Tabell’s Market Letter – June 12, 1970

Tabell’s Market Letter – June 12, 1970

Tabell's Market Letter - June 12, 1970
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11 ! Walston &Co.—..;..,,; Inc. ., Membe New York Stock Exchange and Other Principal Stock and Commodity Exchange, OVER 100 OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER June 12, 1970 In our letter of May 29, we used the following language. It is, in summary, our judgment that the effective bottorp has been reached. The use of the word effective is cal- culated. It would not be without precedent for the market to move back to or through the old lows. Indeed, in every base formation that has occurred in the past, a testing of the lows has taken place and in some cases, June, 1962 being a typical example, that test involved the penetration of the former low by a significant amount. It was our intention, at the time, to s'xike the positive stance which we felt events warranted without succumbing to the euphoria induced by a three-day, 75-point rally. We were, in short, attempting to convey the impression that a new market phase had been en- tered .without suggesting thatall the market's .troubles.were.over. May lows was the precursor of a new bull surge. .rC\.l1y.from v' .- -. . – – Now that the rally has run its course, and the market has spent the past week declin- ing, the familiar miasma of gloom has slowly begun to return to the financial community. And yet, the outlook, of course, is unchanged from what it was two weeks ago. Without offering any judgment as to the short-term course of the market, it is possible to say today, as it was then, that high-grade stocks are and will continue to be buys on further weakness. Whether the May 26 low of 627.46 will be penetrated remains, to our mind, an academic question. From a technical point of view, ability to hold at around the 670 level would be constructive. 670 happens to be the downside objective of the top formed during the first week in June. It also happens to be a 50 or normal retracement of the May-June advance. This is all interesting to the technician but should tess so to the investor whose basic strategy should now be the g, eakness. Such selection is, at the moment, we think, a difficult r 'ri certain amount of in- tellectual gymnastics, for the criteria for stock is, feel, in the process of changing. A year or two ago the watchword U,,..,w.estern movie, consisted of good VWqu-arterto qUi t he investment world, like the er were deemea unworthy of in sensible portfolios. any price , ,.J, if a company's earnings were growing at 20 a b heap at a 100 pie sinc, hat was only 10 times results 13 years h c. a lscovered, to our sorrow, that earnings growth is mercurial, uncerta s suredly not worth an infinite price. Could it be perhaps that we will discover e co ary — that, at some price, even those companies with no m-M,ospects and with highly visible problems become cheap. Some example come to mind. Chrysler Corporation, as everyone knows, makes automobiles and, as almost everyone knows, is in some financial difficulty having lost 61 per share in the first quarter of 1970 and probably slated to do little better than break even for the upcoming quarter. Little improvement is expected before the final quarter and, for a number of reasons, it would be optimistic to assess the 1971 outlook as wildly encouraging. And yet, Chrysler earned 6. 23 per share in 1968, and had an average earning power of clo to 5.00 a share in the 1963-1968 period. We are not suggesting that Chrysler is a premier growth company; we are merely noting that 20 is not a terribly exorbitant price for a COml)alolll which has demonstrated this sort of earning power and might very possibly be able to do so again before too long. Or let us consider I,itton Indust.ries whicp the market was sna.pping up for years at 20 to 40 times earnings before it committed the unpardonable sin of having its growth curve flatten out slightly. The stock down from 112 to 17 is now available at around nine times 0 estimated results for the year to end next month and is, at the moment, not a very different company than the one it was two or three years ago. Or indeed Occidental Petroleum, whose problems can be summed up in one word, Libya. We are not exactly bulls on the Middle East outlook, but, if one were to totally eliminate all of OXY's Libyan's earnings, the pi e ratio would still be under 10. With the market down as far as it is, quite obviously, examples of this sort of thing abound. We are in an investment climate which emphasizes problems and ignores values, and we do not think it unreasonable to point out that such situations have seldom lasted long. Dow-Jones Ind. 684. 21 Dow-Jones Trans. 138.27 ANTHONY W. TABELL WALSTON & CO., INC. AWTl'Iln ThiS market letter if! pubhshed for your convemence and information ant.! IS not an OffCl to or d llollrltatlOn to buy any .seCUTitles lhscussed Th formatIOn was obtained from sources '01oe bel,t'\e to be rehable, but do not !(Unl antee Its accunl(.) alston & Go., Inc and its officers. dlr toe In- employet!1I me.y have an interest in or IJurchMe and sell lhe secunUl.'s rderred t() hel',\' ec rs or liaiidi'JUdiriIWilW'.'lilli,.mLI,iil bilild lilNti tiiiiiLiE Eli. iL IIEII' II ,;,., ,. .. i ,. j, dO .,

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