Tabell’s Market Letter – October 09, 1964

Walston &Co. Members New York Stock ExcluLnge NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER October 9, 1964 The extreme selectivitj'that'1iils characterized the stock market for the past nine months still continues. Since the beginning of the year, the Industrial Average has advanced about 120 points from around 760 to 880. Percentagewise, the advance of 160/0 has been rela tively modest. Many individual issues have shown much greater advances, but also many stocks have shown below average action. The 160/0 advance has been a meaningless figure as far as most stocks are concerned. The technical pattern on the averages gives no indication of an important move in either direction at the moment, but individual stocks show evidence of relatively wide moves in both directions. The averages have been in an uptrend for over two years and the advance is probally.at a development. This is evidenced by the increasing selectivity and the slowing down of volume on a longer term basis. The twenty-fi ve week moving total of volume of trading on the New York Stock Exchange reach- ed a high of 622 million shares on the week ended May 22nd, and has gradually fallen off to a total of 576 million shares on the week ended October 2nd. These volume drop-offs usually give a warning signal long before the market reaches its peak. For example, in 1961, the twenty-five week moving total of volume reached a high in April and gradually started to fall off. The high in the average was not reached until November. In our recommended list, this letter has tried to counter the extreme selectivity in the general market by recommending issues where the technical pattern is strong and where the downside risk is compensated by a sizable long term potential. Most of the issues have shown above average action in recent markets. J. RAY McDERMOTT (35 7/8) has advanced frw weeks. While some consolidation may be needed, the long term potentials in t I i to make it an attractive long term holding. The same applies to P advanced 500/0 in price since the first of the year. r… v A ',8 D L (61 1/2) which has MOHASCO 151/8)entered our at around the 13 1/2 level and has a mod erate advance since that tim. .site Oak River Mill Dix.iana Mill of-thls company-laBt-week pr eLiwIth what I saw. I WIll go mto mor detail in a future letter. favoring the upper part of the n be around 1. 15 to 1. 30, with the od levels the stock appears favorably priced in view of the excellent 1 n 0e . J. C. Penn e r recommended list on September 15,1961. Currently, although it has a Ion rm oe potential of 72 from a technical point of view, it has reached its shorter te 'oe potential. The stock is, accordingly, being removed from our list, although inve s interested in quality and longer term growth may well wish to continue to hold it. However, more aggressive investors may well want to consider switch- ing into MONTGOMERY WARD ( 43), which seems to us to be a highl,y attractive capital gains vehicle. Almost everyone is familiar with the immediate post-war history of Montgomery War the company's hoarding of cash and its refusal to expand as did its major competitor. An equally well known story is the effort of new management since 1957 to recover the ground- lost. Unfortunately, in a company the size of Montgomery Ward, such recovery is a slow proc ess, but there is evidence that tangible results have already been achieved and that the har- vest of the company's belated expansion may be reaped more markedly over the next few years. Since 1958, ninety-two new stores have been opened and these units now account for some 440/0 of sales. The number of larger stores has been increased while small, less profiF able stores have been sharply reduced. Sales since 1957 have been increased by almost 500/0, and 1964 will probably mark the fifth consecutive year in which an earnings increase has been shown. However, the compa ny's need to put expansion above all else in the past seven years has placed a heavy penalty on profitability and recent earnings gains have been less t gains in sales. With the modernization program largely complete, it is felt that the company can increase its profit margin as well as show sales increases, and the effect on earnings could thus be dramatic. For the year to end Jan u a r y 31, 1965, earnings could well reach 1.75 per share versus 1. 56 in 1963-64. Further growth for 1965 appears to be in prospect From a technical point of view the stock has an upside objective of 53-66, and it is being add ed to our recommended list. Dow-Jones Ind. 878.08 Dow-Jones Rails 222. 12 EDMUND W. TABELL WALSTON & CO. INC. market leHer 1'1 not nnd under no CIrcumstances IS to be con …trucd ns, nn offer to sell or n soliCItatIOn to buy a.ny IIccurlbes referred to herem The informntlon c(Jntnined herem IS not )!Ullrnntccd as to nCC\lrncy or compJetenes'I anri the hn nlshm, thereof IS not, and un del no clrcumswncea I' to he construed a r(!pre,(!nta t'on b) Walston & Co. Inc All exprCSSlOns of oPinion are subject to chnnl!c \\Ithout notice. Walston & Co, Inc. and Officers, Directors, Stockholders and Enlployees therrof, 11Ull'hl'l.e, sell and may have nn interest 10 the !'ecurJtles mentioned herem. This market letter IS mtended and presented merely as a general mformlll commo;ntary on dn)' to day market news and not as a complete analYSIS AddltlOnal mformatlOn with respect to any securities referred to herem Will be furnished upon requco;t \\.. 301