Tabell’s Market Letter – August 05, 1966

—- Walston &- Co. 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 August 5, 1966 The market slide abated this week, ostensibly under the stimulus of the steel price rise. The Dow-Jones Industrials, after reaching an intra-day low for the year of 827. 28 on Tuesday, advanced almost 19 points in moderately active trading on Wednesday and Thursda The rise continued at a somewhat slower pace on the final day of the week with an intra-day peak of 860.57 being reached. At the low of this week, the Dow had reached the 840-825 range which we had en- visioned as a possible downside objective for the Index. At that point, various short term in- dicators had reached sharply oversold territory, and the general market was as deeply over sold as.it.had been at any time since the bottom position of this nature, a rally toward the overhead supply in the 870-880 area would appear to be a plausible expectation. Ability to push well into this area on the present move and the to hold would have to be considered extremely bullish insofar as the general market is con- cerned, although there is no definite indication at the moment that this will take place. In last week's letter we pointed out that, while the recent decline had been exceeded in severity by only three previous downswings in the post-war era, it had, nonetheless, been quite selective. As we suggested, a great many stocks are, today, selling at higher levels than they had been earlier in the year – despite the fact that the Averages were then conside ably higher. In this sense, action is very much reminiscent of the first three quarters of 1960. During this time the Averages were in an almost continuous downtrend – approximatin the current one in extent – but a great many issues moved up quite sharply. We continue to feel that the action of individual issues will be Averages. As most investors should be aware, the presen 0 than that of the g es not date back only to last February when the DJI made its high. Aaa so, in;luding some of th highest grade issues available, reached their peaks uch as teen months to two year ago in late 1964 and early 1965. These stockm e b n rrective phase for the entire inyervel1.iEg.period and, in many ent levels. On the other side of the-c; e ave a! pre.s- e -m stocks-iii such diverse industry group as Office Equipment, O ( a continued to move ahead despite the weakness in the market, and s s n deterioratbn. In short, it is still not 2hard to find attractive is u c , especially since the recent weakness has brough a great many stoc t t 0 upport levels. Regular rea titer will have noted that we have not, during the recent de- cline, followed the poli astically reducing the number of issues in our recommended list. This policy, of c e, has be en in line with our feeling that stock selection is more im portant than the trend of the Averages. By and large, we have been pleased with the perform- ance of most stocks in our list, and we will continue to follow the policy of considering is- sues individually rather than making drastic changes due to general market trends. In a de- cline such as the recent one, however, there are in any list certain stocks which turn out to be particularly susceptible to downward market pressures. In such cases, our general policy is to ascertain whether the original reasons for recommendation are valid. In most cases, if the technical and fundamental situation has not changed, it is best to hold such stocks or average down, pending further developments. Two issues from our Recommended List come to mind. Parke Davis (28), suggested last April at a price of 36 1/2, moved to a low of 27 earlier this week. At that level it had just about reached the downside objective of a short term top formed in May and June. We originally suggested the issue on the basis that the expiration of Chloromycetin patents in October had been drastically over-discounted, and we still feel that this is the case. The co pany's present dispute with the I n t ern a 1 Re venue Service does not, we believe, fundamen tally alter the situation. General Dynamics (46), which reached a low of 44 1/2 vs. a high of 66 1/2, is pre- sumably under pressure due to weight difficulties with the Navy version of the F-111 Fighter Unnoticed in the furor has been the fact that the Air Force version which will account for the larger portion of the contract, is proceeding on schedule with initial production under way. Although the technical picture has deteriorated somewhat, earlier earnings estimates of 5.75 for 1966 still appear valid and the stock appears cheap at present levels. Dow-Jones Ind. 852.39 Dow-Jones Rails 219.62 ANTHONY W. TABELL WALSTON & CO. INC. AWT' amb This market letter 1& published for your convenience and Information and Is not An ofter to eell or R solicitation to buy any eeeurities dlBCUSsed. The informatIOn WlLII obtained front sources we believe to be reliable. but we do not gUarantee its accuracy Walston & Co.. Inc. Rnd Its officers. dIrectors or employees may have an interest In or purchase and sell the securities referred to herem. WNSOI