Viewing Month: December 1972

Tabell’s Market Letter – December 08, 1972

Tabell’s Market Letter – December 08, 1972

Tabell's Market Letter - December 08, 1972
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YOAK STOCK eXCHANGe. INC. MEMBER AMERICAN STOCK eXCHANGe – December 8, 1972 Greater than the tread of mighty armies is an idea whose time has come. 0 o – – -, -, Victor,Hugoc Hugo's oft-cited quotation is equally applicable to the equity market as to other fields of endeavor. For stock-market purposes, however, it is necessary to append to the quotation and say, An idea whose time has come–again. For there are seldom any new ideas in the stock market–only old ones which, at irregular intervals, become rediscovered as blinding flashes of revealed wisdom. One such notion, dormant for almost ten years and now, apparently, in the process of rediscovery, is the concept that util- ity stocks, as a class, might constitute attractive investment vehicles. The table below cites price and earnings statistics for the Standard & Poor's Utility Index plus two representative utility stocks, Florida Power Corporation, generally regarded as a growth utility, and New England Electric System, a typical example of the more stable income type. All figures given are for the year-end except 1972, where present prices and full-year earnings estimates are used. I S & P UTILITY mDEX I FLORIDA POWER CORP. /NEW ENGLAND ELECTRIC SYSTEM Year End I Price Earnings gain P,1; ratio I Price Earnings gain P;tratio I Price Earnings gain P;t ratio 1962 61.09 3.06 5.2 20.0 44 1.59 27.7 25 1.36 18.3 1963 66.42 3.22 B.6 20.6 44 1.59 27.7 27 1.46 7.3 18.4 1964 74.52 3.50 B.6 21.3 47 1.77 11.3 26.6 29 1.50 2.7 19.3 1965 75.51 3.8B lO.B 19.5 46 1.B9 6.7 24.3 30 1.60 6.7 18.B 1966 69.35 4.16 7.2 16.7 48 2.12 12.1 22.6 28 1.73 8.1 16.1 1967 66.08 4.40 5.7 15.0 46 2.27 7.0 20.3 26 1.93 11.5 13.4 1968 69.69 4.41 0.2 15.8 42 2.51 10.5 16.7 2B 1.94 0.5 14.5 1969 56.09 4.61 4.5 12.2 49 t970. S1.V, 4.67–1.13.255 1971 59.834.92 5.3 12.1 46 2.91 15.9 16.8 22 1.96 1.0 11.2 3.0B 5.8 17.8 23 1.98 1.0 11.6 3.ci2.l.9-i5224-5-3.5- -Ii. 7'— – – 1972 62.35 5.16 4.9 12.0 50 3.35 10.9 14.9 27 2.30 12.1 11.7 10 year compound 5.3 7.8 5.4 growth rate The figures are interesting. The first relevant conclusion is that, for the past ten years at least, there has been absolutely no reason to own these stocks. Both the Index and New England Electric are selling today below where they were selling in 1964, and the price of Florida Power is not that different. The second obvious conclusion is that, despite the lackluster performance, the fundamental record for the industry is fairly good. Earnings for the utility average have managed to grow at a rate of 5.3 a year compounded, an increase which has been duplicated by New England Electric. Florida Power, meanwhile, has been growing at a rate half again as great as that of the industry. , It is also notable that the market has tended to accord to the Index and to the two stocks fairly con- sistent pie ratios relative to each other. In recognition of its growth rate, Florida Power has consis- tently sold at a higher multiple than the mdustry as a whole, and New England Electric at a very slightly lower one. What the table clearly shows, however, 15 the fact that, despite the fundamentally good record, the market has tended to place a decreasing value on utility earnings over the past decade. A dollar of earnings by the Utility Index was worth 20 in 1962 and is worth only 12 today, and the record of the price-earnings ratios of the two stocks is similar. Now all this is just another example of the point that we, as market technicians, repeatedly feel com- pelled to ra-ise, i.e. that prices depend on investor sentiment as much as on earnings. The earnings record for the utility industry over the past decade is impeccable. Its price record is dismal. The im- portant factor at the moment is not that fundamentals have improved; they have simply stayed the same. It is that technical factors suggest a possible change in the attitude which the stock market might take towards the industry. In 1964, the Standard &Poor's Industrial Average sold at a lower pie ratio than did the Utility Index. At mid-1972, the Industrial pie was almost twice as great. Florida Power can be bought today at less than 15 times estimated 1972 earnings, affording a 3.5 yield. New England Electric, with a more slowly growing earnings trend, affords a 6.2 dividend return. The investor in selected utilities today, it seems to us, is assured of reasonable income and, even should the present technical strength prove ephemeral, slow capital growth in line with continuing earnings improvement. Should the market again come to regard utility stocks as highly as it did in the early 1960's, the capital-gains potential would be rewarding indeed. NOTE The above comments are bas ed largely on technical factors. Further information is available on request. Dow-Jones Industrials (1200 p.m.) 1033.71 S&P (1200 p.m.) llB.64 AWTrk ANTHONY W. TABELL DELAFrELD, HARVEY, TAB ELL No statement or expression of opInion or any other motter herein contained IS, or IS to be deemed to be, directly or Indirectly, on offer or the soliCitation of on offer to buy or sell any security referred 10 Or mentioned The matter IS presented merely for the converlence of the subSCriber While we believe the SOlJrces of our Informa han to be reliable, we In no way represent or guarantee the accuracy thereof nor of the slotemel'1is mude herern Any action to be tak.en by the subscrrber should be based on hiS own Investlgohon cmd 'nformatlon Janney Montgomery Scoll, Inc, as a corporation, and Its officers or tr!mployees, may now have, or may later toke, poSitions or lrades In respect to any seCl,lfll,eS menhoned rn th,s or any future Issue, and such pOSition moy be dr/ferent from any views now or hereafter expressed rn thiS or any olher Issue Janney Montgomery Scott, Inc, which IS registered With Ihe SEC as an IIlVestment adVisor, may give adVice to lIS mveslment adVISOry and othel customers Independently of ony statements mode In thiS or In any other luue Further rnformotlon on any security mentioned herein IS avorlable on reques

Download PDF

Tabell’s Market Letter – December 15, 1972

Tabell’s Market Letter – December 15, 1972

Tabell's Market Letter - December 15, 1972
View Text Version (OCR)

.- — — — ———–'——–l j ! TABELL'S II MARKET LETTER I I , \ .. .-JI 909 STATE ROAD, PRINCETON, NEW JERSEY 08640 DIVISION O'F MEMBER NEW YORk STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE December 15, 1972 ..- –;;-. Our readers-are no doubt aware-that it-isour-practice.to devote-the'last-few'issues of. this letter each year to a forecast for the year ahead. This exercise is generally divided into two parts, the first being a review of the market events of the prior year and the second an attempt to see how these events shed light on the future. This letter, then, constitutes the first part– a look back prior to a look ahead. In the present instance, we think it essential to an understanding of the current market to look back, not just a year, but some two years and seven months, to May 26, 1970 when, as we all know, the Dow-Jones Industrial Average bottomed out at 631.16 after the worst bear market of the post-war era. As the cries of doom and gloom gradually subsided, the Dow, over the next 11 months, advanced over 300 points to reach a high of 950.82 in April 1971. Summer, 1971 was a period of general market weakness, although many issues were resistant to the decline, and, by Fall, almost half the initial phase of the rise had been retraced, as the index reached a low of 797.97 in November. From that point, another upward leg began, with a closing high for the Dow of 968.92 being recorded in April. Summer, 1972 was, like Summer 1971, a period of weakness but with one essential difference. Whereas in 1971 the market averages had performed worse than the aver- age stock, for 1972 precisely the opposite was the case. The period April-November 1972 saw a sideways trading range in the 900-980 area, as far as the averages were concerned, but many stocks underwent sharp declines. This phase, of course, terminated with the recent rally, as c. the D b…'''.k-te,..!..oention.on the .upside, reag .!..high (to ate) of 036. 32. f'. r…Now tile purpofe of tillS lengtny exerClse lS to remlOO US to place the-present marKet sltua tion in context. We are in a bull market. That much is obvious. We are, more preCisely, in the third upward leg of that bull market, there having taking place two corrtctions (April-Novem- ber 1971 and April-November 1972) which can be classified as mtermediate-term in scope. That bull market has gone on now for more than two and a half years, 654 trading days,and encom- passes a 65 advance for the Dow-Jones Industrial Average. A month ago in this space, we cited the above statistics and compared them with other bull markets of the post-war era. We do not propose to reiterate all these comparisons here, but it will be recalled that the conclusions were, 1) that a good portlOn of what would ultimately be the total bull-market advance had probably already been seen and 2) that a topping out of the advance sometime in 1973 would be entirely m line with historical precedent. This remains true despite the almost total lack of evidence, on a short-term basis, of such a top forming in the immediate future. While the present bull market is in no way different in character from past such advances, we must also remind ourselves that it is taking place in an entirely different context. The fact that 1972 has been a year in which the low was recorded in January and the high in Decem- ber helps to obscure the fact that the average price for the year is about 960, not too different from the average price of 1965, seven years ago. The present bull market in other words has, to date, been totally consistent with the relatively flat secular trend which, as we have been P9inting out m this.spacead.nauseam, ha chatacterized the market i!1ce the mid-1960's,,in vivid contrast to the secular uptrend which had been rising at a rate of 9 for some 20 years through 1966. We thus find ourselves, 1) somewhere in the mature stages of a bull market and 2) near the upper part of the trading channel which has characterized the last seven years of stock market activity. Another point should be noted. As we suggested in our 1972 forecast, the fact of an election year augured well for the yeats market prospects. The historical record of post-election years is unfortunately conslderably less auspicious. Every major bear market since 1929 has begun in the year following an election or in the hrst half of the succeeding year. We think that all of the above factors will be relevant to a 1973 forecast. Dow-Jones Industrials (1200 p.m.)l024.53 ANTHONYW. TAB ELL S&P (1200 p.m.) 118.11 DELAFIELD, HARVEY, TABELL A VERY MERRY CHRISTMAS TO ALL No statement or expreUlon of opmlon or any other matter herem tontclned IS, or , to be deemed to be, dlrettly or mdlrectly, on offer or the lollcltotlon of on offer to buy or sell any security referred to or mentioned The matter IS presented merely for the converlente of the subscrlber While we beheve the sources of our mformatlon to be reliable, we m no way represent or guarantee the o'Curccy thereof nor of the statements mude herem Any oct,on to be taken by the subscrtber should be based on hiS own mveshgotlon and information Janney Montgomery Seall, Inc, 0 a corporOllon, and Its officers or employees, may now have, or may later toke, POSitions or trades m respect to any seurtt,es mentioned In th,s or any future Iswe, and such postllon may be different from any views now or hereafter expressed m thIS or any other Issue Janney Montgomery Scolt, Inc, whIch IS regIstered With the SEC os on Investment adVIsor, may gIve odvlce to ,1 mvestment adVisory and othe, customers Independently of any statements mode m thIS or m ony other Issue Further InformatIon on ony security mentioned herein 1 avadoble on request

Download PDF

Tabell’s Market Letter – December 22, 1972

Tabell’s Market Letter – December 22, 1972

Tabell's Market Letter - December 22, 1972
View Text Version (OCR)

\ \ TABELL'S MARKr LETTER I. 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW VORk STOCK eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE December 22, 1972 But who knows where or when -. . c ,C-.-,.-.,. . '. . . -., Rodgers,and-Hat,– ,.,-.,,……,. As the time comes to issue a 1973 forecast, the question posed by the stock market is quite clear and is embodied in the popular song. The answer, as we shall see, is less definitive and depends on a number of factors as yet unknown. Reviewing our forecast of a year ago, we find it essentially in the ball park, albeit a bit con- servative. We said in this space on December 23, 1971, The market is … likely to .. spend most of its time in the 800-950 range (It) should be noted that 1972 is an election year, and the normal shape for such a year is a flat-to-down market in the first half, followed by higher prices during the second half. Thus, our projected 800-950 range, if it is to be Violated, is most likely to be exceeded on the downside in early 1972 and on the upside in the latter part of the year. The projected range was, in fact, never exceeded on the downside, and turned out to be at a slightly above the one we had anticipated, i.e., 900-980. AS,the election year pattern accurately forecast, the upside violation came at the end of the year, in November an! December, and we now find ourselves at approximately 1000 on the Dow, moderafely above the trading range we had envisioned. The task at hand is to relate this market action, as it did, in fact, develop, to a rational market expectation for 1973. We drew attention in last week's letter to three factors we considered relevant. They were as follows 1) A comparison of the present bull market with past bull markets indicates that we are in all probability, in terms of time and amplitude, at a reasonably mature stage. 2) We are currently near the upper part of the market trading range, which our analysis of supply/ dem-a'i\d'f6rces read'sus'-tc)be1ieve w-illdlYmiha te-marketacrionirt'lea-s1'for lheear'lyT9 70'''s'''.-..,.—I 3) The seasonal pattern for the initial year of a presidential administration is .such that a correc- tion of major proportions in 1973 or early 1974 is a real possibility. We know then what we are looking for–a market top. This should not be surprising. All bull markets have topped out in the past and this one will, also. The questions are Where and When –when, because if a top is well off into the future there is little point in allow- ing it to dominate our current investment thinking, and where, because, if the top is going to occur at much higher levels, the ultimate bottom will be at prices not too much different than current ones. History furnishes us with some less-than-precise guidelines. If the experience of 1953- 1956, for example, were to be duplicated, the top could occur as early as next March. If, on the other hand, the present bull market equaled the one of 1957-1961 in length, the ultimate peak could be deferred as long as March 1974. As to the question of where, current upside objectives on the Dow center on the 1050-1100 range, and we are willing, for the present, to use this as an approximate target price. The central factor which will probably determine the length of the present bull market is at present unknown. The last upward phase has featured a distinct and dramatic shift in leader- ship away from high pie glamour issues, in favor of lower priced, slow-growth, and cyclical stocks. We would expect a continuation of this phase to carry the market higher, at least in the early months .of )973. The ,question is whetheL there ,will then be a.further, shift.of ,interest in favor of secondary and tertiary issues. There is at the moment absolutely no sign of this occurring, but, if it does occur, it could well prolong the life of the current upswing. Our foreca st for the year, then, must call for higher prices, to be reached, in all probability, during the first half of 1973. Whether the favorable market climate can be sustained through- out 1973 will depend, in great part, on whether the market can broaden its leadership to seg- ments of the list hitherto ignored. WE WISH YOU ALL A VERY HAPPY NEW YEAR Dow-Jones Industrials 11200 p.m.)1003.39 S&P (1200 p.m.) 115.62 AWT rk ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement to buy or sell or expression 01 opinion or any other any security referred 10 or mentioned molter here'n The moiler IS contolned presented 15, or 1 to be merely for the cdoenevmeredIe1n0boef, directly or mdnec1ly, the subscrIber WhIle on -Ne offer or believe Ihe the 5o0u1rIcCeItootiof nouorf on offer Informa- tIon to be reliable, we In no way reprelent ar guarantee the accuracy thereof /lor of the statements mude herell'l Any achon to be tai-en by the subscriber should be based on hiS own Invesllgohon and Informallon Janney Montgomery Scolt, Inc, as a corporation. and ItS officers or employees, may now have, or may raler toke, poSitions or trades In respect to any SeCUrities menhoned In thiS or any future IUe, and such position may be d,ffere'lt from any views now or hereafter expressed III thiS or any other Issue Janney Montgomery Stott, Inc, which IS regIstered w,th the SEC as on Investment adVisor, may give adVICe to Its IIlvestment adVISOry, and othel C\,ISfOmerS ,ndependently of ony statements mode ,n thn or III any other Issue Further Information on any security menhoned herein IS available on reques,

Download PDF

Tabell’s Market Letter – December 29, 1972

Tabell’s Market Letter – December 29, 1972

Tabell's Market Letter - December 29, 1972
View Text Version (OCR)

po – – – . -.. I TABELL'S I MARKET LETTER — – —– 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEM8ER NEW YORK STOCI( EXCHANoe, INC MEMBER AMERICAN STOCK EXCHANGE December 29. 1972 -For some-yearsnow, we-havestudied-.the fam-i-!-iarseasona-l tendencyofthe-stock -mar-ket-to stage a year-end rally, and it has been the custom of this letter each December to pOint out some of the conclusions that can be derived from a study of this phenomenon. We have suggested that an exhaustive study of chart patterns since the Dow-Tones Industrial Average first was computed in 1897 indicated that such a rally, h01.'.everminiscule, invariably had taken place. A number of intereSting facts about the market action of the year-end may be noted. (1) – As stated above, an identifiable year-end rally has taken place in every year since 1897. This rally often has been of great magnitude with advances as great as 28 having been recorded. It also, on occasion, has continued with only minor interruptions for as long as six months into the new year. However, on other occasions, it has been of only a few days' duration. reaching a top extremely early. Thus, in 1960, 1962,and, most recentlY,in 1970 the rally reached a peak in the first week in Tanuary. In 1961.1964,1967, and 1971. it continued into February or March. In 1971, the rally continued through mid-March. (2) – There has been a persistent tendency for the rally to begin early in years when the market has been up, and late in years when the market has been down. In recent upward years, 1959, 1963, and 1967 are examples, the rally commenced from early December. In 1962, 1966 and in 1969, it began late in the year. This year's rally, typically, began in late November. (3) – The important thing to watch in connection with market action in the early months of the new year is tlTe-low forth-e'previo\lsDecember–This-iuvrtra-s- been-broken'in-fortythree – – years out of the past seventy-two. However, in twenty-five of these forty-three cases, itwas broken in Tanuary and February. Since 1937, it has never been broken later than mid-March, with the single exception of 1965. Thus, if the market is able to hold above its December low for the first 2 1/2 months of the year, chances become good that this low w ill not be broken. For example, in 1960, 1969 and 1970, the December low was broken early in Tanuary. In 1963, 1964, 1967. and 1971, and, most recently, 1972, it never was broken. 1965, as noted above, was unusual with the December, 1964 low of 850.19 being broken in Tune when the Dowreached an intra-day low of 832.74. (4) – In years when the December low has been broken, the subsequent trend has been downward two-thirds of the time. 1960, 1962, 1966, and 1969, of course, are typical cases. Again, 1965 was an exception. 1970, of course, was a down year in the first half. (5) – The magnitude of the rally is an important clue as to the year's market trend. For example. an advance of 10 or more from the December low has been followed byan upward or neutral market in thirty-one of the thirty-six years that such an advance has occurred. An advance of less than 10 from the December low before an identifiable correction takes place has been followed by a downward market in t wenty,four of the thirty-six years. 1963, 1964 and 1971, the year-end rally approximated 10, and in 1972 it was 17. In 1960, 1962, and 1970, for example, it was less than this figure. (6) – The length of time in which therally continues intothe,new yearalso is important. For example, in nineteen ye;;'s the raily continued into MaiCh or later. – In seventeen of these nineteen years the eventual trend was upward. In 1964 and 1972 the year-end rally continued into March and in 1961, 1963, 1967 and 1971 into February. In the coming year. therefore. the December low of 1000 is an important point to watch. If this low is broken. it would be a strong indication of probable market weakness. A like indication would be failure of the Dow to advance 10, or to approximately 1100. On the other hand, if a rally continues into February or March, or reaches above 1100, an extension of the upswing might be indicated. Dow-Tones Industrial (1200 p.m.)1018.36 S&P (1200 p.m.) 117.75 AWTrk ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL No statement or expres.slon of opInion or any other matter herem contOlned IS, or IS 10 be deemed 10 be, directly or mdl-ectly, on offer or the sollcltoTlon of on oHer to buy or sell any secUrity referred 10 or mentioned The motter IS presented merely for Ihe convel.enC1i of the subscriber While e believe the sources of our Informa t.on to be rel.oble, we In no way represent Of guarantee the occuracy thereof nor of the statements mude herein Any action to be token by the subSCriber should be based on hiS own investigation and Information Janney Montgomery Scott, Inc, os a corporotlon, ond It off,cers or employees, may now have, or may later toke, POSitIons or trodes In respect to ony seCufltles mentioned .n thiS or any future Isue, and such POSitIon may be different from any Views now or hereafter el'pressed In Ihls or ony other Issue. Janney Montgomery Scali, Inc, which IS registered wllh the SEC as on InveUmcnt adVISor, may give adVice 10 Its Investment adVISOry and othel CVitomers Independently of any stotements made I thiS or In any other Issue Further information on any secvrlty mentioned herein IS Qva.loble on request

Download PDF