Tabell’s Market Letter – May 21, 1965

Walston &CO. Inc ;,…..;…….;;….;;. INVESTMENT …..NKERS MUTUAL FUNDS MUNICIPAL BONDS Members New York Stock Exchange end Other Principal Stock and Commodity Exchan98s OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER May 21, 1965 Over the, past few months this letter has consistently noted the shift in leadership which appears t.e be taking place, out of blue chip issues, which had been in the forefront of the advance through 1963 and 1964, and into secondary and tertiary issues, which still appear to represent good investment value. Since it does not seem that this tendency has altered appreciably of latel.the1iltiyer who by reason of regulation or preference, is restricted solely to primary grade equities has found himself confronted with a shortage of relatively attractive investment media. There are, however, eScceptions to this rule, and two higher grade stocks, which appear attractive for new buying at the present time, are discussed below. — Aluminum Company of America (77 -1 / 8) was 'added-to'oUl;'high;-qualityRe-coinmeno'eQ List two. weeks ago, and National Cash Register (88-3/ 8) is being added herewith. The aluminum group, at the moment, presents somewhat of a paradox. Despite the fact that the outlook for 1965 is as bright as it has been in years, most stocks are selling more cheaply in relation to earnings than they have at any time in the past half-decade. This -situation presents an interesting opportunity. Growth in domestic aluminum usage continues, and, although it may not expand at the 10/0 rate of the 1950's, a 7/0 annual expansion through 1970 is expected. Moreover, the factors that masked this growth in the latter part of the 1950 ' s are conspicuous by their absence. The key too-the situation is the fact that the supply-demand equation in aluminum has been brought into line,and present conservative expansion plans indicate that it will remain there. This has resulted in a noticeable strengthening of product prices which, to the companies who derive a large portion of sales from fabricated products, can mea an i t increase in earning power. ((C Alcoa, of course, is the leading factor in 34/0 of all aluminum-produced and, with expansion 'd y, accounting for some ough 1967, it should be able to maintain that share of the market. in 1964, and first quarter Cash flow was over 7.00 a earnings and cash generatieo' c when 57 was reported (YI nsiderable improvement in both 1\tgie' coming year. The stock is unques,tionably the quality National Ca annals. Sales' hav 'n e 's u roup. – oment, presents a history not uncommon in corporat ed since 1955 and cash flow has snown a respectable increase, yet per s e a gs over the past decade have been virtually level. Explora- tion of all the reasons his decline in margins would require a more complete analysis, but certainly a large ortion of the pressure on margins is centered on one area—heavy research and development expenditures amounting to over 10 per share in the five years through 1963. A great portion of this R&D has gone into computer development, and the relative unprofitabilityof NCR's computer operations is, of course, tied into IBM's dominance of the industry. With the current rapid technological change in Electronic Data Processing, it is impossible to say at this time what the future holds, but it is possible to suggest that NCR has basic strengths which augur well for its future. These strengths in the fact that the company dominates the cash register field, much as IBM does the computer industry, and is a major factor in accounting machines, This strength can become more important as time goes on. Technology has developed computers able to process data at fantastic speeds. The major problem to be solved overlhe next decade is getting the data to the computer. This bottleneck can be broken by producing data in hard form, i. e., a form that can be read by a machine, at the point of transaction. It is, therefore, worthy of note that the cash register is far and away the most common pOint-of-transaction device in U. S. business. NCR has pioneered the development of total systems, which coordinate point-of-transaction devices with computer)! in order to simplify record keeping. Meanwhile, near term prospects appear promising, especially in the foreign area which accounts for almost half total volume. In 1965, earnings should show a significant improvement over the '2J6'g of 1'9'64, and, from a technical point of view, the stock has recently broken out of a three-year base, with a long term upside objective of 144 to 188. The stock sold at a high of 142-1/2 in 1961. It is suggested for purchase in quality Dow-Jones Ind. 922.01 – ANTHONY W DDW'…d'tM.Qtt!r . h ,,;y convenience and mformatlon and Is not an offer to I'!eI1 or ft fOriiULtlOh was 0 n rom sources we tx.o(leve to be reliable, but we do not guarantee Its enJllloyee. may have an Interest In or putchue and sell the securities referred to herein. TABELL The lft. or WN.8Dl ./