Viewing Month: April 1985

Tabell’s Market Letter – April 04, 1985

Tabell’s Market Letter – April 04, 1985

Tabell's Market Letter - April 04, 1985
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 9249660 April 4, 1985 After 30 years of observing the stock market, it is difficult to find market behavior that does – – not produce-at71east some sense—of ded-vu;-and -the presenr case IS no exception-.-A -marKet being led – on the upside by stable. defensive groups such as Foods, Tobaccos, and Utilities is, of course, according to modern portfolIo theory. not supposed to happen. since excess reward is, theoretically, obtaInable only by assuming excess risk. Such leadership has emerged over the past four years, however. and, as veteran observers are aware. the phenomenon is not new, having similarly occurred back in the dark ages of the late 1950's. The followmg table shows the approximate price moves, low to high, of four typical stocks and the S & P 500 for the periods 1957-1961 and 1980-1985. Adjustments are made to reflect 1961 and 1985 capitalizations in the respective cases. Coca Cola FPL Group General Foods Reynolds Ind. S & P 500 1957 Low 32 22 20 13 38.98 1961 High 108 88 108 89 72.64 Change 238 300 440 584 86 1980 Low 29 10 24 27 98.22 1985 High 70 24 62 87 183.35 Change 141 140 158 222 87 Interestingly enough. the prIce moves for the stocks in question durIng the current period pale in comparison with those of the earlier one. For the two time periods, the change in the S & P 500 was approximately the same. However, in 1957-1961 the moves of the individual stocks — and they were truly representative of their groups at the time — were almost twice as great as those which have been seen to date. The reason, perhaps. is that the earlier rise featured increasing investor confidence In the stocks in question, somethmg which has been largely absent to date. The table below shows the earnings per share for the same stocks at the beginning and at the end of each of the two periods. From these earnings. p Ie ratios, at the low and at the hlgh prices for the move. are calculated. Finally, each price learnin gs- ratio is shown relative -to that-'-of–'-the-S & – p 500 rat the…time-;–a-statistic–8rrivedat-by-di— – viding the individual stock p Ie ratio by the S & P p Ie ratio. Coca Cola FPL Group General Foods Reynolds Ind. S & P 500 1957 EPS. PE Rei PE EPS 2.40 13.3 1.15 3-00 1. 52 14.5 1. 25 2.08 1. 90 10.5 .91 2.85 1. 55 8.4 .72 2.85 3.37 11. 6 3.19 1961 PE Rei PE 36-0 1. 59 42.3 1. 86 37.9 1. 67 31. 2 1. 37 22.7 EPS 3.42 1. 97 4.47 6.23 4.82 1980 PE 8-5 5.1 5.4 4.3 6.6 Rei PE 1. 29 .77 .82 .65 1985-Estimated EPS PE Rei PE 5.55 i2-6 1. 24 2.80 8.6 .84 7.35 8.4 .82 8.50 10.2 1. 00 18.00 10.2 As can be seen, 1957-1961 was a period of markup for stocks in genera!, the pie ratw for the 500 almost doubling. By contrast, in the current case, it has risen only a bit more than 50 and, interestingly. is lower than where it startea in 1957. The multiples for the four stocks also increased between 1980 and 1985 but, by and large, remam modest. The key statistIc is that, for three of the four stocks at least, the relative p Ie ratios have remained approximately the same for the past four years. By contrast, during the 1957-1961 period, the relative multiples for all four of the stocks increased substantially. They did this, furthermore, at a time when the S & P multIple itself was doubling. Thus earnings gains averagIng some 50 over four years produced price appreciation averaging 390. In the current case, earnings rises of about the same magnItude have produced only half as much appreciation. The aftermath of the sort of price exploitation which took place in 1957-1961 should also be noted. Three of the four issues (Coca Cola is the exception) did not agam exceed their 1961 highs until the 1980's. As we read today's fmancial commentary, we are already beginning to see repetitive fundamental rationalization for the moves in defensive issues which have taken place to date. These rationalizations, and they are perfectly valId, include prospects for deflation and, in the case of UtilItles. lower capitalinvestment requirements. It will be Interesting to see whether this reasoning continues to attract Investor notice. possibly resulting in the sort of price markup which took place two-plus decades ago. AWT;rs ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. Dow-Jones Industrials (400 p.m.) 1259.05 S & P Composite (4'00 p.m.) 178.42 Cumulative Index (4/3185) 2366.46 No stalOmcnt or eXpresslorl of opinion or any olher matter herein contained IS, or IS to be deemed to be directly or Indirectly an offer or the soliCitation of an offer to buy or sell any security referred to or mentioned The matter 15 presented merely for the convenience of the subscriber While we believe the sources of our information to be reliable, we m no way represent or -guaranteo the accuracy thereof nor of the statements made herem Any acllon to be tah.en by the subSCriber should be based on his own inVestigation and information Delafield, Harvey, Tabell Inc, as a corporation and Its ofllcers or employees, may now have or may laler lake poSitions or hades In respect to any secuntres mentioned In thiS or any future Issue, and such pOSItion may be dllferent from any views now or hereafter epressed In thiS or any 01 her Issue Delafield Harvey Tabell Inc, which IS registered With the SEC as an Investment adVisor, may glyeadYlce to Its Investment adVIsory and other cuStomers Independently of any statements made In thiS or In any other Issue Further Information on any security men\!oned herein IS available on request

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Tabell’s Market Letter – April 12, 1985

Tabell’s Market Letter – April 12, 1985

Tabell's Market Letter - April 12, 1985
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC (609) 924-9660 April 12, 1985 The rcen! sht-term position of the stoc! market r.emains uncha!lged. We have, in the past. CUr-rent cycles ————-perioaically -attempted .. t9 r1easurethe-positIonor-the stOckriiarketagmnsfpast market' in order to maintmn 3 proper long-term perspective. ThIS type of examination, we feel, continues to be a useful exercise. The chart below shows the recent cycle wIth the maJor component swings in the S & P 500 from August, 1982 to date. Using a 10 filter, the high and low points are drawn to a unIform horizontal scale. The other data on the chart attempts to compare the present cycle to the eIght most recently completed cycle perlods WhICh we have identified from June, 1946 through August. 1982 and are lIsted below. The horIzontal lines drawn through the upper part of the chart show the length. in tradmg days. in each of these previous eight cycles. crCLE PERIOD 172 65 OCT 1983 FEB 19B5 55 c. \. JUL 19811 11I7 82 OCT JUN In February, 1984, this letter suggested with hindsight, after an advance of 68.57 in the S &I P 500 from August 12, 1982 to October 10, 1983, that a new bull-market cycle did, in fact. begin. More importantly, however. because of the short length of time from August, 1982 to February, 198ij cycle analysts were able to correctly describe the subsequent decline of 14.38 in the S &; P 500 which carrIed into July as an intermediate-term correction in an ongoing bull market. None of the above past cycle declines from cycle peak to cycle low has been as small as 14.38. Again, in October, 1984. we updated the position of the current cycle which was then two years old. At that time it became necessary for the market to accommodate the cycle theorist by posting a new high. Four months passed but. of course, the market, as we know,dld just that, rISIng to a high on February 13, 1985 to 183.55. an overall increase from the August, 1982 low- of 79.02. The bull-market requirements of the cycle have now been fulfilled, both in length of time and magnitude. The number of trading days of the current cycle is now 674 days old which represents 64 of the average length of the eight previous cycles (1053 days) and the average advance for the eIght cycles is approximately 80. This brings us to the present. Cycles are measured from low point to low pomt and the key question facing us now IS whether or not the high of February 13, 1985 constitutes the peak for the current cycle. Two possible scenarios exist at this stage as this current cycle matures. First. a correction to a cycle low may, in fact. have already started from the February 13 high, or second. the market could still easily rally to a new high and then correct itself from that level. In both cases. from a cycle point-of-view, it must be pointed out a correction of some magnitude will be necessary to complete the current cycle — the average correction for the past eIght cycles from cycle peak to cycle low has averaged 27.17— and time is running out. RJS rs Dow-Jones IndustrIals (1200 p.m.) 1263.80 S & P Composite (1200 p.m.) 180.21 Cumulative Index (4/11/85) 2381.12 ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. NO statement or eJfpreSSlon 01 opinion or any other matter herein contained Is, or IS to be deemed to be directly or Indirectly, an otter or the soliCitation of an oHer to buyor sell any secunly referred toor mentioned The matter IS presented meralylor the conlfenience of the subscriber While we believelhe sources 01 our Informallon 10 be reliable we In no way represent or guaranlee the accuracy thereof nor at the stalements made herOin Any action 10 be la;-en by the subscriber should be based on his own investigation and mformatlon Delafield, Harvey, labell Inc, as a corporaflon and Its officers or employees may now have, or may later take, POSitions or trades In resPect to any securihes mentioned m thiS or any future Issue, and such POSition may be dillerent from any views now or helcaftcr expressed In thiS or any olher Issue Delafield Harvev, labell Inc which IS registered with Ihe SECas an Investment adVisor, may give adVice 10 liS Investment adVisory and other customers Independently of any slatemfnts made m thiS or In any olher Issue Further Information on any securltv menlloned herem Is available on request

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Tabell’s Market Letter – April 19, 1985

Tabell’s Market Letter – April 19, 1985

Tabell's Market Letter - April 19, 1985
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 9249660 April 19, 1985 – – .-. -The stock market -has.. -over-thepast. seven-weeks ,-entered -into -another-one-of those – periods of lassitude which seem to be characteristic of the latter stages of the 1982-198 bull market. Almost invariably, however, even in dull markets, there exist localized areas where the action is, That action, currently, is in the area of takeovers, To the jaded market observer, the current takeover boom is hardly an unusual phenomenon. Something is needed to fill the pages of the financial press each day, and the present plethora of hostile ac quisition bids obviously provides its share of newsworthy Items. The current focus on takeover candidates, actual and putative, may be likened to the frenzy in technology stocks a couple of years back or any number of other mini-booms in specialized areas whiCh, in the past, have become the focus of investor interest and then faded from the scene, Again, like its predecessors, the takeover explosion has engendered intense debate, Characteristically, among the participants in this debate are those whose favorite phase is tch tch, This sort of commentary is not exclusively confined to the managements of those companies which have become the object of unfriendly bids. Indeed, there are aspects to the takeover boom which are, at the very least, aesthetically unattractive and which, at worst, raise serious questions as to the structure of financial markets, However, before we rush to condemn those entrepreneurs who are busy rocking so many boats, it is wise to have a framework within which to view the takeover phenomenon. Let us try, for instance, the framework of ecology. Financial markets, can be viewed, after all, as ecosystems, with multitudes of participants in a continuing dynamic relationship with each other. One similar ecosystem, with which we have some familiarity, is that of the plains of Southern Africa. There are, on thOle plains, to the delight of the observer, large numbers of elephants. The elephant, being a very large beast, eats a great deal and, in the course of the natural pro- cess of digestion, rroduces a gI'eat deal.of waste. Indeed, as anyone who has been in Africa is aware, the results of this process reach proportions that may be' described-aEtruly-aweso'me -. There exists also, in the bush, a tiny insect called the dung beetle, This creature, quite simply, feeds upon the results of the elephant's digestive process, in the process refining it into small, manageable amounts spread over wide areas where it can serve to fertilize the Imh grass. This grass, in turn, serves as the principal food supply for the myriad of other animals that occupy the plain, The beetle, therefore, however unattractive a creature he may be, performs a function which benefits the entire system. The takeover operator, it seems to us, performs a not dissimilar function in the financial marketplace, i.e., he contributes to the efficient pricing of capital assets which, to the investor ppulation as a whole, constitute a necessity much as grass is a necessity for plains inhabitants, Viewed in this light, the current emergence of takeovers is not unlike the recent proliferation of a number of market mechanisms, unknown a short decade ago, whose existence can be justified on the basis of their promotion of market efficiency. One thinks, for example ,of the emergence of options, futures contracts, and other relatively arcane and indirect means of trans- ferring the risk inherent in the very existence of capital assets. Indeed, the stock market itself can be viewed as just such a mechanism, The only point at which the financial industry contributes directly to a capitalist economy is in the provision of new capital for industry. However, it would be extremely difficult to provide such capital under the present structure without the existence of an efficient market for already-existing securities, much as the existence of a flourishing used-car market is necessary for the sale of new automobiles. All of the above is not to say that we should be unaware of some of the problems re- sulting from takeover proliferation, Inequitable treatment of different classes of shareholders is certainly, we think, a proper subject for legislation. The methods by which takeovers are financed and their implications for the entire banking and financial system also raise serious questions, Before we rush out to pass laws prohibiting this or that aspect of unfriendly takeover bids J however J it is appropriate, it seems to us, to view these bids within the context of the entire financial ecosystem. AWTrs ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow-Jones Industrials (1200 p.m.) S & P Composite (1200 p.m.) Cumulative Index (4/18/85) 1264.24 180.52 2392.80 No statement or epresslon of opinIOn or any other matter herein contained IS or IS to be deemed 10 be directly or mdlrectly, an offer or the soliCitation of an offer to buy or sell any secunty relerred toor mentioned The malter IS presented merely lor Ihe convenience of the subscriber While 'oe believe the sources of our information to be reliable, we In noway represent orguarantae the accuracy thereof nor of the statements made herem Any action 10 be taken by Ihe subSCriber should be based on hiS own Invesllgallon and Informal Ion Delafield, Harvey, labell Inc, as a corporation and Its oHlcers or employees may now have or may tater take positions or trades In respeclto any secuntles menltoned In thiS or any luture Issue, and such position may be different tram any views now or heleafter expressed m thiS or any other Issue Detafletd Harvey Tabe!! Inc which IS registered With the SECas an Investment adVisor, may give adVice to Its Investment advisory and other customers Independently of any statements made In thiS or m any other Issue Further mfonnatlon on any security mentioned herem IS available on request

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Tabell’s Market Letter – April 26, 1985

Tabell’s Market Letter – April 26, 1985

Tabell's Market Letter - April 26, 1985
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE. INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 9249660 April 26, 1985 For about the umpteenth tIme in the past few years, we find ourselves compelled to write a letter about a stock-mfll'kettrnding range. r-he current-cxamplc of- such -a range was– as of'We-dnes'da' datmg28 tradmg days old and thus had conflned the market averages for six weeks -back to March 15. On that day the Dow closed at 1247.02 and the S & P 500 at 176.53, in both cases the lowest figure at- tained between then and now. In terms of the Dow. the market recovered to 1271. 09 on March 19, dip- ped again to 1259.72 on March 26, posted a slightly better peak at 1272.75 on April 1 and dropped to 1252.98 on April 18. Most recently. the Dow recovered to 1278.71 on Tuesday. In Thursday and early Friday tradIng. the major Indices fInally moved tentatively out of the sIx-week tradlng area, the Dow reaching 1284.78 at Thursday's close and the S & P, along with the NYSE Composite, actually attroning newall-tIme highs. Until the breakout, however, the range, low to high, had been 2.54 for the Dow and 3.48 for the 500. In a word, boring. We should by now, however, be accustomed to this sort of boredom. The most recent sIdeways market, descnbed above, was preceded by another similar penod lasting 27 trading days between Janu- ary 29 and March 7. In this partIcular instance the Dow was controned in a range bounded by its 811- time hIgh of 1299.36 on March 1 and the February 22 low of 1275.84, a range 1. 84 in extent. This in turn followed a lateral range of much longer duratIon, covering 71 trading days betwen October 9, 1984 and January 18. For this three-month-plus period, the outer trading limIts were 1163.21 and 1244.15, an only slightly broader 6.96 bracket. The two periods of transition between these three ranges were relatively short. The Dow moved from its 1163-1244, October-January range to the January-March range of 1276-1299 in just six trading days. The downward swmg from that range to the current one occupied all of five days. Thus the Dow spent 11 out of the last 137 tradIng days to Wednesday actually doing something and the rest of the time subjecting us to protracted dullness. Whenever a trading impaSge such as the current one exists it becomes incumbent on the technician to hazard a guess as to the direction, up or down, 1n which it wlll fmally be resolved. A great many practitioners had been professIng, with a good deal of certitude, to know precisely which direction the ultImate breakout would take, with the bulls and bears, interestingly, expressing equally strong degrees – of.-convict-ion-.-P-erhaps-we-are -less-elever.,…..but—we-are….aware-of……no-mcthod….valid—at.oLall…tImes- and 1n all — places, for determining the directIon of a breakout before it actually takes place or, indeed, of being totally certain that It is real when It does occur. We are, nonetheless, willing to hazard a guess that the ultimate resolution of the current dilemma will be on the upsIde eIther, with a continuation of Thurs- day's action or with a pullback into the range followed by an eventual broad upside move. ThIS guess is based on a number of aspects of internal market action. The past six weeks. first of all, have seen more mdividual stocks demonstrating bullish behavior than bearish. Each week, we survey upside and downside breakouts for some 3000 issues. During thIS period exactly 100 stocks have posted upside breakouts, 43 of them major, while there have occurred only 67 downside breakouts, with but 13 of them representing major tops. This sort of action hardly suggests the sort of internal deterioration which might be expected to precede an Important down- SIde thrust. Analysis of breadth strowsthat, between March 15 and AprIl 24. there occurred, on average 740 individual stock declines per day. This is almost the same as the number that occurred in the October- January trading range. where the ultimate resolution was on the upside, and perceptibly, although not sIgnifICantly, less than the 783 average dally declines wh1ch characterized the January-March short-term top. In the October-January trad1ng range, daily downSIde volume averaged 36.45 million shares and, m the current case 37 million shares. This contrasts with 47.59 million shares durIng January-March. The recent trading range, moreover, has shown a respectable 76 average d811y new 52-week highs versus only 10 new lows. We frankly do not see in these numbers anytlung which should. suggest significant underlying deterioration. AssumIng the reality of the current upside breakout, it becomes necessary to formulate an ulti- mate target. Such a target would undoubtedly mean new highs by a SIgnifIcant amount, but we find it d1fficult to project astronomical figures. The base formatIon between July and January has upside object- lYes in the 1350-1400 range, and we would certt\inly consider this a possIbility. By contrast, if the breakout is reversed and the current range is unexpectedly penetrated on the downside, it IS difficult to see prIces all that much lower. Strong support at 1225-1200 should contain any downswing. Our readers are aware that we consider the present bull market to be in a mature phase, but we still think the investment odds favor a relatively-fully-invested equity positIon. AIVTrs Dow-Jones Industrials (12' 00 p.m.) 1279.03 S & P Composite (12' 00 p.m.) 183.26 Cumulative Index (4/25/85) 2411. 51 ANTHONY IV. TABELL DELAFIELD, HARVEY, TAB ELL INC. NO statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, direct Iv or Indirectly, an offer or the soliCitatIOn of an offer to buy or sel! any seC\.lflty referred toor mentioned The matter IS presented merety lor the convenience of the subSCriber While we believe the sources 01 our Information to be reliable we 1(1 no way represent or guarantee the accuracy thereol nor of the statements made herem Any action to be tafen by the subSCriber should be based on hiS own Investigation and mformation Delafield Harvey Tabell Inc, as a corporation and Its officers or employees, may now have, or may later take POSitions or trades In respect to any secuntles mentioned I!'\ thiS or any luture Issue, and such position may be different from any views nowor heroafter exprtssed In thiS or any other Issue Delafield, Harvey Tabell Inc which Is registered with the SEC as an Investment advisor, may gIVe adVice to Its IflleS\ment adVisory and other customers Independenlly of any statements made In thiS or In any otller Issue Further Information on any secuflly mentioned herein IS aallable on request

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