NEW YORK Walston &Co. —–Inc, —….;;- Members New Y01'k Stock Exchange SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OfFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER January 5, 1962 fhe action of the past week may be an indication of what we may expect for most of 1962. The week featured extreme irregularity. Most of the weakness was concentra- ted in the overexploited issues selling at historically high valuations. The more real- istically priced stocks were firm or mOderately higher. The short livEd rally from the December 22nd low of 714. 60 to the December 28th high of 738.79 has apparently ended. 'As note(fi;;-our letter of Dec-emoer22no;'tlie December intra-day low of 714. 60 was an important point to watch. When the December low is broken early in the next year, the trend for the remainder of the year is usually down. Today's intra-day low was 709.74. Most economists expect 1962 to show an improving business pattern over 1961. The 1 Federal Reserve Board industrial production index, now 116, may reach 130 by mid-1963 The Dow-Jones industrials are estimated to earn around 31. 50 in 1961, increasir;g.; 15 to 20 to 36. 38 in 1962. There is only one fly in the ointment., Has the stock market already dis co unted the improving business pattern There is no doubt that, statistically, the market is extremely high as evidenced by the earnings trend and priceI earnings ratios of the Dow-Jones industrials in 1950 and from 1955 to date '-, , -1950 1955 1956 1957 1958 1959 1960 1961 Earnings 30.70 35.78 33. 34 36.08 27. 95 34. 31 32.21 31. 50 Avg. pIE 7.0' 12.2 14.9 13.1 17. 19.5 21. 5 From the 1950 low to the 1961 high the Dow has e earnings moving sidewise. This has been brought about by a ,.oe)fa s. st, the market was ridiculously undervalued in 1947-1950 period. for common stocks brought about, by an the as a tremendous deman increase in,institutional – funds available for investment. r ldence has risen sharply since the 1947-1950 period. /Yw lingness to pay three times as much for earnings in 1961 as in 19 The h' f ce factor is what makes the market vulner- able. A return l a o ,in our opinion, too fantastic to even consider. This would mean t e ould sell at 225. The investment bargains of 1947- 1950 will not be avai a gain in the lifetime of any investor, However, it is possible that a return to 19 aluations might occur. In 1956, the average pI E ratio was 14. 9 times earnings. If we allow for an increase in earnings to 38.00 in 1962 and apply a 1956 valuati'On of earnings the average would be selling at about 566. It can be said, with considerable justification, that straight annual ea rntngs since 1950 do not show the true picture because the quality and stability of earnings are much better today than ten years ago. The table below shows the cash flow earnings of the Dow-Jones industrials in recent years. These are earnings after taxes but before deducting depreciation and depletion 1950 1955 1956 1957 1958 1959 1960 1961 Cash Flow 40.35 53.20 51. 70 56.90 50.25 57.40 56.20 57.00 These cash flow figure s 'probably show a earning!;l,gr'!.. .. ever, even these figures indicate that the market is historically high. In 1956, the price cash flow ratio ranged from 8.9 to 10. O. A,pplying these ratios to an estimate of 65.00 cash flow for 1962 would result in range of between roughly 575 and 650for the industrial average for 1962. Low Jones Ind. Dow Jones Rails 714.84 146. 60 EDMUND W. TABElL WALSTON & CO., INC. This 15 not, and under no circumstances IS to be construed as, an offer to scil or n SolLclwtion to buy secuntIes referred to herein The information conta n erem 18 not gUaranteed as to accuracy or completenes8 and the furnI8hmg ill not. nnd under no circumstances 18 to be construed a8 a representn tlon by Walston & Co. Inc. AU expreSSlons of OOlnIOn are subject to chanp;-e wlthout notice. Walston & Go Inc. and Offlcers SU;ckholders and EmploYCf!1I thereof. purchase. sell and may ha.ve an mterest in the secuntics mentlOned herem ThlS market lettc'r 111 and OJ; a general ',nformhnl..commentnrl' on duy to day market news ang not us a complete nnalysls Ac1lLtlOnnllnformation Wlth respect to any securities referred to herem wlll urnls …. WI\ JOt

&-Walston Co. Inc. Mem.bers New Y01-k Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CKiCAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER January 12, 1962 From a technical viewpoint, the Dow-Jones Industrial average reached its mini- mum downside objective at Monday's intra-day low of 698.42. The minor top formed in November-December at the 735 level indicated a decline to 700-695. There is, however, a broader top formation around the 730 level that was formed from August to Lecember. This technical pattern has a downside potential of 650-635. This is the maximum downsid indication shown by our technical work at the moment. The action of our breadth index should furnish an important clue to nearer term price action. This index, which has been acting worse than the market since May, also clined with'the averages -during the ,but September-low. A. decline below that level'would indicate the probability of 650-635 in the Industrial average Ability of the breadth index to hold above the September low and move above the l\Tovembe high would be encouraging. Continuing the discussion started in last week's letter relative to a possible re- turn to 1956 price valuations, it is interesting to apply this formula to the thirty individu issues comprising the Industrial average as well as the average itself. Last week we stated that the Industrial average was selling at an historically high price/earnings ratio even if cash flow were used rather than straight earnings. In 1956, the Industrial average sold at a ratio of 8. 9 to 10. 0 times cash earnings as compared to 10. 7 to 13. 0 times cas flow in 1961. Allowing for a rise to 65 cash flow in 1962 compared to 57 in 1961, and applying 1956 ratios, would result in a price range of 650-575 for 1962. However, if this same formula is applied to the thirty individual issues in the In dustrial average, some very diverse results occur. This is largely due to the changes in investment popularity of each issue in the past five trends. For example, American Tobacco was a rather st y the relative growth sR-e issue in 1f.56. At a high of 42 and a low of 34, it yielded 5. 9 to 7. 4 S O. t 4 times cash flow of 4.04 a share. In recent years, the issue has b c e m c re popular investment wise. The tobaccos are one of the groups c ifi s consistent growth issue accOrding to one r enti 0 sell'anrigher piE-ratios. Th question is whether this trend has b e a t ggerated. At the recent high of 111 /, American Tobacco was Applying 1956 ratios ld r a cash flow for 1962 and yielding 2. between 58 and 46 against today's clos of 991/2. We do no a acco stocks are going to return to 1956 valuation when they were r hey appear to be amply valued at the moment. -Techni cally, most of the t a e reached upside objectives. On the other side of the pictu is Aluminum Co. of A ca. This was an extremely popular issue in the early 1950's an advanced from a 19 ow of 13 to a 1956 high of over 130 in 1956. Earnings, which had shown a very nice growth trend, started to decline in 1956 and the stock reached a low of 60 in 1958, rallied back to 115 in 1959 and sold as low as 56 1/4 in 1961. Cash flow has dropped from 6.71 in 1956 to an estimated 5.75 in 1962. Applying the 1956 formula would result in a price range of 119-73 as against today's price of 62. Here again, we do not imply a return to 1956 valuations which were extremely high. However, Alcoa has probably discounted most unfavorable developments and does not appear too vulnerable. Technically, the aluminum issues are close to downside objectives. Other stocks in the Dow-Jones Industrial average that appear high when a 1956 valuation of current cash flow is used include General Foods with a 41-37 figure as against a 1961 high of 1073/4 and t0daY's price of 921/4, Procter & Gamble with a 47- 37 figure as against a 1961 high of 1011'12 and price of 86 1/2, and Sears Roe- buck with a 50-39 figure as against a 1961 high of 94 3/4 and today's price of 80 1/8. The steels still appear a bit high based on a 1956 valuation. Bethlehem Steel (41 7/8) has a 39-32 figure, and U. S. Steel (765/8) a valuation of 62-44. Yet, many of the thirty stocks appear tobemodestly priced when 1956 valuations are used. They include Allied Chemical (54 7/8) with a figure of 71-50, duPont (232) with a figure of 300-220, General Electric (71) valued at 75-65, International Paper (34 3/4) valued at 44-31, Standard Oil of New Jersey (51) with a prOjected range of 59-46, and Union Carbide (119 1/4) with a figure of 164-130. Swift & Co. ,(45 1/8), moreover, is considerably below its 1956 valuation.of 63-56. EDMUND W. TABELL 18 to he construed 88, an offer to sell or a I b ur y RC!!U1J les rtferred to hClem The lnfOrmatlO1l …….c'tfnULinMi as tt'l'ccu'laty or completeness and the thereof 15 not. and under no CIrcumstances UI to be construed as, II, representa- bon by Walo;ton & Co, Inc. All of opmion arc subJect to change Without nObce Walston & Co, Inc. and Offlcers, Dircctors. Stockholders and thereof. TlUrchuse, eel! and may have an interest in the securities mentioned herein ThIS market letter IS intended and prC'lentcd merely as II. general. informal commentary on day to day market news and not as a complete analysis Additional mforrnatlOn With respect to any referred to herem Will be –turmshed upon – r e-q- u e– s- t .-'——— — — – – — \\ N .301

NEW YORK Walston &Co. —–Inc —- M embej's New Y oTk Stock Exchange SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER January 19, 1962 The irregular downdrift from the November high of 741. 30 in the Dow-Jones In- dustrial average continued during the past week, and a new intra-day low for the move wa reached on Thursday at 690.21. At that level, the Industrials were very close to the Sept ber low of 688.77. From a technical viewpoint, it is interesting to note that our breadthof-the- market index is also close to its September low. In a sense, this is at least nega tively favorable. Since May, the breadth-of-the-market index has acted worse than the market.XThis is a necessary preliminary to better-than-market action by the breadth ind This observation would still be valid if both the Industrial average and the breadth index broke the-Septembe;ro.lows. on our technical work is 650-635, two-thirds to a half of the possible decline has already taken place. From here on the objective should be to watch for signs of a possible chang in trend. During a market decline, relative strength can be of great help in attempting to find the leaders of the next advancing phase of the market. Contrary to general opinion, t e stocks that are usually the leaders of the next advancing phase are the issues that decline the least and not the issues that declined the most. during the preceding downward move. It is possible for a stock to improve its r.elative strength even though it declines in price provided its decline is less than the average The Rail average is an illustration of improving relative strength. While both the Industrial and Utility averages are well below their December lows, the Rail average, at today's close of 148.26, has held above its comparable low of 139.74. In fact, the F ai average is a shade closer to its October high of 153.60 than it is to its December low. Th r is the possibility of a very strong lsmg-term technical question is one of timing. With the exception of a dl dow to The only 'in July, the Rail ave age has held in a comparatively narrow trading ,rou ,139 and 153 for a 1 of 1961. Ability to break out on the upside of this tag are uld be a most construc- tiveiechnicaJ development. The Western a -'s .-patterns for the intermediate uth r ek– ve the more attractive 17'2)7 Canadtan Pacific (253/8), Chicago, Milwauk Northern .acific (42), and b c u ,Chicago & Northwestern (205/8) i /2), are in our recommended list. Woul take advantage IJ1\e\ d to holdings. An exa e relative strength is to be found in the aero-space group. ''ne of the' s 0 recommended list, North American Aviation, reached a new high at 69 1/2 u' the past week, despite the downtrend in the general market. It entered our list 1/2. The oils are also showing good relative strength action and should be bought on minor price declines. Kern County Land (82 1/4), Kerr McGee (43 1/8), Louisiana Land (73 5/8), hillips etroleum (56 5/8) and Royal Dutch (35) are on our recommended list. inother oil issue showing excellent long-term technical action is Gulf Oil (39). 'urchase of this issue is recommended in the 38-35 range. On the speculative side is 'acific Petroleum selling at 15 1/4 on the jl,merican Stock Exchange. It has built up a strong technical pattern and has broken out on the upside of the 13-8 range in which it has held since late 1959. This stock sold at 39 in 1957. The meat packing group has also shown excellent relative strength in the last few weeks. Cur favorite is Swift & Co. (45 1/2). 'I'hishas been a very-disappointing '' issue up until now, but we still believe it is undervalued. Earnings should be higher next year after a disappointing fiscal 1961. Profit margins have been low in the meat packing industry and diversification has been sought. This has taken time. Swift & Co. has been slowly expanding its interest in the insurance business, and it is interesting to note that insurance earnings made up 28 of Swift's 1961 net. As a radical speculation, Internatio Packers (15 1/2) looks interesting. The risk here, of course, is the extremely volatile political situation in South America. Dow-Jones Ind. – 700.72 Dow-Jones Rails – 148.26 EDMUND W. TABELL WALSTON & CO. INC. Thl'l market letter IS not. und under no CIrCumstances is to be construed as, an offer to sell or n solicltatlOn to bu any referred to herdn The mformatlon contained herem IS not gunrnntced as to accuracy or completeness and the furnishIng IS not, and under no cIrcumstances IS to bc construed us, n repre;cnta- t!on by \Valston & Co, Inc All c,,presslons of oplnlon are BubJect to change Without notice 'Valston & Co. Inc. and Officers. Directors. Stockholders and Emilloyee, thereof. purchase. sell and may have an mterest In the I'CCUTltJeI mentioned herem Thll' market letter IS Intended and presented merely as n general 1I1formni commentary on dny to day market news nnJ. not as a complete analYSIS AddItional mformation Ith lcspect to any securities referred to herem WIll furlllshed upon request. .. 301 .

Walston &Co. Inc. Membe's N elO YOl'k Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHJCAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER January 26, 1962 ,At least insofar as the averages are concerned, the market is approaching a critical stage. The last major upmove in the Dow-Jones Industrials started on September 25, 1961 from an intra-day low of 688.87, and culminated in a newall-time high on No- vember 15th at 741.30. ,At the intra-day low of 689.11 on F ri day of this week, that advance had just about been cancelled out. However, the decline was not accompanied by inferior action in the breadth index, and, as of last week, both the longer-term and shorter-term breadth indexes had managed to remain above their September lows along with the avera1;esA's-has this-is'at-least negatively -' .At this stage, either one of two eventualities may take place. A decisive penetration of the September lows by both the averages and the breadth indexes, would, as has previously been mentioned, suggest a possible decline to the 650-635 area. This is, after all, not too far below present levels, and, at the moment, it is difficult to read top patterns which indicate any lower figure for the Dow. The other possibility is that the averages will hold around current levels, breadth will remain level or improve, and a new advance will be started from the present area. The extent of this advance would, of course, depend on how much of a base forms. . This is, of course, all very well, but it does little to suggest a specific invest- ment policy. Since late last year this letter has pointed out the high degree of risk in- herent in the market and has advocated reduction of risk exposure in investment accounts Based on the possibilities above, there is no reason as yet to change this suggestion. However, risk exposure may be reduced in many ways. way is the outright sale of equities in order to reduce debit balances, or to d l'his may be ap- propriate in conservative accounts. However, r' K be accomplished by the elimination from portfolios of fully ations ng at a high price in ' Lelation g.pd their th raJle and technical patterns which are has been pointed up by the past dec! 0b 1h ric 'n relation to earnings. This securities such as Swift &. , North American Aviation higher at their lows of last week than at their highs er-N It beco 0 vident that today's markets are characterized by shifting preferenc ' . rather than by all-encompassing bull and bear markets, and there appears to e' reason to expect that this type of pattern will not continue to obtain. An inter g example of this type of shifting preference is shown in the following table giving prices of eight securities at their September lows and their January 24th lows. It will be recalled that on each of these dates the Dow was approxi- mately at the same level. Low 9/25/61 Low 1/24/62 Low 9/25/61 Low 1/24/62 American Motors Brunswick Fairchild Camera Great \Vest. Financial 18 1/8 57 5/8 1/2' 55 3/4 Adjusted 15 1/4 39 1/2 , 59 1/2 37 .- Armour Daystrom TXL Oil Pacific pete 42 34 1/4 14 7/8 10 1/4 – 51 3/4 40 23 14 3/4 The above figures speak for themselves and emphasize again the importance of considering downside risk as well as upside potential in investment decisions. Even with the sharp drop that has taken place thus far in the market, a large number of issues are still vulnerable to agonizing reappraisal. In other situations, as fundamental and technical analysis can show, risk is relatively small and potential, over a period of time, can be great. It is such issues that should form the backbone of any investment portfolio, regardless of what course the averages may take. Dow-Jones Ind. 692.19 QQ'lT TQ,p j9 Pails 14 6 86 ANTHCNY W. TABELL WALSTON & CO, INC, ThiS mllrket letter IS not, and under no Circumstances IS to be construed as. an offer to sell or II sohcitatlon to buy any secUrIties referred to herem The mformatlOn contnmed herein IS not guaranteed as to accuracy or completeness and the furnlshml'' thereof IS not, and under no Circumstances is to be construed as, a reprcsenta- tlOn by Walston & Co, Inc. All expressions of oPinIOn are subJect to change WIthout notice Walston & Co, Inc, and OffIcers, Directors, Stockholders and Employees thereof, purchase, sell and may have an mterest In the securitaes men boned herem This market letter is mtended and presented merely as n Stel'!ernl. informnl commentary em da to dn market news and not as a complete anah'sls AddItIonal mformallOn WIth rc;pcct to nny SeCurltles referred to herem wlll be furnished upon request .. . .. \\,N 30t