Tabell’s Market Letter – May 14, 1971

Tabell’s Market Letter – May 14, 1971

Tabell's Market Letter - May 14, 1971
View Text Version (OCR)

– – ….- – – – – – – – – – – – -, TABELL'S MARKET !, L E T T E RL- 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW fOAK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE r– May 14, 1971 Equity markets continued to shrug off the machinations of European central bankers and moved last week in what was, essentially, a sideways drift in the general range of 930-940 On the Dow. Actually, it – .,Js.. amos.! two we..s .no..in,-e.–,-the. cmarketmade ,gs .most rece!'tJ9w,.clo.sirlg, at 93.30. 4LonMay3Jr three days of decline from the bull market high of April 28. The present level of the average, therefore, \ has some significance from a technical point of view. It is made even more significant by the fact that the Index is now bouncing along the lower end of the uptrend channel which has contained it since last November 18. Continued ability, therefore, to hold above the recent low would suggest a new leg up in the bull market without any further correction. A downside penetration, on the other hand, would indicate a possible 912, not the end of the world certainly, but the most substantial correction so far in the up- swing and a definite indication that the bull market had reached a more mature stage. We would not care at this point to make a firm prediction as to the direction in which the breakoutfrom the current impasse might take place. However, most short term indicators are in oversold territory in- creasing the odds in favor of an upside resolution and, in addition, market psychology, as evidenced by rising odd lot sales into the decline of a week ago, constitutes another favorable straw in the wind. All in all, the market remains in a healthy state, suffering only by comparison with its unusually strong techni- cal condition last summer and fall. Fortune magazine, this week, released the latest edition of its compilation of the -500 largest industrial companies and, as always, it was fascinating reading to anyone who cared to take the trouble to peruse it in some depth. We know of no other readily-available compilation of statistics which by itself can be more productive of provocative ideas than the 500, and its analYSis not only provides stimulus for further in- vestigation but also affords insights into whole areas of American industry. An exercise which is always interesting to us, for example, is to see who made the list and who didn't. The latter is often the most in- teresting statistic. There is little surprise in the fact that General Motors, Standard Oil of New Jersey, –Ford.,General Electrlc,andI BM.areth e.fi ve-larges tiRd ustrialmpanie s,butcen sidel'ingt-heirpromiRenc e., in recent stock market volume statistics, it is worth noting that Bausch & Lomb, Telex and Memorex, to pick three is sues at random, are cons picuous by their absence. Among the most interesting statistics that Fortune computes is each company's rank in terms of growth in earnings per share over a lO-year period. It is certainly not startling news that Xerox has the best 10year growth rate of any of the 500 companies. We would be willing to hazard, however, that most investors would have trouble naming anyone of the next nine without peeking at the footnote at the end of the page. These nine companies rank ahead of Polaroid (27). IBM (36). Texas Instruments (234). One derives the im- pression that the concept of growth about which many on Wall Street are so excited is often divorced from the statistical reality of that growth. Fortune also gives, as part of its compilation, ranks in terms of various other statistical measures of a company's finances, including industrial group rankings. One table lists median profit gains for major in- dustrial groups in 1970. If asked to guess industries which might be near the top of the list, many might choose Office Equipment & Cbmputers. As a matter of fact, this industry had the second largest decrease. The best profit gains in 1970 were shown by Tobacco and Mining. Profit margins have often been used as an indicator of a company's health. Here again the leadtng in- dustry, surprisingly, was Mining. Of the 10 highest-.-anked companies in return on sales last year, six were, in fact, mining companies. (Newmont Mining, Texas Gulf Sulphur, American Smelting, Phelps Dodge, and Hanna Mining.) Two other measures often used in analysis are sales per employee and sales per dollar of stockholders equity. The first statistic measures sensitivity to rising labor costs and the second is some indication of ability.to increase sales with minimum dilution. The industry which stands out clearly.. ———..- …… —- -.. ….. ..1 –… …… – . ' —. — in b.oth the……. — se cate- gories is the meat packing industry. Five of the first six companies ranked by sales per employee are meat packers as are seven of the first eight ranked by sales in relation to equity. Now, as noted above, this sort of thing is nothing more than a stimulus to further investigation. How- ever, the facts we have noted are only random samples of hundreds of equally interesting pieces of tnfor- mation that can be gleaned from a study of the 500. In these terms we think such study is a useful exercise. NOTE The next nine companies in order of 1O-year earnings growth were Koehring Company, Colt Indus- tries, Akzona Inc, Skyline Corp, American Petrofina, Pneumo DynamiCS Corp, Loew's Theatres, Capitol Industries and Gulf & Western Industries. Dow-Jones Industrials (1100 a, m,) 935,71 S&P (HOO a,m.) 102.50 AWTmn ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No sfotement or expression of opinion or any other matler herein contained IS, or IS to be deemed to be, directly or IndIrectly, on offer or the soliCitation of on offe' to buy or !.ell ony security referred 10 or mentIOned The matter IS presented merely for the convellenCE of the subSCriber While we believe the sources of our informa- tion to be reliable, we In no way represent or guorontee the accuracy thereof nor of the statements mude herein Any actIOn to be token by the subcflber should be bosed on hl own investigation and information Janney Montgomery Scoil, Inc, as a corporation, and Its officers or employees, may now have, or may loler toke, poslhons or trades In respect to any seCUrities mentioned In thiS or any future Issue, and such position may be dlfferenl from any Views now or hereafter expressed In thiS or ony other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as on investment adVisor, may give adVice 10 Its Investment odvlOry and othel customers Independently of any stotements made In thiS or In any other Issue Further Informotlon on any security mentioned herein 1 available on request

Download PDF