Tabell’s Market Letter – February 17, 1967

Tabell’s Market Letter – February 17, 1967

Tabell's Market Letter - February 17, 1967
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,——– ————————- —- – —— ————- t1 eL Walston &- Co. MUNICIPAL BONOS UNDERWRITRS MUTUAL FUNDS Mamba.. New York Stock Exchange and Other Principa' Stock and Commodity Exchanges OFFICES co' to COAST AND OVERSEAS I TABELL'S MARKET LOTER February 17, 1967 It has often been pointed out in this letter that stock prices are largely determined by , three factors, earnings and dividends, money rates, and investor confidence. The first two of these can easily be quantified, but the third, while nebulous, is a highly important factor. It explains why in a period of low confidence, such as 1949, blue chips of the caliber of Stan- dard Oil of New Jersey and General Electric could sell for seven to eight times earnings to yield 6-7. It likewise explains .why the stocks of marginal companies with uncertain pros- pects sold at astronomical levels in a period of high investor confidence such as 1961. As we have pointed out in the past, investor confidence has, since 1961, been in a downtrend. In that year the-Dow-Jones In.dustrial Average sold.for 24.2 times.earningsys. 13 1/2 times earnings at the end of 1966. The present level of 14 1/2 times earnings for the year just ended, appears rather modest when judged by the standards of recent years. We pointed out this fact in a letter written last August which suggested that, at that timE prices by historical standards were exceedingly low. We noted that 23 of the 30 Dow stocks v.erE ; cheaper then than at the 1962 lows, and half were cheaper than at the 1957 lows. The object 0 1 , this exercise was to show that stocks appeared rather equitably priced and presented a mini- mum of downside risk over the long term. The following table presents the optimistic alternative. It takes the 30 stocks in the Do and shows, in addition to 1967 earnings, the current price, the current pIE, and the high pIE ratio that prevailed in the 1956-66 period. In the final column is shown the price at whic the stocks would sell tOday if this high ratio were applied. Applying this procedure uniformly to all stocks would result in a Dow level of 1500. This is, purely theoretical since quite obviously, all stocks are not going to reach their hig ever, serve to demonstrate that, regardless of the 0 a nlrl , potential in a great many issues if, in the future, fo time. It does, how ere is a good deal of are applied. Stock Earn.1967-E Price pIE Hi Earn. x High pIE r Allied 30 . 40 1 , 92 I -. 4 American Tobacco Anaconda Bethlehem Steel Chrysler DuPont Eastman Kodak General Electric General Foods , General Motors Goodyear T & R Intern'IHarvester Intern'l Nickel Intern'l Paper Johns Manville Owens-Illinois Procter & Gamble iJ Sears Roebuck Stand. Oil of Calif. 1 Stand. Oil of N. J. ' Swift & Co. Texaco Union Carbide ., ! Uu.nSit.eSdteAeilrcraft Westinghouse Elec. .,.I. Woolworth Total – 2.245 3 OW .0 3. .0 4.50 4.30 4. 10 5.25 3. 50 3.25 4. 80 2. flO 4.25 3.50– 4.00 2.25 5.50 5.25 4.00 5.40 3.85 5.30 4.20 3.50 2.20 131. 00 58.35 Dow-Jones Ind. 850. 84 11 8 36 10 39 11 157 21 138 31 85 20 74 18 75 14 44 12 38 12 88 18 28 11 56 13 60 17 82 20 52 23 62 11 63 12 52 13 78 14 53 14 79 15 45 11 53 15 22 10 438 851 14.6 A,lWTamb have an In1uat In or pmehMe and sell the aeev.rltles referred to herein. 95 23 73 18 198 22 77 14 49 31 232 42 189 30 129 38 155 19 99 22 77 17 55 32 153 24 60 27 114 24 84 – 40 '110 38 85 16 88 19 99 22 88 22 l18 30 115 22 116 20 84 26 91 20 44 3374 ANTHONY W. TABELL503 Wtna ALSTON & CO. INC. ';; WH.l

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