Tabell’s Market Letter – August 12, 1966

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 August 12, 1966 , Earnings multiples have, historically, been the subject of a great deal of theorizing. On the one hand, the financial community has been beset of late with a horde of academic types armed with complicated valuation models which prove their favorite stock is worth 43-1/2 times earnings. On the other hand, the popular reaction today to low earnings multi- ples is to point out that, after all, earnings are expected to decline in 1967 and the current low level of stock prices only reflects this fact. One is reminded of the hordes of experts wh assured us that stocks were dangerous in 1949, because the inevitable post-war depression was about to come crashing down on our heads. Historically, at least, most theoretical justi- fications for price-earnings multiples have been notable chiefly for their inaccuracy. It is just possible that a more relevant approach to earnings multiples may be to. com pare their current levels to levels achieved in the past. The following table attempts to do this for the thirty stocks in the Dow-Jones Industrial Average. In the first column are given estimates of 1966 earnings. Succeeding columns show the price/earnings ratio which prevail ed at the lows of 1949, 1953, 1957 and 1962, historical low points in the stock market. Fol- lowing this is the level the stock would sell at if 1966 earnings were capitalized at those mul- tiples. If the resultant price is about the same or higher than the recent price, given in the last column, the figure is underlined. The table is worth a glance. It shows, for example, that 23 of the 30 stocks are cheap er today than was the case at the 1962 lows, and half of them are cheaper on an earnings basis than was the case at the 1957 lows. It is necessary to go all the way back to 1953 to find a case when the majority of stocks had lower in this case, 9 of the 30 stocks are lower today than was then the case. Amazing e fstocks can be bought cheaper today than was the case in 1949. Allied Chern. Earn. 3.25 1949 PIE Price 10 32 1/2 1953 PIE ,T–J'!-/9 4 52 1 9 13 2 PIE Price 16 52 Close 8/12/6 387/8 Amer.Tel&Tel 3.60 15 Amer. Tobacco Anaconda 10 5 Bethlehem Steel 3. Chrysler 5.75 DuPont 9.00 Eastman Kodak 4.10 11 General Elec. 4.60 8 General Foods 3.85 9 General Motors 6.50 4 Goodyear 3.50 5 Intern'l Harvester 4.00 5 Intern'l Nickel 4.90 10 Intern'l Paper 2.60 3 Johns Manville 4.50 6 Owens-Illinois 3.70 12 Procter & Gamble 3.45 8 Sears Roebuck 2.50 7 Std. of Calif 5. 60 5 Std. of New Jersey 5.25 6 Swift & Co 3.75 6 Texaco 5.15 4 Union Carbide 4.1010 United Aircraft 6.00 9 U. S. Steel 4.50 4 Westinghouse El. 3.50 5 Woolworth 2.65 11 1 8 23 99 45 367/8 345/8 26 171/2 20 49 73/4 27 443/8 -27 5/8 171/2 28 31 1/2 22 1/2 205/8 41 54 18 17 1/2 29 1/8 4 15 54 18 647/8 53 41 9 283/8 13.i!… 7 73 1/2 6 63 9 94 1/2 32 1/4 77 3 101/4 8 27 1/4 10 34 31 1/2 8 46 5 28 3/4 9 51 3/4 37 17 1653/4 19 1851/4 17 1653/4 1811/2 15 61 1/2 17 693/4 23 943/8 128 12 55 21 965/8 18 823/4 943/4 13 50 12 461/4 19 73 1/8 72 1/4 8 52 13 91 11 77 78 l/E 4 14 12 42 14 49 7 28 10 40 13 52 10 49 11 53 1/4 15 781/2 8 203/4 14 363/8 15 39 41 3/ f 847/.8 27 1/8 9 401/2 14 63 14 63 13 48 1/8 11 403/4 15 55 1/2 513/4 66 14 48 1/4 14 48 1/4 21 72 1/2 653/E 11 271/2 11 271/2 20 50 531/4 8 44 3/4 10 56 11 615/8 62 5/8 8 42 12 63 12 63 67 5/8 7 261/4 13 483/4 12 45 463/4 8 41 1/4 10 51 1/2 12 613/4 685/8 17 693/4 20 82 17 693/4 551/2 6 36 6 5 22 1/2 7 36 19 114 31 1/2 13 58 1/2 77 40 9 31 1/2 18 63 18 63 46 1, 14 37 1/8 11 29 1/8 13 34 1/2 215/8 Jj)ow-Jones Ind. 840.53 Dow-Jons Rails 214 .54 ANTHONY W.TABELL WALSTON & CO. INC. AW letter 18 pubhshed for your eonvemenee and infonnatlOn and is not f\n offer to sell or 1\ to buy any aeeuritles dlseussed. The Ln- -formation was obtained from sources we Ix.heve to be reliable, but we do not guRrRntee its BccurRC), WRIston & Co.. Inc Rnd Its officers. dlref'tors or employees may ht'LVe an mterest in or purchase and sett the securities referred to herein , WN.SOI