Tabell’s Market Letter – July 06, 1965
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r- Walston & Co. —–Inc INVESTMENT BANKERS MUTUAL FUNDS MUNICIPAL BONDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges OFFICES COAST TO COAST AND OVERSEAS lABEll'S MARKET lETTER July 6, 1965 The Dow-Jones Industrial Average entered our suggested 850-820 buying area and rebounded sharply on heavy volume to close 20.80 points higher on the week at 875. 16. An intra-day low of 832.74 was reached on Tuesday and was followed by an intra-day high of 878.40 on Friday. Considering the sharply oversold condition of the market after an 11. 8 decline in eight weeks, it is difficult to figure just how far the rebound in the Averages might carry. Steep declines, caused largely by emotiJnahcharrgesllI'ather than by specific economic developments, can reverse quite sharply. A comparable 11.80/0 decline in eight in April of 1956 was followed by a complete retracement of the decline in two months. Our opinion on the market pattern for the foreseeable future is that the uptrend channel . rom the October, 1962 low has ended arid -will b-e-roeplaced oy a b-ioad-trnding-area with U wide price swings both up and down. During this period the action of individual stocks will be far more important than swings in the market averageiwe would watch closely stocks that are showing above average relative strength and would concentrate our attention on issues that at last week's low held above the low they had reached in December when the Industrial Average was at the 850.19 level. One such a stock was Radio Corp. of America (34 1/8) which, at this week's low,fail- ed to penetrate its December bottom of 31. The technical action of RCA has been interestin Early in 1964 it reachd a high of 35, then reacted and, throughout most of 1964 and early 1965, held in the 27-34 range. Early this year it posted an upside breakout from this range. In our June 14th letter we recommended its purchase on any reaction to the support level of 32, and the dip to this level subsequently occurred. The objective of over 60 per share. to have an upside 0 Such an objective appears attainable over e this growth compan Obviously, the most interesting aspect of RCA at company did most of the initial research and largest individual prOducer of tubes. Sales i a color television. The in 's area and is now by far the 'on sets have been growing at an astronomical rate, they are will no doubt accelerate as more pro .to 500/0oincrease.this year. The trend W cast in color, and yet the market is far from saturated. At the is a color Yet televis' n y of every seventeen television sets in use V a e only string to RCA's bow. Its data processing oper ation has recently itt ack; backlog is up; and its new Spectra 70 computer line is expected to achiev re ely favorable reception. Defense business is sizable and NB profits continue good. sent prices mark the stock at just over twenty times estimated 1965 profits of 1. 60 er share. The stock is added to our recommended list for quality and long term growth. While certainly not of the quality of RCA, Automatic Canteen (20 3/8) also, on re- cent break, held above its December low. It also appears to have a highly interesting growt potential. The company is both an operator and manufacturer of vending 'TIachines, but the greatest portion of revenues comes from vending operations and food services rather than manufacturing. Total revenues have shown an increase in every year since 1955, but net earnings have been erratic, due to various non-recurring items and other factors causing pressure on margins. Nevertheless, 1964-1965 earnings (the fiscal year ends September) are expected to reach a new peak at 1. 10 per share, and further growth appears in pros- pect as the demand for fooa service continues to grow. It now appears that any change in coin silver content will not seriously affect the company or the industry, and, therefore, one potential cloud On the horizon appears to have been removed. On the assumption that per-share net can more closely approximate sales growth in the future, the stock appears to have merit as a growth speculation. The technical pattern, meanwhile, is highly attractive. The stock from 1962 to mid- 1964 held in a base formation in the 10-17 area. The upside penetration of this base indi- cated a possible 40, and good support exists not too far below current levels. Other stocks mentioned in our June 14th letter, anclca.'ddieu;to.our recommended list as buying levels were reached, includeAmerican Hospital Supply (27 1/8) bought at 25, and the previously mentioned American Potash (401/4) bought at 39, International Paper (313/8) bought at 31, Interstate Motor Freight (27 1/2) bought at 28 and Perkin-Elmer (51 1/4)bough at 48. EDMUND W. TABELL Dow-Jones Ind. 875.16 Dour-Jones 97 70 WALSTON & CO. lNC. ThiS market letter IS published or )our COil nlenre 1'11' I/lirmntlon and 1; ,!l fTr to '1,,11 or J\ w\lrlh\tlon to b\l\ Rn seeuntiM thsrU''1ed Th(' \J\- formation WI\' obtaln('(i from !IOU ret's We! lilliCH, to 1. f.hallle, but \' ito not gu,'l,lnt(. ll(UI 1('\ \\',,J.lun S. C, In. olnd It!! dlrt'dor'l or emJ'llo)ei'!l rna) have nn interest In or .lIltj ;,1 uf'II!'.! to nl'I!I