Tabell’s Market Letter – June 06, 1958

NEW YORK Walston &Co. —–Inc —- Members New Ym'k Stock Exchange SAN FRANCISCO ' LOS ANGELES ' PHILADELPHIA OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM CHICAGO TABELL'S MARKET LETTER June 6, 1958 The averages have worked deeper into the heavy supply overhanging the market at 460-525 in the Dow-Jones Industrials and at 45-50 in the Standard & Poor 500-Stock Index. My forecast has been for a probable high for the year in the 460-480 area in the Dow-Jones Industrials and at around 45 in the Standard & Poor 500-Stock Index. At this week's intra-day highs, the industrials reached 470.69 and the combined index was at 44.83. The short term action of the market continues favorable, but I would use current strength to lighten commitments in the less desirable groups. In order to build up a broad base pattern strong enough to penetrate the heavy overhead supply in the averages, I peV.eve it is necessary for the averages to coniilme to fluctuate in a broad trading area for a long period of time. This will mean many ups and downs withn the range, of roughly 480 and 420 on the Dow-Jones Industrials and equally roughly in the 45-39 area of the Standard & Poor combined Index. During this period, which I believe is comparable to 1946-1949 and 1951-1953, all groups will not act the same. If market action since October, 1957 is broken down into group action, we come up with quite a different picture from that of the averages. The Dow-Jones Industrials declined from a 1956 high of 524.37 to an October low of 416.15. Since October, the average has recovered approximately 5070 of the 108 point decline. The action of the various groups since October can be roughly broken down into three categories. In the first category are the groups that have reached newall-time high territory above the highs of 1955 -1957 despite the fact that the industrial average is only at 470 as compared with a high of 524. Included in this category are drugs,finance (small loans), food products, grocery chains, meat natural gas, soaps, sugar, telephone, tobaccos and utilities. It will be seen that mo 0 gJIoups are in the consumer or soft goods industries. They also migh)rbe de i ensive type groups. It is probable that these groups will contirl.kM m h' and they do not appear vulnerable in the event of a general market In the, category the hav overed approximately or more of theIr declmes from the -e-October lowS. Included m- this category are (glass, metal and paper) far publishing, retail st e building materials, containers y0 pictures, office equipment, pipelines, t es. It will again be noted that the only really heavy industry g Here probably the action of U. S. Steel, which has recovered 7370 of it e line rgely accounts for the 510/0 retracement of the steel group average. In t is ond category will probably be found the groups that will also reach newall-tO e high territory during the next advancing phases. In the third category are the groups that have recovered less than 5070 of the decline. I have broken down this category into two separate classifications. In the first are the groups that have recovered more than 2570 of the decline and could soon ad- vance into the second broad category. Included in this group are aircrafts, auto trucks, electrical appliances, electronics, mining and smelting, oils, paper, radio-TV, rails, shipbuilding and shipping, sulphur. In the classification of issues that have recovered less than 2570 of their decline are airlines, autos, aluminum, chemicals, coppers, elec- trical equipment, lead and zinc, machinery, metal fabricators, rayon, rubber and steel alloys. Most of the groups in this classification will probably show below average action over the nearer term and will be the last to complete their accumulation bases and join the general advance. As.a number of thesecgroups are Just.a.shade.above the October – 0 lows, they could reach new low territory in the event of a fairly sharp technical decline in the general market. The combination of the three categories listed above will probably result in a stock market that will hold in a relatively narrow trading area for the next year or two. I anticipate neither a broad upswing nor a broad decline, but rather a market in which individual issues seek their true level in line with earnings, dividends and future pros- pects without the undue influence of a pronounced bullish or bearish trend. EDMUND W. TABELL WALSTON & CO. INC. Thl'f market Jetter IS riot, and (lnder no c!lcumst,mces 15 to be construed lIS, an offer to sell or n sol/cltatmn to buy any seCllrltles refcrrei! to berem The informlltlon ('ontllined herel!) 1S lIot gual'llotcerl as to '\CCUIIlCY 01 completeness nnd the furnishing thereof 18 not. und unrler no CII cumstullcC'S IS to be construed ns, a repre'lenta. tl'n hy \\ .d'lto!) & Cr Inl' All c'lllrc'l&wnq of opUllon nre sUbJedt to ehanl,rO \Hthout notice \Valston .t Co, Inc. and Oft'lcers, Directors, Stockholders and Emlllnyees acll .lI1d may hnve an IntCICSt m the seCUrItIes mentIOned herem ThIS market letter 18 mlenderl and presented merely as n general, mrltlllli (mmcntl1l\' on dlly to ,iny nl.llket news and !lot a complete annh'lOls AddltlOnallnfolnmtHln wIth respel't to any !;CCllrltlCs referred to herem Will be Illllln request \\ N 301 . LIST I WELL ESTABLISHED, GOOD QUALITY ISSUES WITH AN OBVIOUS GROWTH TREND. PRICE DIVIDEND AMERADA PETROLEUM AMERICAN CYANAMID DU PONT ; FOOD MACHINERY 109 2.00 72 2.50 206 7.00 67 2.00 1.8 3.5 3.4 3.0 HOOKER ELECTROCHEMICAL 45 1.00 2.2 SCOTT PAPER t 68 1.80 2.7 SPERRY RAND 25 0.80 3.2 SYLVANIA ELECTRIC 52 2.00 3.7 THOMPSON PRODUCTS 72 1.40 1.9 UNION CARBIDE 122 3.00 2.5 LIST II EITHER NEWER OR SMALLER COMPANIES WITH A RELATIVELY SMALL NUMBER OF SHARES OUTSTANDING BECKMAN INSTRUMENTS BERYLLIUM CORP. PRICE 35 59 DIVIDEND 0.60 YIELD 1.0 CONSOL.ELECTRODYNAMICS 32 0.40 1.3 FOOTE MINERALS 45 0.40 1.0 G. RAY McDERMOTT 42 0.60 1.4 MINERALS & CHEMICALS 35 2.00 0.6 RORM & HAAS STRATEGIC MATERIAL3 432 32' 2.40 0.6 VERTOL AIRCRAFT 5 VISKING CORP. 39 .0,) 2.5 LIST III COMPANIES NOT IN ESSENTIALLY GROWTH INDUSTRIES BUT WHICH, BECAUSE OF RESEARCH, NEW PRODUCTS, OR GROWTH IN TERRITORY SERVED, HAVE AC- QUIRED GROWTH CHARACTERISTICS. PRICE GULF OIL 121 DIVIDEND 2.50 YIELD 2.1 IDAHO POWER 26 1.20 4.6 LILY TULIP LINCOLN NATIONAL LIFE MONTANA DAKOTA UTIL. NORTHERN NATURAL GAS PANHANDLE EASTERN SHELL OIL 59 225 26 49 97 88 1.60 1.55 1.00 2.60 3.00 2.00 2.7 0.7 3.8 5.3 3.1 2.3 PACIFIC WEYERHAEUSER TIMBER 74 40 3.00 0.80 4.1 2.0 LIST IV OF HITHERTO MEDIUM-GRADE QUALITY THAT HAVE OR ARE IN PROCESS OF IMPROVING INVESTMENT QUALITY AND SHOULD SELL IN THE FUTURE AT HIGHER PRICE-TO-EARNINGS RATIOS THAN IN THE PAST. PRICE DIVIDEND YIELD BELL & HOWELL 42 LOO 2.4 BRISTOL MYERS 38 1.60 4.2 CARBORUNDUM 43 1.60 3.7 CARi1IER CORP. 58 2.40 4.1 CRUC IBLE STEEL 65 3.00 4.6 GENERAL DYNAMICS 52 1.60 3.1 GENERAL RWY.SIGNAL 87 3.00 3.4 MAGM.l\. COPPER 113 MARTIN (GLENN L. ) 40 J..60 4.0 UNITED AIRLINES 39 1.50 3.8