Tabell’s Market Letter – September 09, 1966

Tabell’s Market Letter – September 09, 1966

Tabell's Market Letter - September 09, 1966
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r ,,',F Wdlston &Co. Inc .—,PILe– 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 September 9, 1966 Q. Mr. President, could you give us your observations on what you think it is that specifically is troubling the stock market A. Jl No . 11 From President Johnson's press conference of Sep- tember 8, 1966, as reported by the New York Ti meso The President, quite obviously, has prerogatives which are denied to market analysts, who are expected at all times to have the answers to all questions. The difficulty at the mo- ment is-that a great many questions are, simply, -unanswerable. – c The stock market has, ever since August 29th, been, by any measurement one cares t utilize, in an oversold condition. As we pointed out last week, however, this factor by itself is of absolutely no help in determining the sho rt-term course of the market. It will be neces sary, first of all, for a rebound from this oversold position to take place and, secondly, for a new pattern to form. This process, quite naturally, takes time and we, therefore, continue to be unwilling to make any guess as to the immediate future of stock prices. We continue to suspect, however, that a great many economic factors, the fear of which has driven stock prices down so sharply over the past six months, may simply not materialize; or, if they do materialize, may already be discounted by present sharply depressed quotations. If this is the case, a great many stocks represent excellent value at the present time. The next obvious question is What stocks Here again the question is at least par- tially unanswerable. We have mentioned the fact that a stocks have reache long-term downside objectives. Let us take two n s and Allied Chemi cal have both reached long-term downside targets tistically cheap, selling at around eleven times f st 29th. Both are stayi ng over 5 and 6, res- pectively. Yet, before either stock moves ,a base must be formed, and there is abs()lute!y .1 s will take,. or of guessing which stock, GM or Allied, will complete it n sta a new upswing first. We are reduced, very simply, to making the the last few weeks, that t ey re e Or, to raise ano e a 0 that we have repeatedly made during oOd\.-lhue to the long-range investor. uestion, what of the glamour stocks Many in- vestors are inclin ues into one category, forgetting that there has, in fact, been tremendous dive it of on between them. Just to cite two stocks in the same indus- try, Motorola was recent own almost 100 points from its high for the year, whereas Magn vox, at Friday's close as trading at about the same price it sold for in February when the Averages made their highs. Other leaders of the 1965-66 upswing have held up equally well. Again, it is too early at this point to tell whether they will eventually resume their upw'J.rd move or will follow their cohorts into the abyss. There are, however, fortunately, a number of stocks where one can speak at the mo- ment with some confidence. These are stocks which broke out of large base formations Just before the market slide began in February, formed only shorter-term tops earlier this year, and have now moved to the downside objectives of those tops and to the support provided by the original bases. One example would be AIR REDUCTION (53 7/8) which, in late 1965, brok out of a trading range between 46 and 60 in which it had held since the 1962 low. The upside objective of this base was 110. The -stock reached a high of only 78 before a short-term top was formed indicating 52. This was the low reached last week. The stock continues to be fun damentaUy attractive, selling at nine times estimated 1966 earnings of 5.75 with every pros pect for bettering this figure in 1967. The 2.50 dividend, which could be raised, provides a yield of just under 5. Another example would be REYNOLDS METALS (41 7/8), recently reached a 10 of 40 1/2, is in a major support zone and where the 1962-65 base mdlcates a long-term po- tential of 94-104. The worst possible downside objective which can be read is 38-36, and the stock certainly appears to be an attractive purchase on any dips. Estimated earnings for 19 are 3.75, and an improvement for 1967 is highly likely since company.will be able to supply more demand from its own production rather than resortmg to profitless sales from government stock pile. Dow-Jones Ind. 775.55 Dow-Jones Rails 194.46 ANTHONY W. TABELL WALSTON & CO. INC. AWTamb ThIS market letter is published for your convemence and mformatlon and IS not an offer to sell or R eoIlcltation to buy Rny eeeurities diSCUSsed. The 1114 formation wall obtamed from sources we beheve to be rehable, but v.e do not gul\rantee lb aCl'urac'o \\-'alston & Co, Inc, and Its officers. directors or eml'loyets may have an mterest m or purchase and sell the seCllTltlcs referred to herem WN.301

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