Viewing Month: February 1974

Tabell’s Market Letter – February 01, 1974

Tabell’s Market Letter – February 01, 1974

Tabell's Market Letter - February 01, 1974
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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 —Last-;eebYci larg';,c;o;;-tinedthe rent paftern 'of lack!!t;;Jit97i;–lopoint act -. -k vance on a fairly healthy increase in volume wiped out earlier losses on Wednesday, but this was unable to hold, and the week ended with little change in most indices. Thus the market remains, for the time being, on dead center,but it is, in our view, approaching a fairly critical Juncture, one which could go a long way toward indicating what to expect for the first half of 1974. Many commentators seem to feel that the impelling force for an eventual move in either direction will be some sort of news event. We have in the past confessed our impatience with this sort of thinking, and we suspect that that impatience will be tested in the coming months, if for no other reason than the fact that there exists, at the moment, a record number of developing news stories to serve as a convenient rationale for explaining the market's behaViOr. Watergate, impeachment, the energy shortage, the posturings of the Arab states and international monetary developments all will no doubt be used in coming weeks to provide excuses as to why the market is behaving as it is. We much prefer, as market technicians, to view the present dilemma in technical terms, and we feel its ultimate resolution in those terms will be a great deal more clear-cut. Today's stock market can be understood in terms of three historic benchmark dates. The first of these is January II, 1973, on which day the Dow Jones Industrial Average closed at its all time high of 1051.70. The second is December 5, 1973, eleven months later. By this time, the Dow had declined to a closing low of 788.31, down 25 from its earlier high — a decline that was pretty much of a continuous phenomenon, interrupted 'only by a fairly dynamic rally in August, September and October ,.,.a ndoonewhich.,in.histor,ica lter.ms.,,,,cel;talnly..qualafies,,,for ,thea ppela tion maJorbear .,., market. The third benchmark date of importance is January 3, 1974, at which point the year-end rally from the aforementioned December low topped out at 880.69, after an advance of ll. 72, which qualifies as a rise of intermediate-term proportions. Now, it is possible to describe the 1973 bear market by a mathematically-constructed trend- line. This line starts at a base of approximately 975 in January, 1973, and declines at the rate of approximately 0.42 pOints per trading day. Its current level is about 863, a pOint fairly close to where the market is at the moment. It is also possible to measure the variability about this line. If we draw parallel lines 76 points above and below the trend line itself, we have a channel that contains almost all of the fluctuations of the Dow from January, 1973 to date. It is likewise possible to utilize exactly the same process to describe the rally from December 5, 1973, through January 3, 1974. This trendline starts from a base of 805 and rises at a fairly steep rate of 2.40 points per trading day. The variability about the line suggests that a trading channel 34 pOints on either side of it should contain most of the fluctuations of the Dow. Now, it is obvious that these two channels, one descending at a very slow rate and the other rising at a relatively fast one, must ultimately converge and, indeed, the trend lines themselves have converged already, the basic trendline for the intermediate uptrend now being some 40 pOints higher than for the major downtrend. It will be, however, a while before the lower part of the uptrend channel moves through the upper limit of the downtrend channel. That event will occur sometime during the last week in February. At the week's close, the Dow had moved below the intermediate term uptrend channel, al- tlfough not'by qU1te-enough'to call'the'penetration decisive .. In any case;–however;'the'situation'— will shortly be resolved. EIther the uptrend channel will be decisively violated on the downside, strongly suggesting that the market remains in the grips of the major downtrend which has been in effect for thirteen months, or it will continue to a point where that downtrend channel will be decisively penetrated. Were such a penetration to be accompanied by other favorable technical Signals, a vastly improved market climate for 1974 could be foreseen. The ultimate resolutlOn of this technical impasse will, in our opinion, provide a more valuable clue as to the probable future course of the market than random news events. Dow-Jones Industrials (1200 p.m.) 846.17 S & P Compo (1200 p.m.) 95.57 ANTHO NY W. TABELL DEALFIELD, HARVEY, TABELL Cumulative Index (1/31/74) 614.41 AWT/jb No statement or expreulon of opinion or any other maHer herem contOined IS, or IS to be deemed to be, directly or ,nd,rectly, an offer or Ihe soitcltatlon of on offer to buy or sell ony security referred to or mentIOned The mOllcr IS presented merely for Ihe converlenc of the subscriber While -Ne bellev!! the sources of our InformatIOn 10 be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any action 10 be toen by the SUbSCflber should be based on hiS own InvestigatIOn and Informotlon Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now have, Of may later toe, pOII,ons or hades In respect to any securities mentioned In thiS or any future Issue, and such pOSIlon moy be different from any views now or hereafter expressed In thiS or any other Issue JO'1ney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, may give adVICe 10 IS Investment adVISOry and othel customers Independently of any slotements mode In thiS or In any other Issue Further Information on any sectHily mentioned herem IS aVailable on request

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Tabell’s Market Letter – February 08, 1974

Tabell’s Market Letter – February 08, 1974

Tabell's Market Letter - February 08, 1974
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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 — — …. –..- …. …….—!i!'-…….., —.- … '- — ..-,; …….—- February 8, 1974 Part of our routine activity in observing market action each week consists of compiling a list of securities which have built fairly substantial potential base formations. The securities on this list have, in general, a number of common factors. First, they remain within the confines of bases which have not yet been penetrated on the upside. Secondly the upside objechves of those base patterns generally suggest price objectives substantially above current levels. Our latest tabulation of this type contains a total of 94 stocks, and one of its interesting facets is the industry representation. In the present instance, the 94-stock list contains 7 rails,S steels, 4 textiles, 4 foods and 10 companies either in the oil or natural gas transportation area. These 7 industries, in other words, comprise almost one-third of the total list which has, in turn, been culled from a master list of 1607 companies on the New York and American Stock Exchanges. The character of these industries, says, we think, a great deal about today's stock market since one quality they all have in common is fundamental cheapness. The following table shows the January 30th level of the Standard and Poors industry index for each of the industries in- volved, and the estimated 1973 earnings for that index together with the price/earnings ratio. The next column shows the year the index last sold at a lower price/earnings ratio, and the last column shows the highest price/earnings ratio at which the industry has sold since 1946. 1973 S&P Index Earnings-E Year Last Sold High PiE at this PiE Since 1946 Rails 42.71 4.56 9.4 1966 stee' -'-7-6r–6.47— '74- 1957 17.9(1961) 24.rT1962)— Textiles 44.54 6.89 6.5 1950 29.6 (1971) Foods 64.43 5.15 12.5 1953 27.8 '1961) Natural Gas 111.78 10.91 10.2 1970 22.2 (1959) 011 140.04 16.04 8.7 1954 17.1(1958) The results are interesting. Textiles, for example, have not sold at a price/earnings ratio lower than the current one since 1950 and foods since 1953. The peak valuation of earnings was 4 1/2 times the current one for textiles, 3 1/2 times for steels and at least twice as great for all of the other industries mentioned. Now, a low price/earnings ratio was accorded a great deal more importance back In the dark ages of the 1950's,when we first engaged in the securities business, than it is today. At that time we ourselves often derided the emphasis that a great many analysts placed on it, suggesting that there had to be more to security analysis than the mastery of long division. Now the emphasis has changed. According to the ardent advocates of the growth school, all that is now necessary to become a competent analyst is mastery of the nuances of a compound-interest table. It is the compound-interest school, in fact, that would probably find little exciting In the above industries for the reason that they are not generally regarded as growing ones. Nonetheless, as the final column of the table shows, quite rational investors dId, at one time or another In the not- too-distant past,regard earnings in these industries as being worth a good deal more than the price placefromat which those same earnings are today available. The interesting factor, we think, is the fact thaTthe tnd-U'STries-were-drawn Tn–the -first alist ofstocks-'which hadsom; attractlon– from a techmcal pOint of view. Our own biases have always leaned to the combination of sub- stantial technical potenhal and fundamental cheapness. We think that combination exists In a good many areas today. Dow-Jones Industrials (1200 p.m.) S&P Compo (l200p.m.) 92.79 Cumulahve Index (2/7/74) 597.39 AWT/jb 823.53 ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement or expreulon of opinion or any other motter herein contolned IS, or IS to be deemed 10 be, dtrectly or Indirectly, en offer or the ollcllotlon of on offer to buy or sell any security referred 10 or mentIOned The molter IS presented merely for the conve,enct of the subscriber While we believe the Ources of our Informahan to be reliable, we In no way represent or guarantee the occurocy thereof nor of the statemenls mude herein Any aellon to be token by the subflber should be based on hIS own investigation and information Jonney Montgomery Seott, Inc, as 0 corporotlon, and Its officers or employees, may now have, or may loter toke, POSitiOns or trades In respect to any secufltles mentioned In thiS or any future Issue, and such pOSItIon may be ddferent from any vIews now or hereafter expressed In thiS or any other ISsue Janney Montgomery Scott, Inc, wh,ch IS registered With the SEC os on investment odvisor, moy gIVe adVice to Its Investment odvlsory and othEl! customers Independently of ony statements mode In thiS or In any other Issue Further informatIOn on any security mentIOned herein IS available on request

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Tabell’s Market Letter – February 15, 1974

Tabell’s Market Letter – February 15, 1974

Tabell's Market Letter - February 15, 1974
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, TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGE, INC MEM8EA AMERICAN STOCK EXCHANGE -.–I–'-,,,,,,,,-,,,,—- …o. -'-' n'–.'- ''e15ruary r5-r9-74—' – In a familiar blue-Monday trading session, the stock market plunged to new lows in the initial trading session of last week, moving significantly below the previous bottom whi ch had been es- tablished in early December of 1973. At its lowest levels of last week, the market was lower than it had been at any time since a few days around the bottom posted in November of 1971. The previous point that stocks had traded at a lower level was on the initial rally of the 1970-73 bull market in the late Fall of 1970. Now we are well aware that there are those, confirmed watchers of the Dow-Jones Industrial Average, who will immediately take issue with the above paragraph. For, in fact, in terms of the Dow, the market did not, last week, move below its December 5th low of 788.31. Monday's close was 803,90 and the latter part of the week saw SOme improvement, albeit in a rather des- ultory fashion. In addition, our Cumulative Index was, at the beginning of the week, well above the bottom it had posted last September. If, however, we are willing to accept the broad-based Standard & Poor's 425-stock Industrial Index,or the SOO-stock Composite as true measures of the general market, our opening statement is, in fact, perfectly true. The December 5th lows for the two indices were 103.37 and 92.16, respectively. The comparable Monday closing figures were 100.83 and 90.66. These figures compare in turn with November, 1971 lows of 99.36 for the Industrials and 90.16 for the Composite. The above, in our opinion, is something more than just an idle statistical exercise. We think, 1 .–E.y contrast,–!hat the ,!;bove numbers rather nicely encapsulate what has really been taking place –in the equity rriarkt over 'the pilsi-Iew weeks. We'lfave poInted-Out mirriytlmesilill1e'jm-S't 'that- — the Standard & Poor's indices are weighted more heavily in favor of the billion-dollar growth stock favorites of 1972 than is the Dow, and this discrepancy is even truer of the comparison be- tween the S&P indices and our Cumulative Index,which gives equal weight to every New York Stock Exchange-listed issue. The contrasting performance of the two indices, in other words, neatly underscores the fact that the leaders of the downside parade have been growth issues, while the rest of the market, if not exactly in robust health, has managed to stave off utter collapse. This fact is further highlighted if we look at the list of new lows for Monday and Tuesday. The list is relatively small (a point we will return to later), but it reads like an honor roll of last year's growth favorites. Such names as Avon Products, Clorox, Coca Cola, Eastman Kodak, Eli Lily, Pepsico, Ponderosa, Procter & Gamble, Searle, and Tropicana, once the darlings of the one-decision school of investment, are conspicuous by having posted 14-month lows. In a number of cases, the dismantling of the first tier has assumed blockbuster proportions, as wit- ness a Simplicity Pattern managing to lose half its market value in two trading days. The old saw about the optimist seeing the glass half-full and the peSSimist seeing it as half- empty IS applicable in many ways to today's stock market. The peSSimist can point quite rightly to the utter devastation taking place among growth issues, calculate the billions of invest- ment values being lost due to the huge capitalizations of these issues, and conclude, with some justification, that the present market situation is, in fact, utterly chaotic. The optimist can, on the oth-er hand-;-ctraw comfort from the observation that the growth-stocks have'managed to move off the bottom of most charts without, so far at least, taking the rest of the market with them, The phenomenon of 53 new lows on Monday and 66 on Tuesday, days when both S&P 10- dices were effectively trading at their lowest levels of the past 27 months, is, in fact, a unique and lOteresting one. It is here, we think, the battle will be joined, a nd our vle;s on the future of the growth stocks, as readers of this letter are well aware, are anything but sanguine. Whether they will succeed in dragging the rest of the market down along with them, something they have not been able to do in recent weeks, is a question which should be answered shortly. Dow-Jones Industrials (1200 p.m.) 813.52 S&P Compo (1200 p.m.) 91.48 ANTHONYW. TAB ELL DELAFIELD, HARVEY, TABELL Cumulative Index (2/14/74) 585,98 AWT/jc No stalement or expression of opinion or any other metter herein contained IS, or IS 10 be deemed to be, directly or indirectly, on offer or the soliCitation of on offer to bvy or sell any security referred to or mentioned The matter IS presented merely for tne conver'lenc of tne subscrober. While we believe the sources of our Informotlon fa be relmble, we In no woy represent or guarontee tne occuroey thereof nor of tne sloleme-nls mode herem Any ccllon to be token by Ihe subunber should be based on hiS own !nveSllgallOn and Information Janney Montgomery SCali, Inc, as a corpOr()tlon, ond Its officers or employees, may now have, or may loter toke, POSitions or trades m respect to ony SeCUrities mentioned In thiS or any future Issue, and such position may be dlffere'1l from any views now or hereafter expressed m thiS or ony olher Issue Jonney Montgomery Scott, Inc. which IS registered With the SEC as on mvestmenl adVisor, may give adVice to lis mvestmenl adVisory and othel customers Independently of any statemenTS mode In thIS or In ony other Issue Further information on ony security mentioned herein IS available on request

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Tabell’s Market Letter – February 22, 1974

Tabell’s Market Letter – February 22, 1974

Tabell's Market Letter - February 22, 1974
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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 February 22, 1974 the craze- . ..-;– A 'couple'of yearsgcwheh the one;tleclsionnvErstmentCbhcepfand for growth -Zr-.;e;…. stocks still retained the status of revealed religion, it was a fairly difficult task to suggest to many portfolio managers that these stocks, on a technical basis, possessed rather substantial potential vulnerability. More recently, since many of the growth idols have developed apparent feet of clay, it has become easier to convince investors that indeed some risk may attach to these issues, and we find ourselves being asked more and more often at what level does technical work suggest they should be bought. This, unfortunately, is precisely the wrong question. The right question as regards many of the former favorites is not at what level they should be purchased, but whether or not they should, at any time in the foreseeable future, be purchased, and, indeed, by extenSion, whether they should not now, even at current depressed levels, be sold. The 1973 bear market, in other words, has convinced many investors — rather painfully — that stocks which become excessively priced in relation to others can be vulnerable to correction. The attitude still remains, however, that at some point the unpleasantness will be over, and we can go back to playing the same old game with the same old familiar names we came to know and love a couple of years ago. That particular myth may die harder, and, while it is still believed, it is likely to be productive of subpar investment results. Let us illustrate by a fable. Suppose a number of years back that an investor had located a rather interesting company in one of America's larger industries. Recent years had produced def icits due to industry-wide overcapicity, but the technological and earnings outlook for the industry was good. The stock was available at a modest price of around 13 and a hypothetical ilwJlsJor ,jllS sa',decided to purchaselOOO shaces. Thedecisionproved to pe.a wise one. – Over the next 18 y'ears, barely half a working lifetime, the original 1000 shares had increased through splits to 12,000,and each one of these 12,000 shares was worth 111. The original 13,000 investment, in a relatively short period, had increased to over 1.3 million. These flcticious results were perfectly attainable. The company in question was the Boeing Airplane Company,and the 18 years referred to were from 1949 to 1967. The subsequent story, of course, has not been as happy a one. In the 1968-70 bear market, Boeing declined to a low of 12, and has spent the entire subsequent period trading between that low and a high of 26. Indeed, its average price for each of the past four years has been around 19 a share. Not that this is par- ticularly the fault of Eoeing itself. True, there was a difficult period in 1969-70, but the re- covery has been fairly impresslve,and the company, while earning half of what it earned in the 1967 high, is selling for one-tenth of the price. Clearly the bulk of the reevaluation has been caused by the market's looking at Boeing in a different way today than it did a few years ago. The magic of the compound interest table, moreover, cuts in two directions. If our hypotheti- cal Eoeing investor had analyzed his rate of return during the first ten years or so of his invest- ment, he would have discovered he was earning at an annual rate of 40-50 on his capital from capital appreciation alone. Despite the fact that the same investor today has a 1000 profit, his annualized rate of return has been reduced to 11 compounded. We are furthermore hypoth- esizing the case of a man who was lucky to buy early in the advance, in 1949. Any investor who came to the game somewhat later, and bought the same stock at its average price for any year subsequent to 1953 today shows a loss on his Investment. The pOint Is–;- of course,-that todays avld'seekers-of growth'stocks are neither more nor less— bright than their counterparts who were bemused by the prospects of the aerospace industry a decade or so ago. Those analysts were just as certain of the bright future of the aerospace in- dustry in the middle '60's as analysts of a couple of years ago were sure that first-tier issues were going to continue their growth forever. As we suggested above many investors are still not totally disabused of this idea, and the process of so disabusing them Will, we think, be a long one. Dow-Jones Industrials (1200 p.m.) S & P Compo (1200 p.m.) 94.74 Cumulative Index (2/21/74) 601.46 AWT/jb 848.09 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expreSlOI1 of op'nion or any other metter herein contolned IS, or IS 10 be deemed to be, directly or ,ndirectly, on offer or the sollclhJllon of on offer to buy or sell ony security referred to or menlloned The matter IS presented merely for the convellenCe of the subscriber While Ne believe the sources of our Informoflon to be reliable, we In no way represent or guorontee the accuracy thereof nof of the stotementt mude herein Any action to be token by the subscflber should be based on hiS own Investigation and mformollon Janney Montgomery Scott, Inc, as a corporation, ond 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 position may be different from any vle…,s now or hereafter el'pressedhln 1lIs or ony o'her ISSUII Janney Montgomery Scott, Inc, which l registered wlln Ine SEC os on Investment adVisor, may gl….e ad.. ,e.e to Its ((\vestmllnt adVISOry and ot III customers Hldepcndently of any statements mode Hl thIS or In any other Issue Further Informa'lon on ony securoty mentIoned herein IS ovodable on request

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