Tabell’s Market Letter – January 14, 1966

Tabell’s Market Letter – January 14, 1966

Tabell's Market Letter - January 14, 1966
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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 OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER January 14, 1966 At a stage of the'm-arket such as the present, when a large number of hitherto in- active low-priced are beginni(lg to dominate the headlines and theIpost-a,ctive lists, there often develops among Wall Street savants what could be called the tch-tch complex, As each new low-priced stock chalks up fantastic percentage gains on turnover, the natural reaction of the professional security analySt seems to be to deplore the poor idiots who, not sharing the analyst's professional capability, are blithely falling all over themselves to push speculative issues into new high territory. Enough of this sort of thing usually leads the analyst to proclaim, in dire tones, that the public is back in the market and that, therefore, Armageddon must indeed be at hand. A case in point can be found-in the recent-gyrations-i-n-Ank'en-Cnemicar& Film Corpo ration which,as recently as November,was selling for 8 7/8. Through this year, the compan has had a four-year record of decreasing earnings; capped by at least four successive quar- ters in which it showed a deficit, but, on January 7th, it announced that it would attempt to market a new device for developing black-and-white film at home. Despite the fact that ther was absolutely no rational way of projecting what the market success of this product might be and that, due to competition in the photographic field, there were, at least, grounds for doubt whether it could be successfully marketed at all, t he stock, selling for 16 on the day before the announcement, proceeded to move to a high of 383/8 over 5 days, trading 1, 127,700 shares or 106 of the capitalization in the process. It is, of course, only one example of the sort of thing that has been hitting the headlines with increasing frequency of late. It is, of course, very easy to make a case that himself in the current speculative orgies is a stock illiterate. It q iwoth r thing, however, to draw, therefrom, portentious conclusions about the a e tear as a whole. There is, indeed, a distinct relationship between the action of rice ks and major stock mar- ket peaks, but tha t relationship is a good to believe. Low-priced stocks, are, indeed, Ie – n many analysts seem wont cator, but it is worthwhile asking just wha Br.iefly,eit activity generally occur well which can be demonstrated by e r s' ow-priced–issues-and- in declines. This is a relationship to any chart. That there are peaks in any index is easy t dicting a peak bef i is not while it is sti .. g, b 13 i ight. There is, however, absolutely no way of pren l' words, the time to worry about a leading indicator ter it turns down. This, of course, has not yet occurred in most low-priced sto k a speculative activity indices. This is not to s t there are no grounds for concern about the current action of the stock market. There are, and most of them center on the length of the most recent up- swing without any noticeable interruption. The Dow-Jones Industrials have advanced from a sharply oversold condition at 832.74 in June to this week's high of 994.09, with the most drastic correction in the entire process being one of less than 5 in November-December. In this sense, at least, the situation is highly reminiscent of last May when a long protracted rise in the market was suddenly broken by a sharp decline which took a great many analysts by surprise. Yet, even in the May-June decline, a great many stocks had relatively mild reactions. The reason was, in most cases, simply that they represented, at the time, relatively good value. Having mentioned one specific instance above, let us cite another. Reynolds Metals (54 1/2) which happens to be in our recommended list, has, generally, risen over the past three years from a 1962 low of 20 1/2 and a low of 36 as recently as June. The point is, how- ever, that the rise in the price of the stock has been roughly coincident with the rise in the company's earnings so that at its current price Reynolds is now selling at less than nineteen times 1965 earnings, a ratio not too far different from the sixteen times latest twelve-month earnings it was selling at at its 1962 low. Clearly, the stock represents value at the present time, and, with further e-rnings gains in prospect, we have nO hesitation about retaining it in our recommended list for purchase. The point of all this, of course, is that,despite the flurries in low-priced issues, goo values continue to exist. The sensible investors' reaction to the activity in low-priced issues will be, simply, to ignore it, and to concentrate his efforts on a search for those many stock which still appear technically and fundamentally attractive. Dow- J ones Ind. – 987 . 30 Dow-,Iooes Rails – 257.48 ANTHONY W. TABELL WALSTON & CO. INC. ThiS market letter IS pubh&hed for our COn\Ct'llCn(.c Hnd Information and not an offer to '1dl or R ooIlcltRtion to buy any eeeuritu.'s The in- (olmntion waS obtained (rom /IOurce; we bLheve to L.' rehahlt. but \\c rio not guarmtee Its 1I('t'urar\. \\'al..ton & Co.. Inc lind It.. officcl!. d,rt'(.tors or -…..cmJ'loyCl may have an mterest In or purehasc I\nd sell the ;,ceUillno''' Icfl'rr,d to herein. WN3(H -I

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