Tabell’s Market Letter – August 28, 1959

Tabell’s Market Letter – August 28, 1959

Tabell's Market Letter - August 28, 1959
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– Walston &Co. Inc fiLE COPY Membe,'s New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER August 28, 1959 The market moved a bit higher during the week on relatively small volume, but the most constructive technical feature was a slow strengthening in my graphs of volume, advances and declines and new highs and lows. On my ten-week mewing averages, for example, advancing stocks are beginning to catch up to the number of st()cltEt declining. Continuance of this trend for a week or two more, with restricted price Hl'..JV''' ment in the averages, would be most encouraging. Statistics Current Price Current Dividend Current Yield '—AMERICAN VISCOSE CORPORATION– 46 2.00 4.3 Since its original recommendation by this letter at 52 3/8 a month ago, VISCOSE reached a new high at 55 3 8, subsequently reacted to a low of 45 5/8 on Common Stock Sales – 1959-E Sales – 1958 5,098,377 shs. 375,000,000 310,000,000 Friday, presumably affected by DuPont's announcement of lower prices for nylon cord. Close analysis of the DuPont price cuts indicates that their effect on American Earn.per sh. 1959-E 6.50 Viscose may be of little importance and the Earn.per sh. 1958 2.70 Market Range -1959 55 3/8 – 37 stock appears to be an outstanding buy on the current weakness. American Viscose earning power is Note Sales and earnings figures include fold. The company itself is America's equity in unconsolidated subsidiaries. largest and secondlarg prodw;,er 0 el Due in no small measure to non-recurring expenses, net was y i 8 to 1.36 per sha This year operations have improved sharply, with ear n the first half and a net of 3.25 -3. 50 projectedfor-the full year. r -probably– comes from cellophane, which market as the trend fo, conve- nience packaging continues. rO' Parent-company s \Y story, however. The giant Chemstrand Corporation, jointly 0 0 hemical, reported record sales for the first half of 1959. A r e ' uity in the earnings of Chernstrand and another sub- sidiary, Ketchika u , were equal to 1. 61 per American Viscose share, should reach 3.25 r t 11 year. Thus, American Viscose consolidated net earning power is 6.50, giv' e stock a pIE ratio of 7. Why the DuPont announcement should have caused weakness in American Viscose difficult to analyze. There is, fi rst of all, no certainty that the price cuts will have any effect whatever on rayon's share of the tire cord market. Since commitments for 1960- model autos are already made, it will in any case have no effect before 1961. Further- more, since Chernstrand is the second largest producer of nylon, its increased earnings should more than compensate for any loss to the parent company. Most significant, is that at current prices,American Viscose is selling at only eleven to twelve times eaTn,t mgs of Chernstrand and the cellophane division. In this connection, it is interesting to that recent prIces mark DuPont, its only major competitor in these fieldS, at 30 times ea.rnlihf's Avisco's low pIE ratio is especially unusual considering the company's excellent growth prospects. Chemstrand has increaseds-ales from 106 million in 1955 to an antici pated 220 million m 1959, with continuation of the growth trend in prospect. Cellophane production continues to strain at capacity and a new addition which will increase capacity 50 is now in operation. Furthermore, a new joint venture with Sun Oil Company, Avi Corporation, will shortly go into production of polypropylene, a new plastic material which is expected to supplant polyethylene in many applications. At current prices, the stock has reacted to a strong technical support level and yields 4.3'70 on the recently increased 2.00 dividend. Technical objective is still 65 followed by a long term 120. The stock is again recommended for purchase. Dow-Jones Ind. 663.06 Dow-Jones Rails 163.49 EDMUND W. TABELL WALSTON & CO. INC. II! not, and under no Circumstances IS to be construed 115, an offer to sell or n sohcltatlon to buy any secUrities referred to herem The mformatlOn cnntnlned herein IS not guarnnteed as to accuracy or completeness and the furnishing thereof IS not, and under no Clrcum!!tancea lS to be construed as, a representa- tIon by Walston & Co, Inc All expreSSIOn!! of oplnlon are subject to chanj'!e WIthout notice Walston & Co, Inc, and Officers, Directors, Stockholders and IIlrormal thereof, purchllse, commentary on day tsoeldl aayndmmarakyethanvewe sana Interest In nd not as a the SecUritlCS mentIoned herem ThiS market letter IS mtenrled complete analysIs Additional mformatlOn With respect to Ilny and presented merely as n general, securities referred to herem wIiI be furnlshed upon r e q u e s t ' \\'N 301

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