Tabell’s Market Letter – June 22, 1962

Tabell’s Market Letter – June 22, 1962

Tabell's Market Letter - June 22, 1962
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ftlECOPl Walston &Co. Inc Members New YOk Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA OFFICES COAST TO COAST AND OVERSEAS -. TABELL'S MARKET LETTER June 22, 1962 T!J.e Dow-Jones Industrials declined below the May 29th intra-day low of 553.75 to a low of 537.56. Volume was well below that of May 28th and May 29th. It is not unusual action to have the market drift somewhat lower after the initial rally follow- ing a selling climax. This occurred in the 1946 decline which we believe can be com- pared to the present market. Volume reached its high in early Septembe If 1946 but the averages declined to three new lows on falling volume before the ultimate low six weeks later. The final low was 4 below the climax low. There is as yet no signal of a trend change on any of our technical indicators. The — . bl'eadth index-continuesrto..r.each new 10ws.Volume indicators stillremain unfavorable. These will not change until the market loses its downside momentum. However, despite the lack of technical confirmation that the market has reached its low, we buying at this level. Many individual issues have reached their downside technicc' ,-'bJe.tives and the market should be relatively close to its lows. Waiting for a technic- signal could result in paying prices above present levels. Certainly, for the long term investor, the investment odds are more favorable at the moment than in a long time. This letter turned extremely cautious last Auvust, witi- the averages at 725, and suggested a policy of selling on strength because we -cit that the investment odds were relatively unfavorable. The averages were then s 'ling at twenty-four times earnings and even if earnings in 1962 had increased 25 it was difficult to envision the averages selling t.bove 825 or 100 points higher. On the other hand, we had felt for some time that the average, after reaching its high, could return to around the 1956-1957 high of 525-500 before resuming its long term advance. It app- eared that at 725, the investor was risking 200 points 10sooilOO points gain. The present market decline has radically th iet en the downside, it is possible that lowered investor confidence e P.8 10, now sixteen, down to fifteen times earning…i-.arnings on the thlS should be about 35. in mlgot-arop to;P30.- T01S mlght rally from around present levels. —-ur!edin earnings 0 or ilato aftor a u, e ow e risk seems to be 100 points. V,hat is the upside Certainly, an eventual return to the 740 level is a con This would mean at least odds of 2 to 1 , in the investors vo . 're robable that the industrial average might earn 45 by 1967. Cap d w -times earnings, could result in a price level of 950 and bring the favora e n ment odds up to 4 to 1. Certainly the dro prices has resulted in bringing high quality growth issues down to much more easonable prices. In some cases, the decline has brought their pIs ratios back to the average of the past ten years. TUs list consists of ten highest quality growth stocks. The first column is averageI E ratio for the past ten years. The rest is self-explanatory. These issues are now available at near the average 21 ratio of the last ten years after dropping an average of about 50 from their highs. For long term investors interested in growth, these issues represent a most interesting purchase. For those individuals tied up with losses in second or third rate growth issues still selling at high pI E ratios, it would seem sound invest- ment policy to upgrade accounts by switching into the group below. 10 Yr. Avg. 21 – S t o c k – 1959-1961 — High- 30.2 Corning Glass 194 21. 4 .2astman Kodak 136 28.1 Dow 101 22.1 General Slectric 100 20. 9 Hercules owder 53 37.7 IBM 607 26. 6 Minneapolis Honeywell 179 29.4 Minnesota Mining 88 16. 7 Procter & Gamble 102 25.7 Rohm & Haas 195 High v/-s 57.7 41. 4 37. 5 32.4 36.1 82.7 42.3 71.5 39. 8 39.6 Recent Low 112 86 42 56 28 300 76 43 60 73 Recent O/C). -01 S Decline 27.6 51 24.6 41 19.1 49 19. 6 40 17.6 51 38.5 54 21.1 50 28. 5 60 21. 9 42 16. 6 58 This market letter IS not, and undC!t no Circumstances is to be constru((i as, an offer to sell or a sollCltatIon to buy any sccuritles referred to herdn The mformatLOn mIS qg !e.l!ccWrACY or completeness and the furnishing thereof IS not, and under no . . \nc All opInion are subject. to change Without. nobel' Walston &, Co, -rJiIpetruud Asa lPIJI'eJenta- t ereo'- pure ase, sell and may ave an mterest. In the mentioned hcn!ln ThIS market letter to am not as a complete annl),sl Ad(htlOna mformlltIon With tya!Sr.lA!lJi!\!ibH\yCrable, \\ 301

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