Viewing Month: August 1972

Tabell’s Market Letter – August 04, 1972

Tabell’s Market Letter – August 04, 1972

Tabell's Market Letter - August 04, 1972
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!— I I I I, TABELL'S MARKET I LETTER I.- – – – 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YOAI( STOCK EXCHANGe. INC. MEMBER AMERICAN STOCK EXCHANGE August 4, 1972 As of noon today the stock market still continued its refusal to confirm a short-term uptrend by moving through the 950 level on the Dow. If such a penetration were to take place, a short-term upside objece-' tiJloLBO,995 would.be,indicated ,.whereas,a,iailure to move throughthis..level-wouldsuggestca'con- ' tinuatin of the intermediate term downswing from the April-May highs. A fortnight ago we devoted this space to a general discussion of the relationship between earnings and stock prices, suggesting that a forecast of the former was only a partial step on the road to fore- casting the latter. We would like to expand on this subject a bit further by trying concretely to relate a forecast for the Dow-Jones Industrial Average to its earnings prospects for 1972 and beyond. To begin with, it is well to keep our eye on the ball. The name of the game is to forecast prices, for it is prices that produce capital gains and losses. A price can be viewed as the product of two factors, first, earnings and, second, the multiple which the stock market is willing to apply to those earnings. The financial community spends a great deal of time and effort, by and large successfully, forecasting the former and relatively little effort trying to forecast the equally important second half of the equation — the multiple at which earnings will sell. The present instance can be cited as a specIfic example. For the 12 months ended June 30,1972 (est;.. mating the last quarter) the Dow-Jones Industrial Average earned 58.57. Our own estimate calls for earnings to continue to increase throughout 1972, and we are currently looking for earnings of 64.50 for the 12 months ended December 31, which figure will constitute a newall-time record and a substantial advance from the recession-low figure of 51.02, for the year ended December, 1970. Further improve- ment, although probably not at as great a rate, is likely for 1973. So much for the first half of the equation. What about the second — the multiple It is of more than passing importance. Assuming our earnings forecast to be correct, were the multiple to remain unchanged from the figure of 15.9 which obtained at the end of June, the Dow in December will be 1025, a worth- I–t–.w. hHe-btrt-uns-pectactllaratlvanC-erom—CurrenFlevelS7tiowever, quUea.Uferent- multiPles ate parr of th''''e'''''''-'''-''''- – record of the most recent past. At the high for the 1967-1968 bull market, for example, the Dow sold for 17.6 times earnings and, were this multiple to be achieved again, it could sell as high as 1135 at the end of the year. More recently, at the 1970 low, it sold for as little as 12.8 times earnings, and this multiple would produce a price of 825, better than 100 pOints below today's figure. If we broaden our historical perspective somewhat, an even wider range of valuation appears possible. The record high pie for the Dow of 24.2, achieved in the third quarter of 1961, would produce a price of 1560. Conversely, a return to the multiples of the early fifties would have the Dow around 525. Clearly, any forecast pretending to be worth anything must give some hard thought to forecasting pie ratios as well as to forecasting earnings. Luckily, in this area, there is some historical precedent to guide us. One of the most important prin- ciples is that changes in the multiple tend to be in the opposite direction from changes in earnings. For example, in the 169 quarters since 1929, earnings have increased 107 times. In 72 of those 107 cases, the multiple has moved downward. The converse is true in periods of dec lin i n g ear n i n g s. 62 quarters since 1929 have shown a quarter-to-quarter earnings drop and, in 46 of those 62 cases, the multiple rose. Even more interesting is the fact that exceptions to the rule tend to occur around earnings turmng- pOints. A perfect example is the recovery from the recent recession. In the first three months of 1971, Dow earnings increased by 2, but a jump in the multiple from 16.4 to 17.3 produced a healthy 8 ad- vance in stock prices. As earnings continued to advance through 1971 and 1972, the multiple almost stead- ily decreased quarter-to-quarter, with the result that, while earnings for June, 1972 had advanced 12, the Dow was ahead by only 3. In other words, the clear-cut probabilitY,is that heprice earmngs. ratio for tlfe Dow will be lower'a-t the end of the year Ulan itis-today. – 0 This projection is reinforced by a look at the historical pattern since 1961. Since that time, the mul- tiple applied to equity earnings has been decreasing steadily, with each successive peak lower than the previous one and each successive bottom recording a new low. Thus, the 1970 low multiple of 12.8 con- stituted a 13-year nadir, and the recovery from that figure failed to equal the high reached in 1967 before it began turning downward again. Thus, on a purely statistical basis, it would not be unusual to see multiples move below their 1970 low figure some time in 1973 or 1974. We have outlined In the past our reasons for thinking that the multiple trend since 1961 is not a tran- sient one or a random phenomenon. It constitutes one of the reasons for continued skepticism regarding the likelihood of substantially higher pnces, despite a highly optimistic near-term economIC outlook. Dow-Jones Industrials (1200 p.m.) 947.92 S&P (1200 p.m.) 110.13 AWTmn ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expreulon of op,Ion or any other matter herem contained IS, or IS 10 be deemed to be, directly or indirectly, an oHer or ihe soliCitation of an offer io buy or sell ony secl,lfIty referred to or mentioned The mailer IS presented merely for the COnvel'lence of the subscriber While we believe the sources of our informa- tion to be reliable we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any action to be taken by the slIbscnber should be based on hiS own 'inveStigation and information Janney Montgomery Scolt, Inc, os 0 corporation, and Its officers or employees, may now hove, or moy later toke, POSitions or trades In respect to ony seCUrities menlloned In thts or any future Issue, and such position moy be different from ony views now or hereafter e)'pressedhln Ihl5 or any other luue Janney Montgomery Scoll, Inc, which IS reglslered With the SEC os on Investment adVisor, may give odvlce to Its Investment adVisory and 01 el customers Independently of ony statements made In tha or In ony other ISsue Further mformohon on any sea.mty mentioned herein IS avalloble on request

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Tabell’s Market Letter – August 11, 1972

Tabell’s Market Letter – August 11, 1972

Tabell's Market Letter - August 11, 1972
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– – – – – – – – – -.—————— TABELL-S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – August 11th, 1972 — , egular sede,s ()f thi,,letter,will have noted a certain skepticism regarding what has become, in our . —..- ,-, – – – – . – – ..,.-t…….,– -' !ll view. close to a conventIOnal wisdom in finanCial clrcles – Tnis-conventional w3dom-h'61ds'tnat'the'rn-' vestment management process consists of Ilttle more than selecting a relatively restricted Ilst of high- grade growth compaOles and then simply contlOulOg to buy those companies, pretty much regardless of what prices they may be seillng for at the hme. One prestigious financial institution recently took the opportunity to announce in the pages of the New York Times that the above was. in fac\, its pollcy and calmly proceeded to list the Olneteen issues it regarded as suitable vehicles under the theory. Actually, the theory is not a new one. It had emerged as long ago as 1966, and we took the opportun- Ity to take it to task at that time. We tabulated the performance of a list of widely-recognized growth stocks over the 1955-1966 period. The one difference between our compilation and the usual one of Its type was that we picked stocks widely recogOlzed as growth stocks—not at the end of the period. but at the beglOning, I.e., 1955. We thought It would be interesting to repeat the tabulation today some SIX years later. Listed be- low are the twenty stocks, together with their prices at the end of 1954, at the time of our original study in 1966, and today, With the Dow Jones Industrial Average included for comparison. Certain adjustments have been made. The price of Amerada Hess preferred has been used since It was received in exchange for the original Amerada Petroleum, and recent du Pont prices have been adjusted upward for the General Motors distributions. All 1954 and 1966 prices have been adjusted for stock spllts. 12/31/54 1966 Recent 12/31/54 1966 Recent Alcan Alum Amerada-Hess 26 62 27 21 Minn. Mining 74 102 Monsanto 7 27 40 82 38 53 1,,C,a!Tjj;'rCQ!'P, .'1c4 Corning Glass 58 22 27 182 261 NL Industries Owens Coing 30 17 29 ….,.15 40 47—- Dow Chemical 14 20 92 Pfizer, Chas. 4 23 45 DuPont EI Paso Natural G Goodrich, B. F. H0.neywell Intern'l Bus. M. 170 16-1/2 43 27 15 265 18-1/2 44 57 171 282 18 27 167 422 RCA Rohm & Haas Scott Paper Shell Oil Union Carbide Dow- lones Ind. 11 30 20 26 44 412 48 36 38 79 26 13 68 45 49 48 818 950 Readers with short memories will be as surprised today as they were SIX years ago at the names of some of the' stocks which the prevailing wisdom of the mid-fifties regarded as premier growth issues, Just as, we have no doubt, analysts of the 1980's will be surprised at the inclusion of some stocks 10 a list compiled today. The performance of the list, both to 1966 and subsequently, might, off-hand, seem to support the growth stock thesIs. The list performed 60 better than the Dow 10 the 1955-66 period and two and a half times better than the Dow from 1955 through 1972, sconng a 353 advance. As was the case 10 1966, however, the entire performance superiority was due to just three stocks,IBM, MlOnesota Mining and Pfizer, and, had these three issues been removed, performance would have been worse than the average. Perhaps a better illustration of the difficulties of picking growth issues is the fact that four of these issues are today lower than they were in 1954 (when the Dow was less than half its current level) and twelve have underperformed the Dow. Changes 10 performance since 1966 are also interesting. The three stocks mentioned above were leaders In the 1955-66 penod,and continued to be among. the top.performers.subsequently. Likewise, Alcan and NL Industries, subpar performers at the time of the hrst study, have continued to show below- average performance. On the other hand, RCA, one of the best performing Issues on the list 10 1966, has since lost ground,whereas Dow Chemical and Rohm & Haas, subpar performers prior to 1966, have turned m an above average performance since. We think that the moral we drew at the time of the origlOal study six years ago stlll holds good to- day. Growth continues to be an elUSive concept, and a great many of the stocks which Wall Street re- gards as certain growth vehicles today, Will probably, over the next decade or two, suffer a fate Slmllar to some of those WhlCh were regarded as equally certain growth vehicles In 1954. Dow-Jones Industrials (1200 p.m.) 955.37 S&P (1200 p.m,) 111.37 AWTkd ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No falement or expresSion of opinion or ony other maHer herein contomed IS, or 1 10 be deemed to be, directly or indirectly, an offer-or Ihe SOlitllallon of on offer to buy or sell any setunty referred to or mentIoned The matter IS presented merely for the tonver.ente of the substnber While He believe the sourtes of our Informa tlon to be rehable, we In no way represent or guarantee the atcuraty thereof nor of Ihe statements mucle herem Any action fa be token by the substnber should be based on hiS own Invesllgallon and Information. Janney Montgomery Scott, Inc, as a oorporol1on, and Its officers or employees, may now have, or may later toke, pasilions or trades In respect to any sec;unhes mentioned In thiS or any future issue, and such position may be different from any views now or hereafter expressed in thiS or any other issue Janney Montgomery Soolt, Inc, which IS registered With the SEC as on mvestment adVisor, moy give adVice to lis Investment adVIsory and other customers Independently of any statements mode In thiS or In ony other Issue FUr1her information on any security menlioned herem IS available on request

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Tabell’s Market Letter – August 18, 1972

Tabell’s Market Letter – August 18, 1972

Tabell's Market Letter - August 18, 1972
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEM8ER NEW VORK STOCK eXCHANGE, INC. MEMBER AMERICAN STOCI( eXCHANGE – August 18, 1972 Some rather cruel wit once described a market analyst as one who, at 1000 o'clock, can tell 'Nht stocks are going to go up and, at 330, can explain why they didn't. And, it is indeed a fact -that the finanCial commentator. rather early on, musClearn the art oCexplalni;-hy hiSforecasts- have gone awry. There is little we can do to prevent the following from sounding like such an expla- nation, since we have for some weeks been pointing out the signs of technical deterioration occurr- ing in the stock market and suggesting the desirability if not, indeed, the likelihood of lower prices. The market, however, took the opportunity in Friday's and Monday's trading to chalk up what was, apparently, an impressive rise with the Dow-Jones Industrial Average posting a 20-point gain over the two days. In the process, the Dow-Jones Industrial Average scored a new bull market high at Monday's close, following the broader-based S&P Indices and the New York Stock Exchange Composite, which had moved into new high ground earlier. The move of these widely-followed indicators to new high terri- tory was duly noted, but we think it also important to note the fact that they were not joined by a number of other indicators — four of which are listed in the table below. ApriVMay High Last Wk's High Diff. ApriVMay High LastWI' s High Diff. DJIA 971.25 973.51 0.2 D.J.Trans. 275.71 237.62 -13.8 S&P 425 123.84 126.28 2.0 ASE Index 28.53 27.04 -5.2 S&P500 110.66 112.55 1.7 NASDAQ 134.10 131.70 -1.7 NYSE Compo 61.38 61.83 0.7 Ind.Dig. 59.01 54.15 -8.2 In summary, while new highs were chalked up by the Dow, heavily weighted in favor of blue chips and by the broader-based indices, whose fluctuations are largely a product of these same blue chips plusa..leaveningoflargecapitalizationgrowthlocks,neithertrans-portation.tocks.norsecondary issues, as represented by the NASDAQ and ASE Indices, followed the trend into new high ground. Most indicative, perhaps, was the performance of the little-known but highly descriptive average compiled by Indicator Digest, an index which gives equal weight to the performance of each of some 1500 new York Stock Exchange issues. Nor were advance-decline statistics impressive. The three days which started off the raIl y were on August 2 followed, after consolidation, by the advances of last Friday and Monday. On each of these days the Dow advanced approximately 1, and, on the three days, advances exceeded declines by,respectively,386, 403 and 306 issues. If one takes all of the days since the bull market began in May, 1970 when the Dow chalked up a comparably large advance (greater than. 75), we find that on 57 out of 79 of these days the advance-decline plurality was greater than that achieved on the three recent rising days. Also interesting is the fact that on Monday, as the Dow-Jones surged to a new bull market high, only 101 issues were at new highs for the year and on Thursday, three days after the peak, 39 issues managed to sell at 1972 lows. We are not citing these statistics here to prove that the market did not do what it did, i. e. go up, but we do think they constitute one more link in the chain of evidence which indicates that the ad- vance continues to be supported by fewer and fewer stocks. As more and more of the issues which spark-plugged the 1970-1972 advance (Mobile Home stocks, for example) begin to move lower, there is a smaller and smaller group of new leaders (such as some oils at the moment) to come aiong and take,their p1ace.- Now-it-is, of course,'possible,that; suddenly;-a host of new'issues,-which-have– been laggard in the market so far, will move to the fore, constituting the leadership necessary to pro- vide an extension of the advance. It should also be indicated, though, that the most' elementary study of stock market history indicates that such breadth is unlikely to emerge without the prerequisite of lower prices to attra ct new buying. What then of the future As we indicated two weeks ago, the upside objective for the Dow is in the 980-995 range, which area it had approached at last week's high. The long-term objective for the Dow, mentioned as long ago as October, 1970 in this letter, continues to be 1065, a level which, one would assume, could be produced by the psychological lift accompanying a break above 1000. It would seem, however, the height of folly to suppose that a market in which the leadership is as highly concentrated as it is at present will be one in which the achievement of capital gains will be a particularly easy task. Dow-Jones Industrials (1200 p.m.) 965.46 S&P (1200 p.m.) 111. 75 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL AWTmn No stalement or expression of oplnton or any other matter herein tontOlned IS, or IS 10 be deemed to be, directly or mdnec1ly. on oHer or the rolUllotlon of on offer 10 buy or seli Clny security referred to or mel'l'Ioned The matter IS presented merely for the converlence of The subscriber While we belreve the sources of Ol,lr Informa lion TO be reliable, we 10 no woy represenT or guarantee the occurocy IhereQf nor of the stoTements mude herem Any OCTlon to be token by the .subscriber should be bas.ed on hiS own IOvestlgotlon and Informallon Jonney Montgomery Scoll, Inc, as 0 corporotlon, ond lIs officers or employees, may now hove, or moy laTer toke, posiTions or trades 10 respect to any secUrities menTioned In thiS or any future ISSUe, and such posiTion moy be different from any views now or hereafter expressed In thiS or any other ,ssue. Janney Montgomery Scoll, Inc, which IS registered With the SEC os on inVestmenT odvisor, may gille adVice to Its Investment odvlsory ond othel customers Independently of any statements mode 10 thiS or In any olher Issue Further information on ony security mentioned herein IS ovodoble on request

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Tabell’s Market Letter – August 25, 1972

Tabell’s Market Letter – August 25, 1972

Tabell's Market Letter - August 25, 1972
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– —– – — — —— I TABELL'S I MARKET LETTER I I J 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE August 25, 1972 More than perhaps any market in recent memory, the present one is beset by numerous cross currents. As we indicated last week, an inspection of advance-decline statistics suggests quite clearly that, since – – – -March ;'-fndre'stodks -havebeengoing downtha'ii'nai'-ebeen-golfiup;'OespiteCth'EP'facftnat th-epoptilaf' –'. averages are close to record highs. Yet despite all of the statistics which suggest the increasing com- plexity of the investment environment, there are substantial numbers of individual stocks for which the technical patterns are, by themselves, highly encouraging. To some degree, at least, as we suggested last week, a shift in leadership does appear to be taking place, and a number of hitherto-laggard issues are beginning to look like interesting investment opportunities. – The following table is an attempt to indicate the existence of such a shift. It is based on the fact that three important lows for the Dow Jones Industrial Average are recognizable in the 2 1/2 years since bull market began in May,1970. The first is, of course, the 1970 low itself. The second is the low of last November when the Dow bottomed out below 800, and the third is the low of July 20, one month ago,when the market began its current uptrend. The table takes the performance of the 25 issues most popular in Mutual Fund portfolios as tabulated by Vickers Guide, and measures their percentage change from each of the three lows. Also shown is the change in the Dow Jones Industrial Average. Percent Chge-May 26,1970-Date Percent Chge-Nov.23,1971-Date Percent Chge-July 20,1972-Date 1 MGIC Investment 2 McDonalds Corp 3 Brunswick Corp 595 539 295 1 MGIC Investment 2 McDonalds Corp 3 Philip Morris Inc 113 92 91 1 MGIC Investment 2 Burroughs Corp 3 Travelers Corp 20 13 13 4 Philip Morris Inc 271 4 Burroughs Corp 70 4 Ford Motor Co 12 5 Kresge S S Co 245 5 Eastman Kodak Co 57 5 Du Pont De Nemours 11 6 Northwest Airlines 7 EastmanKodakCo 8 Xerox Corp 138 130, 128 6 Xerox Corp 7 KresgS,Co 8IBM 54 6 Texaco Inc 47 7 General Motors.Corp' 428KresgeSSCo 11 1! 8 9 General Electric Co 10 Minnesota Min. Mfg. 11 Burroughs Corp 12 Reynolds R J Inds 13 Sears Roebuck Co i4 Avon Products Inc 15 Polaroid Corporation 16 Du Pont De Nemours 17 Ford Motor Co 18 IBM 19 Westinghouse Elect 20 Standard Oil Of N J 21 American Airlines 22 Traverlers Corp 23 Dow-Jones Ind. Aver. 24Texaco Inc 25 General Motors Corp 26American Tel & Tel 118 110 110 109 102 84 82 80 76 71 62 56 55 55 54 46 33 3 9 Polaroid Corporation 10 Minnesota Min. Mfg. 11 Du Pont De Nemours 12 Reynolds R J Inds 13 Avon Products Inc 14 Brunswick Corp 15 Dow-Jones Ind. Aver. 16 Standard Oil Of N J 17 General Electric Co 18 Texaco Inc 19 Sears Roebuck Co 20 Northwest Airlines 21 Ford Motor Co 22 Travelers Corp 23 American Tel & Tel 24 General Motors Corp 25 Westinghouse Elect 26 American Airlines 42 9 Xerox Corp 37 10 Dow-Jones Ind. Aver. 35 11 Standard Oil Of N J 33 12 McDonalds Corp 24 13 IBM 23 14 General Electric Co 22 15 American Tel & Tel 18 16 Minnesota Min. Mfg. 18 17 Reynolds R rInds 16 18 Philip Morris Inc 14 19 Eastman Kodak Co 14 20 Avon Products Inc 10 21 Polaroid Corporation 8 22 Sears Roebuck Co 8 23 Westinghouse Elect 5 24 Northwest Airlines 3 25 American Airlines – 16 26 Brunswick Corp 8 7 6 6 6 5 4 4 2 2 2 1 0 -2 -3 -7 -8 -10 The following facts may be noted. 1) A small minority of stocks have managedto turn in conSistently above-average performan-ce. Such issues as MGIC, Kresge, and Burroughs are uniformly near the top of all three lists. 2) Beating the Dow is becoming a great deal more difficult. For the entire bull market, 22 of the 25 issues have outperformed the Dow. ,Since November, only 14 have done so, and, in the past month, the Dow has outperformed 16 of the 25 issues on the list. 3) There was little apparent leadership shift in the rise from the November lows. Of the ten top-perfor ing issues for the period November-to-date, seven were among the top ten for the bull market as a whole. 4) However, on the more recent rise, a distinct shift in relative action is apparent. For the bull mark as a whole, 12 stocks had performed better than twice as well as the Dow. Of these 12, no fewer than eight have underperformed the Dow on the recent rally. On the other hand, five of the nine issues that bettered the Dow on the recent rIse were among the laggards for the bull market as a whole. It is the emergence of this new leadership which has kept the average near its high so far, despite the deterioratkn in a large number of issues. Dow-Jones Industrials (1200 p.m.) 958.31 ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL S&P ( 2'00 p.m.) 110.75 AWT' statement or expreSlon Qf opinion or ony other mattcr herein contolfled IS, or is 10 be deemed 10 be, directly 01 indirectly, on offer or Ine 501l;llollon of on offer ''\6'buy or sell any secunly referred 10 or mentioned Tne moiler 's presented merely for tne conver'lenCE of Ine subSCriber Willie He believe Ihe sources of our Informohon 10 be rel,oble, we In no way represenl or guoronlee Ihe occuracy thereof nor of tne slotements mude herein Any ocllon 10 be loken by the subscriber should be based on h,s—owii Invesllgotlon and Information Janney Montgomery Seoll. Inc, as a corporotlon, and Its officers or employees, may now have, or may loler toke, poslhons or trades In respect loony secUrilles mentioned In Ihls or ony future Issue, ond such pOSition may be different from any views now or herellter expressed In thiS or any olner Issue Janney Montgomery Scott, Inc, which 's registered With the SEC os on Inveslment odvlsor, moy give adVice to Its Investment adVISOry and olher customers ,ndependently of any statements mode m thrs or In any other Issue Further Information on any secunty mentioned herein IS aVailable on requesl

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