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Walston &Co. —–Inc, —– Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OffiCES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER August 7, 1959 Since January, 1955, this letter has been following the fortunes of four groups of twenty stocks in an effort to determine the character of the stock market. ,The in- troduction to the first such compilation, made four and one-half years ago, read as follows Few people realize how diverse the action of the market has been over recent years. Regardless of the fact that the Dow-Jones Industrial average has advanced for over five years with just a few minor interruptions, the action of various types of,securities has been,quite, different. ' Manyholders,shQw.JQsses…on indj.yidual,secu;.. arities despite the fact that the general market has been in broad advance since — – 1949. As always, it has been dangerous to buy the wrong securities at the wrong time. In the main, it has definitely paid to own quality issues over recent years. The following compilation may be of interest. It presupposes an investment of 100,000 in four different groups of stocks at the 1946 highs. The first group is composed of twenty growth issues and presupposes an investment of 5000 each in such growth companies as Dow Chemical, Corning Glass, I. B. M. ,etc. The second group is composed of twenty stocks of investment quality. It was selected from the twenty favored issues of 130 Common Trust Funds of leading trust companies. It includes such issues as General Motors, Standard of New Jersey, General Electric, National Dairy, Sears Roebuck, etc. The third group consists of good quality dividend- paying issues a bit below the investment quality of the second group. It consists of issues hke Allied Stores, Allis Chalmers, Babcock & Wilcox, National Gypsum, etc. The fourth group consists of lower-priced, more It comprises the twenty most actively traded issues in 1953 at ou or ower. It in- cludes the issues in which the general public like Armour, Avco, International Telephone, New '\ill \ 'Cola, etc. It c 'sts of issue,s Cent ,Pennsylvania, Pepsi- the sions drawn period are rather obvious. Growth Issue Investment Issu MedlUm-Gra ssues Low-Priced Issues High 100,000 100,000 100,000 100,000 1949 Low 85,403 69,932 47,520 30,095 1956-57 High 660,301 318,144 206,524 88,111 It can be seen that the growth issues outperformed all the others by a wide margtn both in the 1946-49 bear market and the 1949-1957 bull market, Next best performer In both markets was the Investment group, followed by the Medium-Grade portfolio. The Low-priced speculative issues 'Jere, of course, the worst performers, losing more than two-thirds of their value at the 1949 low and never recovering their 1946 value even at the 1956-57 highs. Since that time, however, relative performance has been somewhat differant and conclllsions are not quite so easy to draw. The following table sh3.wS the perform- ance of each group since the 1956-57 hIgh. Adv. Adv. 1956-57 HIgh 1957 Low Decline 1956-7' 1957 Lo 1956-57 High- Value Hlgh To 1957 Low 8/6/59 To Date Date Growth Issues 660,301 392,086 41 747,198 13 91 Investment Issues 318, 144 220,409 31 331,729 4 51 Medium-Grade Issues 206,524 110,201 47 184,480 (-11) 68 Low-Pnced Issues 88, 111 44,948 49 121,550 38 170 — This malket lette contmned herein r Ie is not, and under not guaranteed a no circumsta s to accuracy nces or c oISmtpolebteenceosnssatrnude d as. an offer to sell or the furnishing thereof a sohcltatu)n to buy IS not, and under no any securities referred circumstances IS to be to herem construed The Information as, a representa- tlon by Walston & Co. Inc. All eXprellBIOnS of opinIon nre subJeet to change WIthout notlce Walston & Co. Inc. and Officers, Stockholders and Employt!es thereof, purchase, sell and may have an Interest III the securities mentIoned herein ThiS market letter IS mbended 4nd presented merely as a general, mformal commentary on day to day market news and not as n complete analysIs AdditIOnal lllformntion with respect to any securities referred to herem Will be furnishM upon r e q u e s t ' WN 301 – -2- The first fact to be noted was that the performance of the four groups m the 1957 correction was somewhat dlfferent from their action in the 1946-49 bear market. In 1957, the Investment -Grade group declined far less than dld the 'growth issues, dropping only 310/0 vs. a fairly high 41/0 drop for the growth equities. Also, the Medium and LDw -priced portfolios, while losing almost 500/0 of their value, did not fare as badly relatlve to the other groups as they had in 1946-49. The most striking difference appear s, however, when the study is brought up to date. The relative performance of the Growth group has again improved with this portfoho having advanced 910/0 in value from the 1957 low to date, vs. a 510/0 advance for the Investment group. Thus, the Growth stocks are now 130/0 above their 1956-57 highs and the Investment group only 40/0 above those highs. The MediumGrade portfolio, while it has advanced 680/0 from the 1957 low is, however, still the only group of the four below its 1956-57 high. It is in the Low -Priced portfolio that the real change in performance has taken place. This portfolio has adanced 1700/0 from its 1957 low, the best performance of any of the four groups in the study. It is now 380/0 above the 1956-57 high, a better performance in this respect also than any of the 3.other groups.Significantly, for the flrst time since this study has begun, the value of the portfoho has risen above the origmal 100,000 invested in 1946. This seems to be graphlc proof of a theory often advanced by thlS letter namely that we are m the final stages of a bull market and that one of the characteristics of this stage is an advance in low-pnced, speculative securities. For the first time since 1946, these issues have enjoyed a worthwhile advance and many of them appear npe for further gains. Indeed, since there as yet has been no sign of a major top developing for stocks in general, these issues still constitute good investment medla for the agile trader. The longer term investor, however, had best note that the same group of stocks lost almost 700/0 of their value in the three years following 1946 and that the mvestor in these stocks at their highs waited twelve years to recoup his origmal investment. AWTamb EDMUND W. TAB ELL WALSTON & CO. INC. Dow-Jones Industrials – 668.57 Dow-Jones Rails – 164.45 NOTE The actual flgures in thlS study are slightly dlfferent than those in prevlOus studies due to refmement of a few statistlcal inaccuracies in the previous data. The general trends and conclusions drawn are the same, however. The names of the issues m each of the four groups, together with the number of sha res owned based on the present capitalization may be obtained at your nearest Walston office. EWT – – -…… filECOPV The following are the stocks mentioned in the Tabell Market Letter of August 7, 1959, together with the number of shares which would be owned as of this date, adjusting for all stock dividends, split-ups and capital changes since 1946 GROWTH ISSUES 769 Aluminium, Ltd. 217 Amerada 178 Carrier 312 Corning Glass 388 Dow Chemical 86 DuPont 512 EI Paso Nat! Gas 333 Goodrich 234 Intern'l Bus.Mach. 291 Minn. Honeywell 689 Minn. Mining 263 Monsanto 357 National Lead 280 Owens Corning 188 Pfizer 258 Radio Corp. 193 Rohm & Haas 360 Scott Paper 263 Shell Oil 120 Union Carbide INVESTMENT ISSUES 192 American Can 314 Amer. Cyanamid 86 DuPont 287 General Electric 178 General Foods 373 General Motors 172 Gulf Oil MEDIUM-GRADE ISSUES 78 Allied Stores 159 Allis Chalme rs 645 Babcock & Wilcox 184 Blaw-Knox 197 Bucyrus-Erie 229 Burroughs 116 Cham Belt 178 Johns Manville 82 Kennecott 221 National Dairy 86 Penney, J. C. 277 Phillips Pete 307 Sears Roebuck 333 Socony Mobil 260 Clevite Corp. 100 Crane Co. 166 Distillers Corp. 83 Carrier (1) 294 Joy Mfg. 286 Lowenstein 408 Mead Corp. 384 Stand. Oil Calif. 200 Stand. Oil Indiana 416 Stand. Oil of N.J. 333 Texas Company 120 Union Carbide 125 Westinghouse Elec. 183 National Gypsum 72 New York Air Brake 571 Penn-Dixie Cement 131 Rheem Mfg. 122 Gen'l Tel. & Electron.(2) 213 Yale & Towne LOW-PRICED ISSUES 251 Amer. Airlines 296 Armour 348 Avco 165 Balt. & Ohio 259 Canada Dry 333 Columbia Gas 555 Em erson Radio 90 Gimbel 159 Intern'l Tel & Tel (61 Loew's,Inc. )(3) (61 Loew's Theatres) 211 Mack Truck 139 N. Y. Central 172 Pan-Amero W.A. 105 Pennsylvania RR 123 Pepsi-Cola 216 Raytheon 253 Rexall Drug 205 Servel 125 Spiegel 195 Studebaker – Packard( 4) (1). Exchanged for ongmal holdmg of Elliott Co. (2) Exchanged for original holding of Sylvania Elec. (3) Exchanged for onginal holdmg of Loew' s, Inc. (4) Exchanged for origmal holding of Studebaker. Edmund W. Tabell Walston & Co. Inc.