Tabell’s Market Letter – June 17, 1966

Tabell’s Market Letter – June 17, 1966

Tabell's Market Letter - June 17, 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 June 17, 1966 GOODYEAR TIRE & RUBBER CO. Current Price 51 Probably the most prominently featured Current Dividend 1. 25 news affecting the investment community in Current Yield 2. 50/0 recent weeks has been the sharp decline in Long Term Debt Common Stock 327,650,000 35,706,296 shs. automotive sales and resultant inventory prob lems affecting auto dealers. Under the stimulus of this news, stocks of major auto com- Sales – 1966-E Sales 1965 2,50,0,000,000 2, 226,'300,-000 – Earn. per sh. 1966-E Earn. per sh. 1965 3.50 3.06 panies have been prominent on the list of new lows. – ParadoxicaUy, at-the -sametime, companies in the tire and rubber industry, a major supplier to the automobile industry, have been reGular items on the new high list, and Price/1966-E Earn. Price/1965 Earnings 14.6 16.7 Mkt. Range 1966- 62 57 – 24 5/8 the relative action of these stocks has improved sharply in recent weeks. Technical patterns, moreover, are favorable, indicating ultimately higher levels. PIE Ratio Range 1966-62 22 – 12 There is, actually, a fairly good reason for this divergent performance. Tire sales can lJe divided into two categories, original equipment and replacement. The former, ob- viouslyenough, varies directly with automotive output. is a product of the number of cars, especially older cars, on the road. rHe be!- of autos two or more years old is expected to increase, roughly, 40/0 in 1!W6 ove 9 , n increase in 1967. \Yr; ould show a further The prospective increase in of importance to the tire manufacturers. Original equipment business . s, e obviously, c;xtremely narrow -Replacement on , Moreover, this profitability companies concentrate more and more on the marketing ium I a ou\;\-owth of the recent concern over automotive safety. . There is s . for unusual growth expectancy in the tire industry. Re- cent record producti t me eavy–m;Iginal equipment demand has placed an unparalleled strain on existing capaci with many plants operating on a three-shift, seven-day schedule, and a great deal of re lVely inefficient plant being utilized. Continuing heavy capital ex- penditures to replace inefficient plant should have the effect of improving productive effi- ciency which is probably fairly low at the current high sales level. Goodyear Tire & Rubber, which is the largest factor in the replacement tire market, should be a of all the factors mentioned above. The company's replacement sales are much greater than its original equipment volume (it is the major supplier to Chrysler, with some sales to General Motors and Ford). The company markets replacement tires through 165,000 independent dealers, distributors and stores, and 1,000 com- pa ny outlets on a worldwide basis. Recent purchases of Vanderbilt Automotive Centers and the manufacturing and retail outlets of Lee National Corporation further enhance the market ing potential. – – — – In addition to being the world's leading rubber fabricator, Goodyear derives some 400/0 of sales from chemicals and plastics, industrial rubber goods, aviation items, shoe products, etc. Foreign sales are about one-third of the total. Earnings progress has been good with an increase having been shown in seven years out of the last ten. For 1966, per share results are expected to improve to 3.50 from 3.06 in 1965. The dividend, presently 1. 25, has been repeatedly raised over the years. Present prices mark the stock at less than fifteen times estimated 1966 results, an historically low level since 1958. From a technical point of view, the stock has a long term objective of 82 and a short term projection of 66 with strong support in the upper 40's. The combination of high quality, historical cheapness and downside protection, plus a good upside potential, seem to represent an interesting investment opportunity, and we are adding the stock to the High Quality section of our Recommended List. ANTHONY w. TABELL Dow-Jones Ind. 894.26 Dow-Jones Rails 231. 96 WALSTO 0 N & C . INC . .. This market letter Is publlshedfor your convenience Hnd mrormatlon nnd IS not nn offer to lIell or R soliCItAtion to buy Rny discussed. The .n formatIOn WJUI obtained from we blh('vl' to be rehnble, but we tlo not guarantee Its nccurnc) Wnlston l.. Co. Inc. And Its officers, directors or employecll may have an mterest In or purchase nnd sell the ;ecunltes rc'erre! to herem. WN801

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