Viewing Month: July 1971

Tabell’s Market Letter – July 02, 1971

Tabell’s Market Letter – July 02, 1971

Tabell's Market Letter - July 02, 1971
View Text Version (OCR)

TABELL-S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08640 DIVISION OF' MEMBER NEW VOAI( STOCK eXCHANGE, INC MEM8ER AMERICAN STOCK EXCHA.NGE Our colleague, Anthony Tabell, had hardly disembarked in Europe on his wellearned vacation when the stock market began a recovery from its recent sharp decline, closing at 873.10 on June 28th. As indicated in last week's letter, at least a portion of the recent decline must be attributed to the Investment Company Institute figures showing that mutual fund s were in net redemptions in May, for the first time in history. The market seemed to have run out of bad news last week and apparently was looking for an excuse for a technical rebound. This excuse was found in several areas. The North Vietnamese Paris proposal on the exchange of prisoners should have come as no surprise but, coming as it did on the heels of the Pentagon disclosures, it may have been interpreted as giving the Administration a chance to gracefully extricate itself from Southeast Asia. Along the same line, the Administration's expressed confidence in the continuing economic recovery, and its ability to control inflation eventually by a continuation of the pre sent policies, and its refusal to consider wage and price guidelines at this time, contributed to the recovery. ' From a business point of view, several other pieces of good news were forthcoming this past week. Machine tool orders in May were reported 27.3 percent above April, and although still below last year's rate, the trend is encouraging. Factory orders rose 1.1 per ,..,..n Max for th!, bigg,est gain since Februar,,..ad,ye.rdathe .'–elll!tjlton Manage;;.n;.;t'lI' -Company'reported that its mutual fund grou-p registered net sales of 3.14 million last month, in contrast to net redemptions of 3.57 million in May. It is too early yet to forecast the summer rally, but we have been encouraged by the strengthening of the bond market and utility averages, and by the breadth of the market recovery thus far. This letter of September 18, 1970 spoke of the coming summer, its heat waves and the demands on those responsible for energy needed for power, air conditioning, etc. We are now in the midst of this period and it prompts us to check upon the current progress of these industries. The utilities are still struggling for fuel, reserve capacity, money for expanslOn, rate increases and investor fnends. We still believe the natural gas producers and distributors, especially those with strong reserve positions have a more favorable longterm outlook in this troubled group. We mentioned Cabot Corporation and JOY Manufacturing among those companies that might stand to benefit from these long-term dema,ds for energy. The former holds well in the market place with a favorable earnings trend and the continued promise for their plans to import liquified natural gas from Algeria. Joy Manufacturing reported earnings for the first quarter of 1971 at .89 per share versus .72 last year. The demand for fuels continues to favor the outlook of this producer of coal mining machmery. The market trend in coming weeks, and particularly the source of market leadership – -willbe carefuHy cconsiderea; -Hopefully ;-the a stute-'inve stor'WiU'b-e–a1'lricipa tfngstronger – – busmess conditlOns for the second half and into 1972. We continue to direct the reader's attention to high-grade companies with strong balance sheets. It is now eVident that the bull market shows signs of maturing, and we will be encouraged if high-grade stocks lead in this phase of the market. As this letter has stated in past weeks, the market should be more selective in coming months. DJII (11 00) 889.38 SPIC (1100) 99.59 Maturin 1. Delafield and Ashton Harvey For Anthony W. Tabell Delaheld, Harvey, Tabell No stotement or expreulon of opinion or any other matter herem contolned IS, or IS to be deemed 10 be, directly or indirectly, on offer or Ihe soil ClIo lion of on offer to buy Of sell ony security referred 10 or mentioned The motler 15 presented merely for the converlencos of the subscriber While Ne believe the sources of our .nformatlon to be relloble, we In no woy represent or guarantee the otturoty Thereof nor of the stotemenTs m(lde herein Any acllon to be token by the substrlber should be bosed on his own Irwesllgatlon and Information Janney Montgomery Scott, Int , 05 0 corparollon, ond It5 officers or employees, moy flOW hove, or moy loler loke, posllions or trade!. In respect 10 any secufilies menlloned In thiS or any future Issue, ond such position moy be different from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scoll, Inc, which IS registered wllh the SEC as on Investment adVisor, may give adVice 10 lIs IfIvestment adVisory and other customers Independently of ony stolements mode In Ihls or In ony other Issue Further Information on any serurlly mentioned herein IS ovallable on request — ,–'-

Download PDF

Tabell’s Market Letter – July 16, 1971

Tabell’s Market Letter – July 16, 1971

Tabell's Market Letter - July 16, 1971
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGE. INC. MEMBER AMER,ICAN STOCK EXCHANGE R. r. REYNOLDS INDUSTRIES (RJRl July 16, 1971 R. J. Reynolds derives about three-fourths of its annual revenues, 1. 8 billion, and more than 80 of 14-ltn''sprtax-earniiigs,''382nlhnon, ffOnitooacco' sale's. 'Despite unavoralil9'hea'1thpubncHy;-adv-ere– – 1.,- Price 61 3/4 regulatory decisions and heavy taxation, tobacco continues to be a very Est. Earns/Sh 1971 4.75 profitable business. RJR is the leading domestic cigarette manufacturer. Earns/Sh 1970 4.10 Winston and Salem are its leading brands. Cigarette earnings evidence Cash Flow 1970 275 Million stable, if undramatic, growth. Leverage results from a federal Range 1971 69 1/2 – 53 excise tax of 4.00 per thousand. RJR cigarette list price at manufacturers 1970 55 3/8 – 34 3/8 level is 10.25 to 10.75 per thousand cigarettes, 0.205 to 0.215 per Dividend 2.40 package. Selling, general and administrative expenses approximate 8 Yield 3.9 of selling price, labor, 7, tobacco leaf, 25, and the federal excise tax, Common Shs 40.3 Million 40. Pre-tax margins approximate 20. Accordingly, a very minor price Fully Diluted increase to its distributors can have a dramatic effect on RJR earnings. For example, a 3.5 increase, such as instituted in 1970, would boost the price of a cigarette package seven tenths of one cent. But, RJR tobacco earnings will increase about 18. It is noteworthy that in 1970, aided by the 3.5 price increase and 2.4 unit volume increase, cigarette pre-tax margins jumped from 18.7 to 21.1. R.J. Reynolds historically has raised Cigarette prices only to maintain its operating margins. Last year's increase was not needed for this purpose. However, three major Cigarette manufac- turers were experiencing sales declines and instituted 4.5 price increases. Common distributors prompt- ly raised the price on all brands to conform to this increase. Thus, RJR could either join the rise or forfeit profits to the distributor. Tobacco industry unit production is obtained from the Internal Revenue figures on removals. A removal occurs when a cigarette is moved from a bonded licensed warehouse area. Thi s ,j!!..pre paration,fQ!..s.h!pping.J.Q,jts.tributor..Atthat !loin,!,.th….QQI)l.ll-I1Y. bec.Q!!1e,liqble ,..fur.,fe.cl era) Cigarette ecise tax. Last year, as a result of strike hedge inventory building by other m' '0' these figures were distorted and RJR percentage of industry production fell to 31. 8 from 32.4 the prior year. Without this influence and reflecting the strong marketing success of Vantage, a low tar and nico- tine high flavor cigarette, RJR should regain its normal market share. Aiding RJR earnings in the current year are the continuing modest uptrend in unit volume, the benefit of last year's price increase for a full year, and an advertising saving that could approach 40 million. In view of continuing negative health publicity and the recent la,cklustre growth in cigarette unit sales, RJR is attempting to diversify. Containerized transportation, food products, and oil drilling are now all in- cluded in Reynold's operations. Food products include Hawaiian Punch, Chun King. McLean Industries, with ltS Sea Land division, is the company's most important acquisition. In 1970 McLean accounted for 374.9 revenues and a depressed 38.6 million pre-tax profits. During the past two years 317 million of equipment has been added to its fleet and an additional 500 million is scheduled by 1975. Margins were under pressure last year due to excess capacity On routes and ruinous price cutting. Price competition evolved in the North Atlantic when American Export dropped out of the rate setting conference. Subsequent prices fell so low that AEX found itself running full ships at a loss. Reinstitution of conference rates should restore stability. McLean, as the industry pioneer, is the most efficient operator. The most re- liable full service and most rapid turnaround times have enabled the Company to run a fleet of 48 older converted containerships against competitions' larger, faster and more efficient vessels. New ships under construction for McLean fleet are at least twice as fast and twice as large as those it now operates. Thus, one ship will take the place of four. Present fleet on charter can be used as feeder ships or charters may be abandoned. Proposed.acquisition of-U.S .Lines ,from-Kidde would .give,RJR-16 containerships,for-65—- million, considerably less than their net value. McLean ship financing is amortized from their cash flow. R. J. Reynolds financial position is enviable. Working capital totals 570 million. Long term debt of 400 million is supported by stockholder equity of 1.2 billion. Current assets include 560 million leaf tobacco inventory at LIFO. Market value for tobacco exceeds by a considerable margin book cost. Leaf inventory accounts for approximately 24 months' sales due to lengthy curing process that is necessary. Inventory decline during the past four years is primarily the result of trimming due to sluggish unit growth. Less tobacco per cigarette is also a factor. Required Penick and Ford disposition will result in 40 million pre-tax loss that will be charged against 1969 and 1970 retained earnings. Reynolds is in an established uptrend. Support eVident at 60-58 level. Point and figure intermediate objective 88. Dow-Jones Industrial (1200 p.m.) 892.52 Ronald Baron for S&P (1200 p.m.) 99.55 AnthonyW. Tabell AWT mn Delafield, Harvey, Tabell No statement or expression of OPinion or any other matter herein contolne! IS, or 15 to be deemed to be, directly or indirectly, on offer or the sOllcltolion of on offer to buy or se1l any security referred to Or mentioned The moiler IS presented merely for the conVef'lence of the subscriber While e believe the sources of our Informo tlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mode herein Any achon to be loken by the subSCriber should be based on tlls own Invesllgollon and Information Janney Montgomery Scott, Inc, as a corporohon, and Its officers Qr employees, may now have, or may loter toke. pOSitions at trades In respect to any Secuntles mentioned In thiS or ony future Inue, ond such pOSition moy be different from any views nON or hereafter e.opreS\ed In thiS or any other InUIl Jonney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, may g.ve advlce to lIs mvetment odvlory and other customen Independently of any stolements mode ,n It-us or m any other Issue Fvrlher ,formation on any security mentIOned herem IS available on request

Download PDF

Tabell’s Market Letter – July 23, 1971

Tabell’s Market Letter – July 23, 1971

Tabell's Market Letter - July 23, 1971
View Text Version (OCR)

——————————————————————————————————– I I TABELL'S I MARKET I I I I LETTER JI, 909 STATE ROAD, PRINCETON, NEW JERSEY 081540 DIVISION OF MEMBER NEW YORK STOCK EXCHANQE, INC MEMBER AMEFUCAN STOCK EXCHANGe July 23, 1971 fi Toe;ery thing' thereis-a-se-as-.;nan'd'&at'im;-toeve.r.y-purp-os..,e…u.n'd'e-r-'t'h'-'e.,hc-'eav-e.n.' znfme to – – be born, and a time to die; a time to plant, and a time to pluck up that which is planted. Ecclesiastes 3, 1-2 M3rket forecasters are not above quoting scripture to their own fell purposes and the above, due to its obvious application to the eternal stock-market dilemma, is probably the biblical citation most often us ed to illustrate the difficulties of equity investment. Gauging the proper time for the purposes of the stock market is always hard and as to whether the present is a time to pluck up that which is planted, we remain, we confess, somewhat uncertain. We suspect, however, that the market soil may be becoming awfully frosty for new planting purposes. Let us briefly recapitulate recent market history. The popular averages last made their highs at the end of April, some three months and 60 trading days ago. The recent low, made at the end of June, had brought the Dow down slightly more than 8 following a 50 rise since May, 1970. During the period obvious signs of potential distribution, in a number of stocks, at least, have begun to manifest themselves. The response to all this in certain quarters has been glacial calm — with references to the need for a healthy correction, incantations about a summer rally and repetition of the assurances of last Spring that a further move in the Dow to above 1,000 is a near certainty. As technicians, we are inclined to turn to market history for an assessment of what the recent downswing really means. The recent drop, as noted above, was slightly in excess of 8 on the I2oJ.DroRs.oL8or-greater-haveoccurred.in.precisely25.instances.since.J.942.1nconly-cfourof- these instances were the corrections involved within the context of an ongoing bull market. Ten of them were part of major bear markets, six were part of top formations leading to bear markets and five were part of trading range or base formation periods. From a time point of view, the figures are equally discouraging. There have been only three instances since 1942 where the market failed to move to a new high for as long a period as it has at present when the result has been other than a bear market or a consolidation period lasting for over a year. As we again approach the warm days of August, therefore, the stock market picture has changorl radically from that happy August of a year ago when the late bear market was finally laid to rest. At that pOint, with the Dow in the mid 700' s, bull market conditions obviously prevailed and, as we moved into the Fall, a newall-time high became an obvious possibility. The market has since moved some 200 points higher and, while tht new high still remains a possibility, we are that much closer to it, and it is only one possibility among many. It is not our intention here to present an overly negative picture. First of all, the amount of distribution that has taken place is nowhere as great as that which existed, say, in 1969. Moreover, the economic picture appears to us not only sound but, more importantly, sounder than is widely recognized. Second quarter earnings have, in a number of instances, been gratifying surprises to a great many forecasters, a-nd this is a trend we expect to continue as long as financial pages continue to prate about a healthy recovery falling short of expectations. Moreover, the ' – -mood'of the investing-public,-it'seems'to us,&whileobvfously optimisticsnow-s'rioneof the—–. …. classic signs of a speculative debauch to be paid for with an unusually unpleasant morning-after. For almost a year now, our own projections have been that the move, which began in May, 1970, would carry to new highs and, as stated above, we still regard this as a possibility. With the bulk of the move having already taken place, however, we are willing to exercise a certain amotnt of restraint. If a further extension of the upswing does take place, we expect its tone to be con- siderably less ebulient than that of the market which obtained through last Spring, and we are ready to admit of the possibility of a protracted trading range or of further minor weakness. Luckily, if a serious top is forming, we are probably still in the early stages. Enough techni- cal patterns remain strongly bullish that there is little difficulty, in our view, in finding attrac- tive investment media in the equity field. We are entering a penod, however, where it seems wise to be especially rigorous in selection of those stocks which merit inclusion in portfolios. Dow-Jones Industrial (1100 a.m.) 886.03 Anthony W. Tabell S&P (1100 a.m.) 98,93 Delafield, Harvey, Tabell 1'1WTmflNo statement or epress,on to buy or sell any secI,HIty tton to be reliable, we In of op.nlon or ony olner motter hereIn contolned IS, or referred no way 1r0eporer menetntoirongeudaraTnhteeemathtteeracIScuprraecsyenttheedremoferneolyr IS to be for the cdoenevmefe'dlentoc be. of dHCdly or Indlredly the subscrrber While on He offer or believe of Ihe statements mude herein Any action to be token the soliCitation of on offer the sources of our mformaby the subscriber should be bosed on hiS own investigation and information Janney Montgomery Scott, Inc, as 0 corporolton, ond Its officers or employees, may now have, or may later toke, POIIIOn5 or trades In respect to any securities mentioned In thiS or any future Issue, ond such pOSition moy be different from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scol', Inc, which IS registered wllh Ihe SEC as on ,nvestment adVisor, may give adVICe to IlS Investment adVISOry and othel customers mdependently of any statements mode m thiS or In any other Issue Further Information on any security mentioned herein IS available on request

Download PDF

Tabell’s Market Letter – July 30, 1971

Tabell’s Market Letter – July 30, 1971

Tabell's Market Letter - July 30, 1971
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER New YORK STOCI( EXCHANGE, INC. MEMBER AMERICAN STOCK EXCHANGE July 30, 1971 ReadersofthtslettermayhavenoticedagrowingSkepticism'asto'the'aGtionofequity,'''''.–I markets creeping into the comments made over the past few months. It could well be argued, in fact, especially in view of last week's market action, that this skepticism should have been voiced a good deal more vociferously. The criticism is well taken here, and a few notes will be offered by way of explanation if not excuse. One of the characteristics of the stock market in recent years is that distributional patterns have tended to build with much greater rapidity than had earlier been the case. This was true prior to the first phase of the late bear market in early 1969 and was even more viciously true prior to the second phase in late 1969 and early 1970. The pattern of a rapid distributional buitl- up has again continued in recent months. As recently as last April or May there was, in our view, absolutely no reason, from a technical point of view, for the maintenance of anything other than an aggressively invested equity position. In a short period of three months, that picture has changed rapidly. Last week's trading saw popular stock-market averages plunge to new lows in a decline re- miniscent of those days we would all prefer to forget prior to May, 1970. The fundamental questions, of course, center around how far and for how long this weakness can be expected to continue. As we suggested last week, history fails to afford us a great deal of grounds for optimism. The percentage decline in the Dow, so far, is 9.4 over a period of 65 trading days. Any available reading of the record of declines of Similar magnitude in the past strongly suggests – -tWO-fa-ctsl)th-at'tliepres-entErakness-i'sl1KelYtb-cott'tinue for some time and;2)-tfiatt1iere i';s..,;…..-t-' at least, a possibility of a significantly lower ultimate low. It is time, quite frankly, that worries us more at the moment than the potential for a further drastic fall from these levels. Any reading of individual stock patterns must convince the observer that many stocks are already reaching downside objectives, and numerous others are close enough to those objectives so that further market weakness would bring them to what would have to be considered an attractive buying area. What we are not convinced of, as yet, at least, is the likelihood of an imminent reversal which would make aggressive equity commitments the attractive proposition that they were in late 1970 and early 1971. This is not to say that we could not be so convinced by technical evidence which might be given by the market's action from here on out. We feel, however, that, if such eVidence is fur- nished, it will become apparent at market levels not too far removed from today's prices. We are, therefore, inclined to await such improvement before becoming wildly optimistic. The above analysis may be criticized, of course, on the ground that it takes no account of the so-called fundamental picture. This view will find little sympathy in this quarter. The so- called fundamentals, quite frankly, are little changed from last April when the Dow was making new highs. It is, in fact, quite plausibly arguable that they have improved. It is, unfortunately, not fundamental factors which cause short-term price movement but supply-demand patterns as reflected by the technical picture. Everything that has taken place in the equity markets both on the rise to last April and the subsequent decline is apparently.consistent with.the'suggestions we have been-making.since– last January about the apparently developing long-term pattern. We have indicated our strong belief that the era in which bull and bear markets are played out against the background of a strong secular uptrend came to an end in 1966. It is quite evident now that Something up there doesn't like us, Up There being the area around 950-1,000 on the Dow. The present marks the fifth instance in the past eight years that a move to that area has been followed by a decline of some magnitude. We do not regard this as a statistical accident. It simply confirms our belief that the secular trend of the market is a great deal flatter than the sharp advance which characterized the 1950' sand 1960' s. We do not believe, in other words, that money can continue to be invested with the naive buy-and-hold-growth-stocks approach was born in the 1960' s and which still dominates investment thinking. Rapid reversals, such as that of the past few months, will, we are afraid, continue to be a fact of investment life. The proper course is not to deplore this trend but to learn to live with it. Dow-Jones Industrial (Noon) 863.03 ANTHONY W. TABELL S&P (Noon) 96.09 DELAFIELD, HARVEY, TABELL Avv J.blemen' or expreslon of opinion or any oiher matter herein contolned IS, or 1 to be deemed 10 be, directly or ,ndlrectly, on offer or the soircltatlon of an offer to buy or sell any security referred to Or mentioned The motter 1 presented merely for the convenience of the subSCriber While we believe the ource of our Informahon to be reliable, we In no woy represent or guoranlee the occurocy thereof nor of the stalements mude herein Any ocllon to be token by the subSCriber should be bosed on hiS own InVestlgotlon and Informalron Janney Montgomery Scali, Inc, as a corporotlon, and Its officers or employees, may now have, or may later toke, positions or trades In respect to any securities mentioned In thiS or any future ISsue, and such poslhon may be ddferent Iram any views now or hereafter epressed In thiS or any other lSue Janney Montgomery Scott, Inc, which IS registered With the SEC as on InveStment odvlsor, moy give adVice 10 Its Investment adv,Ory and other customers Independently of any stotements made In thiS or In any other Issue Further information on any security mentioned herein IS ovailable on request

Download PDF