Tabell’s Market Letter – September 07, 1965

Tabell’s Market Letter – September 07, 1965

Tabell's Market Letter - September 07, 1965
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'''alston &- Co. INVESTMENT BANKE'S ,y,UTU;.l fUNDS UNICIPAl 80NDS Members New York Stock Exchange and Other Prtncipal Stock and CommodIty Exchanges COAST TO COAST ANO OVEIl.SEAS TABELl'S MARKET lETTER September 7, 1865 Last week's market action was impressive. In the early part of the \I'eek, despite \\'eak- ness in the Averages, advances outnumbered declll1es indicating underlying market strength, and, on Thursday and Friday, this strength \I'as reflected in decish'e strength in the .-\ver- ages on impressive volume. Despite the fact that at Friday's high of 910.28 the Dow-Jones Industrials were close to our shorter term upsIde obecthe of 910- 915, further strength in the market leaders is possible..b.eor.e.the decline tops out. In our opinion AMERICAN-TELEPHONE & TELEGRAPH COMP.-\NY ( 67) represents an interesting purchase at present price levels . .-\t first glance, this \\'ould appear to be a arather dull selection. There is no doubt in most people's minds that .-\merican Telephone is prime investment issue, but the genera'l -thought is that it is an stock with a minimum opportunity for capital appreciation. Certainly, American Telephone is not to be regarded as a trading vehicle, but as an investment holding for long term capital appre ciation, it has outperformed both the market and the economy. It is being added to our rec- ommended list. Since 1947-1949, revenues of American Telephone & Telegraph have increased 299, while gross national product has increased 148. Revenues have grown in every yea r since 1932. Population growth, technological progress and a rising standard of living are favorable factors in the long term outlook. I As far as market performance is concerned, Telephone reached a high of 31 in 1955 I after adjusting for stock splits in 1959 and 1964. At present price levels around 67, the stock I Ihas shown a price appreciation of 116 over the past ten cirAverage reached a high of 490 in 1955, and at the present 1 e Industrial 8 5,Ohas advanced 83 in the past ten years. C\, II In the past ten years, American Telephone & s have more than from 4.7 billion in 1954 to 10.3 billion in share for the same period ; tdid not show a comparable rise. 1954 earnin er a' ing for the two stock splits, were -comparoe4-tG-3.-24..fur-thef-1im, 1'.6 … 9 ,- or a r-ise-of-onl.y.4320/0, -This-has beel.,.L largely due to the dilution b \ock'1'eringsduringthepastdecade.Rightsto stockholders to buy additional m bonds were issued in 1955.1956, 1958, 1961 and 1964. If t exercised and the stock purchased, the capital ap- preciation would Indications are that pc n e over the ten-year period than that mentioned above. y not have to resort to as much equity financing in the future as in the past be aus the heavy flow of internally generated funds. This would re- duce the amount of dilu' and indicate a more rapid rate of earnings increase. The increase in long distance calls has more than offset the rate reductions that went into effect on February 1st. Estimated earnings for the fiscal year ending November 30th are 3.35 a share. At present levels of 67, the stock is selling at twenty times estimated earnings for 1965. Since 1964, the PiE ratio has ranged between 20 and 24 times earnings, so the stock is now selling in the lower part of the range. The present PiE ratio is considerably higher than that which existed before the late 1950's when the new dividend policy was initiated after 30 years of stability. Dividends have been increased by small amounts several times since 1959 when the first increase occurred from the 1. 50 dividend paid for a thirty -year period. At the present 2.00 annual dividend, the yield is roughly 3 at 67. There is no indication of an increase in the dividend in the im- mediate future, but the anticipated long term growth-inearnings spould result in an eventual higher payout. From a technical viewpoint, the stock appears to be forming an accumulation base.After reaching a high of 75 in July, 1964 on the news of the stock split, Telephone has held in a narrow trading area since September ayear ago. The high of this eleven-month range has been 70 1/2 and the low has been 65 3/8. The stock, at present levels of 67, is below the 1961 high of 68 1/4. Ability to break out of the recent trading area on the upside would indicate a move to a higher pnc't pIateau. Most of the issues in our recommended list are showing above-average action. In addition to the 19 issues listed last week, four more issues in the list reached new high territory for the year. They are American Bosch, Automatic Canteen, First Charter Financial and Great Western Financial. A new compi ete recommended list will be available this week from your Account Executive. EDMUND W. TABELL Dow-Jones Ind. 907. 97 WALSTON & CO. INC. Dow-Jones Rails 217.75 Thill market lettef IS Jlubllshed for Our COnH'nll!llCe nn,' Information find 1'1 not lin ofTl'1 (olmnhon WllS oiJtnln(!d from we I,d,e\(' to be rell!!,le but \I.e do 1I0t eml'lloet!s rna)' hU\'e an Interest In or purchase and sell the rt'felr(-',\ to het'III, to or It ;OhCltRtion to buy Any 8e('Uf.tU'l'! dlS('us'Iffi The )1\. Its HN'UI,lr\ ,\;. Co Jill' flll,l ,1Ln', 01 \\ N301

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