, the possible range in the Dow-Jones Industrials for 1958 might 1- be 470 high and 385 low. The last half of the year should be more favorable than the first half. Extreme selectivity will be a feature of 1958. Groups showing the best relative strength action during recent weeks include food chains, aircrafts, finance, tobacco, food products, containers, baking, fertilizer, electronics, retail chain, farm machinery, utilities, drugs and soft drinks. Most of these groups, it will be noted, are in the consumer or consumer durable field. Some of the relative firmness can be ascribed to the defensive nature of the industries involved but, on the other hand, many individual issues in these groups have built up fairly sizable base patterns over the past year or two. From a technical viewpoint, they could stage a good percentage advance. There is a seco nd classification of group action. These groups appear, in general, to have started to form re-accumulation or base patterns but may require more time. These groups should be bought during periods of price weakness. They include airlines, building stocks, chemicals, electrical equipment, glass, natural gas, liquor, meat packing, paper, rubber and even our long forgotten friends, the textiles, which are showing some indication of basing out. None of these groups show signs of an iyr,- mediate move but should be watched closely for possible change in trend. athird classification of groupsthat have base-out-I'I;,j and may require a long time to do so. They could be somewhat -.,ulnerable in the fur- ther ups and downs we anticipate in the market over the next year or so. In this group are air-conditioning, aluminums, automobiles, machinery, mining and smelting, oil, railroads and steel. In a broad sense, it appears that consumer groups should show better action over the next year or so than the capital goods issues. To put it another way, the 'lights' should act better than the 'heavies'. A VERY MERRY CHRISTMAS TO ALL EDMUND W. TABELL b&ThIS mnrkellcttcr IS not and under no Clrcumstnnce; IS to be construed al., an offer to to helctn The informntlOn cQntnllled hel eln not guaz ant,1 IS to .tLCl1r,uy 01 completenes'l llnd the furmo;hzng thereof 10; not, and under no I'll I to be conbl! UM a representa. tlon h \\'nlston & Co Inc All of OPlnUJn nrc to \Llthnut notIce Wnlston 8.. Co, In(', and OffIcers, DIrectors, and lmp,,ec-. thelcof, JulLhnsc sdl anu mn h\Le an lnterest In thl' mentIOned hereIn This mnrel letter IS Intended and presented merely .IS a general, Informnl 011 to ddV I'Jalkel new and not ao; n ,,,mlliete anli)q… ArldltlOn'll IIlfOlm'lhon wIth to any ,eellnlle; referred to hClelTl 11\ he flu 11))ln reqllco;t \\-. ,01

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Tabell’s Market Letter – December 27, 1957

Tabell’s Market Letter – December 27, 1957

Tabell's Market Letter - December 27, 1957
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NEW YORK Walston &Co. ———Inc. MembeTs New York Stock Exchange PHILADELPHIA LOS ANGELES SAN FRANCISCO BASLE ISw;t,l.,d) OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM IrABELL'S MARKET LETTER December 27, 1957 After perusing a large number of economic and stock market forecasts for 1958 (including my own), I find a unanimity of opinion on several points. Almost everyone expec s (1) a decline in business in the first half of the year and a pickup in the second half, (2) the stock market averages to reach their lows in the first half and rally in the second half, (3) the stock market averages at the end of 1958 will be approximately at the same level as at the end of 1957, (4) range of Dow-Jones Industrials for 1958 will be approximately 480 high and 350 low. This sameness of thought worries me. When almost everyone has the same opinion it 'usually-aoesn wof00ut. -Mostof'the presuppose' thatboth5usfriess 'an'-d . – the stock market will move as units. Actually this only happens in the earlier stages of advances and declines. In the 1953-1956 advance, almost all stocks advanced from October 1953 despite the fact that business continued to decline well into 1954. However, as early as March of 1955 a great many individual stocks began to top out regardless of the fact that business indices did not reach their highs until late 1956 or early 1957. Even though business as a whole may decline through the early part of 1958, a number of industries may buck the trend. This letter as far back as August of this year suggested switching out of capital goods 1ssues into consumer type groups and a number of issues suggested, like American Stores, Bristol-Myers, First National Stores, Quaker Oats, Winn-Dixie and Zenith Radio, have reached new high territory. Issues of this type will probably continue to show above average action. As time goes .on, and regardless of the movement of the general market, other groups w1ll gradually complete their adjusting phases and stftrt to discount the favorable factors ahead. Three likely candidates are groups that topped out a year and a half or two years ago, namely, building supplies, chemical and paper. The best approach to 1958 is to presume that it will be a trendless market similar to 1952 and 1953 with the upper and lower limits as not yet ascertainable, but probably, as far as the averages are concerned, not much more than 10 above or below present levels. If such is to-be;.the case;,-it–would appear wise'to-more or less ignore-the'general- market and the timing of the highs and lows on the averages and concentrate our attention on individual issues and groups that could conceivably fluctuate over a wider range, both up and down, than the 100/0 noted above. It would also appear wise to pay close attention to the bond market and money rate A further rise in the bond market and a concomitant drop in yields should prove a most stimulating influence on certain types of equities. Electric utility companies are probably the be st example. In addition to electric utilities, some of the natural gas companies ap- —-.., pear attractive at present levels, particularly as they have probably been unduly depresse by recent judicial decisions and government suits. The relatively stable United Gas Corp. (26) is now available at close to a'6'yieHI and EI Paso Natural Gas (26) with an excellent long term growth potential is available at '5.0 'yield and at a price level 40 below its hig Other issues should also benefit from the easier money trend. American Can (40) yielding 5 and selling at the lowest price / earnings ratio sinc e 1951 despite the fact that recent acquisitions enlarge the growth potential, is a case in point. Electronic issues also offer appeal. Raytheon (21) although it pays no dividend at present, should show earnings close to 2.75 and has shown excellent technical action. Hoffman Electronics (21) is an interesting speculation in the solar energy, silicon and semi-conductor fields. Yield is 4.8 ve ,.mentionedWilson& Co. (1.5) , .the outstanding issue ,.in. the meaLpackmg group . recent letter. The yield here is 6.6. Easing in money rates should also help the building stocks. National Gypsum (43) has moved up from its recent low but appears attractive on minor dips. I also like Flintkote (36) and Masonite (24). Tax loss selling has also knocked down a great many issues to what appears to be undervalued levels. General Railway Signal (21) should show earnings of 3.25 for 1957 and at its present price 1S selling at only 6 1/2 times earnings to yield over 7 on the 195 dividend. While this company serves the unpopular railroad industry, it supplies a cost and labor saving product that will pay for itself in a short period of time and the present backlog appears sufficient for a long time ahead. American Brake Shoe (34), yielding almost 9 on the 1957 dividend and selling at about six times 1957 earnings, also appears undervalued. TI1lS market letter IS not fl.nd uncle no clrcumstllncC's 15 to be 11. lin uffer to sEDMXJNIJ.nW tn herem The mfOl mation contfllned herem 15 not guaranteed no; to aCCUrdCY or completeness and the IS to be COllstrUed as, /I, represcntn- tlOn by Walston & Co, Inc All expreSSions of opInion arc to chan!)e (& UQ..,l..Jk\fl.b,\h\l..Qfflcers, Directors, StockholderI' and Emplyel'!I thelenf, and nM)' hnvc ,In In the mentIOned helcLlI ThiS market letter IS Inhnrielr and llrcscntcd merely as Ii gellelul. Illfolmnl commentnr. all dl) to d.I)' market news and not liS Ii complete Adlhtlnti Informntlon \\Ith respect \0 lin secuntles lcfcrled to hCleln Will be furnIshed Ul'on request \\ 30

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