Tabell’s Market Letter – June 07, 1965

Tabell’s Market Letter – June 07, 1965

Tabell's Market Letter - June 07, 1965
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Walston &Co. Inc INVESTMENT BANKERS MUTUAL FUNDS MUNICIPAL BONDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges ';f-';'r OFFICES COAST TO COAST AND OVERSEAS lABELL'S MARKET LETTER June 7, 1965 On Friday we sent the following wire to all Walston offices One of our short-term technical indicators tells us how much the market is over-sold or over-bought at a particular time. This indicator, which is based on advancing and declining stocks, reached minus 3300 at last night's close. At this level it is as low as it was at the bottom of the Cuban crisis low and at the bottom of the Kennedy assassination low. This would indicate that the market, at least on a short term basis, is deeply over-sold and in the next few days could turn around sharply. The rise will be selective. An issue with an interesting technical pattern is mentioned below. E. J. Korvette, Inc., was originally recommended by this letter in January at a price of 42. Subsequently, it'moved ahead sharplyto n-ews developrrfertt-s-have- brought the stock back to support at around the original recommended level. It, therefore, becomes worthwhile to re-examine the original recommendation. As we pointed out in January, when one buys Korvette, one is buying a concept. Korvette is unique in the retailing field. It is neither a discounter nor a department store but rather a unique retailing operation that combi nes the price appeal and mass merchandising concept of the discounter with the broad line, general attractiveness, and—recently—credi availability of a modern department store operation. What has been the success of this concept The table below compares Korvette's growth over the past five and ten years with that of Sears, Roebuck, America's leading retailer, Federated Department Stores, the leading department store operator, and Interstate Department Stores, a typical discounter. For comparative purposes in this and all subse- quent tables, Korvette's fiscal year ending July is facal years of the others ending in January of the s'ame year. Sales Sales s crease /0 Increase 1955-6 1959-60 4-5 955-1964 1959-1964 E.J.Korvette Stores 17.8 – 7. E 9 3973 – 7.3 360 Federated Dept. Stores 1215' 126 60 The figures speak orvette's sales growth has far outstripped that of other leadi ng retail p i i mewhat better than that of Interstate, a pure discount house. A tabulatlOn of O'''–n'r soo re shows the same story. As the table below indicates, Korvette's earnings n has been consistently superior to that of the other retailing companies. Earnings Per Share Increase Increase 1955-6 1959-60 1964-5 1955-1964 1959-1964 E. J. Korvette .12 .74 2.30-E 1817 310 Sears, Roebuck .95 1. 32 2.00 110 52 Interstate Dept. Stores .59 1. 98 230 Federated Dept. Stores 1. 53 1. 98 3. 10 101 45 Despite this fact, Korvette sells at a considerable discount from both Federated and Sears and at a price not much higher than that of Interstate despite the fact that it is a much more broadly based operation and has shown better sales and earnings growth. The table below shows comparative price earnings ratios. Current Price Earn! share 1964-5 p! E Ratio E.J. Korvette 42 2.30-E 18.3 Sears, Roebuck 70 2.00 35.0 Interstate Dept,Stor,es 33 1. 98 16 6 Federated Dept. Stores 73 3.10 23.5 These figures, it would seem, attest to the success of Korvette's retailing philosophy. We continue to estimate earnings for 1964-5 at approximately 2. 30 per share and look for further growth in 1966. Recent acquisitions should further integrate the operation and make for additional long range profitability. The stock continues to have a long term technical objective of 60-80, and is again suggested for inclusion in growth accounts. Dow-Jones Ind. – 900.87 Dow-Jones Rails – 200.47 ANTHONY W. TABELL WALSTON & CO., INC. ThiS market letter i8 IJubhshed (or )our ('onv('nl('n('(' nnd In(ormatlon and IS not lUI offer to sell or a solllltatJon to buy any lleeUtities discussed The In formntlon was obtmncd from SOUf'('S hdlCve to I rehnhle, but we do not gull.rRntee Its 1\C'C'urRC'\ \\fllston . Co, Ine Rn It officelS, dlret'tors or emJ'loyeea may have an mtereat In or purchase Rnd sell the st'l'untu'!' re(l'rren to heft'ln WNSOI

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