Tabell’s Market Letter – September 04, 1959

W—-a–l-s-tIoncn–&—C-o. Membere N e,v York Stock Exchange FIL NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER September 4, 1959 With Labor Day at hand, it appears appropriate to review my thoughts on the general stock market pattern for the foreseeable future. It must be borne in mind, however, that, under present investor psychology, the price actlOn of an individual issue may show little relationship to the general market averages. As I have stated in this letter before, I believe the stock market is on the third and final phase of the major advance that started in June, 1949 from a low of 160 in the Dow-Jones Industrial average. Such major advances usually occur in three phases. The first phase was from 1949 to 1952 when the Industrial average advanced 840/0 in forty-two months, phase was the advance from the September, 1953low of 254;-36to' the April, 1956 high of 524.37. This 1060/0 advance was accomplished m thirty-one month The present advancing phase started in October, 1957 at 416.15. The high so far was reached August 3rd at 683.90, This is an advance of 640/0 in twenty-one months and quite a bit less than the scope and time of the two preceding advances. As mentioned in my letter of March 6th, a study of the fourteen major upswings since 1885 indicate that the average time duration was thirty months and the average percentage advance was 1110/0. Whether the present advance will be below or aGove average is, of course, not ascertain- able, but, if the advance reached its peak at the August 3rd hIgh of 683.90, it would be the smallest percentage advance since the turn of the century and, from a timmg view- pOint, just about equal to the two shortest upswings since the same time period. Usually, the final phase of a major advance is the most dynamic of three phases, so it would ap- pear logical to expect that the high of the move has not yet been reached. The business pattern would seem to bear this out. We seem to be in the middle, or just past the middle, stage of a cyclical upswing in business, 0 . When we come to the nearer term pattern, p'c u e as clear. The In- dustrial average has declined from the 683,90 highl9-.;uP1\ decline of only about 6 1/20/0. Whether the correctiQl, tIC ow of 639.34, a – low at that point; or whether a,further correction IS orsas(l).the duration.ef, the steel strike, (2) the money 3 h chev's visit and the peace scare .There is a support level at 6 Q dustrial average and another at 600-580, A normal entire advance from the October, 1957 low would a de l i 2t ' Industrial avera c0 , t'he top already formed on my graph of the e August 19th low of 639.34 would indicate a fur- ther dip to about 6 w e penetration of the 174-157 range in which the rail average has held sin t 'rst of the year would indicate a further decline to about 143. To summari or the longer term it is my belief that the market will some time later this year or early next year move above the August highs, It will depend on news developments whether the advance will start from the level of the August 19th low, or whether a further correction is needed. Of course, individual stocks and groups may have quite different patterns than that of the averages. The paper group, for example, is shOwing excellent relative strength. On our recommended list, as a speculation in this group,is GREAT NORTH- ERN PAPER (53 1/2) Great Northern, the largest newsprint maker in the United States, appears slowly to be recovering from a host of difficulties encountered in the past two to three years. A disastrous hydro-electric year in 1957 coincided with a dramatic shift from a seller's to a buyer's market 'in newsprint This- shift took place just as-the company ha-d 0 completed a major capital improvement program, Net result was that per-share earn- ings plummeted from 5.44 in 1956 to 29 last year. Cash flow dipped from 12.70 per share to 7.22. The dividend was slashed from 3.00 to the current 60. The prIce of the stock plummeted from 108 1/2 in 1956 to a 1958 low of 37. Smce that time, the stock has held in the 37-61 range and an upside penetration of this range would indicate 137-146. Earning power is slowly improving and 1.50- 1. 75 will probably be earned in 1959, with a cash flow of about 8.00. A return to 1956 levels, or higher, appears possible over the next few years. Dow-Jones Ind. 652.15 EDMUND W. TAB ELL WALSTON & CO INC, tJIGi;W';n'Jkcal1M IS to be construed /lS, an offer to sell or a soliCitatIOn to buy any securltles referred to herein The mformntJOD contamed herein II!! not g\Hlranteed as to accuracy or completeness nnd the furnishing thercof IS not, and under no Circumstances IS to be construed as, a representa- tion b WRIston & Co, lnc All expressIOns of opimon arc subJect to change without notice Walston & Co, Inc, and Officers, Directors, Stockholders and t.hereof, purchase, sell and may have an mterest In th sCurltles mentIOned herein This market letter IS mtendc'li and presented merely as n general. Informal commentnry on day to day market news and not as a complete analYSIS AddItional mformahon With respect to any 'lecurltles referred to herein will be furlllsheri upon request \VN 301