Tabell’s Market Letter – December 19, 1952

Tabell’s Market Letter – December 19, 1952

Tabell's Market Letter - December 19, 1952
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c– NEW YORK 5. N. Y 3S Willi Street DIGBY 44141 PHILADELPHIA 2. PAc 1420 Walnut Street PENNYPACKER 55977 '.. TABELL'S MARKET LETTER LOS ANGELES 13. CALIF 550 South Spring Street MADISON '1212 SAN FRANCISCO 4. CALIF. 2b5 Montgomery Street SUTTER I 1700 ,- ,…. Both averages again reached new high territory this week. The rails '.'.. '.;were the leaders and this average reached a new high of 111.79,as compared ',5 fwith last week's peak of 109.62. The rise in industrials was comparatively I; /'modest. This average advanced slightly above last week's high of 286.32 to ;' ;;'.reach 287.58. While the market advanced during the week, the upside momen- ;..; . tum was reduced and my intermediate term technical indicator gave a sell f' …. 'signal at Thursday's close. This does not necessarily mean that the market ',will turn down immediately, but it suggests caution and taking some profits '''.' 'in intermediate term trading accounts on strength. This, of course, does .,' not apply to long term investment holdings. '. The result of the sell signal could either be a decline or a lengthY;,,1 .. consolidation period to correct the weakened technical pattern. In the event'. 'of a decline at this stage, the next support level would be at 280-277 in ' r'i.the Dow Jones. From that point, the logical technical sequence should be a 'ally back to whatever highs are made on the present move. At that point, ; .market action should be watched closely. Inability to reach new high terri- , . 'tory, would be, of course, discouraging for the longer term. The ability to . penetrate the highs would indicate a continued advance to ap.proximately the '.' .295 area. At the moment, this appears to be the probable market pattern over,.. ,;the next two months, but circumstances may alter it. If such is the pattern; 'it is probable that the February 1953 high may be a rather important top. . .' LONG TERM INVESTMENT I continue to advise a 100 invested position k., in accounts concerned mainly with income and longer term appreciation. pre-l' .ent holdings of recommended issues should be retained, but would withhold hew purchases until some consolidation or correction occurs. f' – AMERICAN TELEPHONE & TELEGRAPH has been rather heavy recently despite; a generally rising market. The stock sold at a high of 161 3/8 earlier in i' c /the month before it sold ex-dividend the 2.25 payment. Friday's low was …. 156t. The reason for the heaviness has been profit-taking in Telephone con- .. ..vertible bonds which have advanced sharply. The convertible 2 3/4s of 1961, .. , '.for example, have advanced from a low of 106 to a recent high of 115 5/8. .., .13ecause of their investment rating, these bonds command a high loan value , –and a nine-point appreciation is substantial. Telephone securities reached , '; ..their lows early in June so holders who purchased at that time can now take ,.,. advantage of the six months holding period and take long term capital gains '.- . profit rather than the higher taxed short term profits. This profit-taking I .' weakness gives the investor an opportunity to buy American Telephone & Tele-'.- graph at a very favorable price level. At 157, the stock is selling at abou. .- .its average price of the last ten years. The yield of over 5.7 is consider-.- ia'bly above that obtainable in other utilities of comparable quality. Tech- . 'nically, for the past five years the stock has held in a narrow trading range between 138 and 163. The present pattern has an initial upside potential of ;'..' ,173 followed by a possible objective of over 200. On the downside, there is .,-. 'good support at 150. The 1952 low was 150 7/8. The stock ha reached the up-;. side potential several times in the past while paying the 9 dividend. The ,.. ;)929 high was 310. The 1937 high was 190 and the 1946 high was 200. It ;C' .woula appear reasonable to expect that A.T.& T.could sell closer to 5 yield.. ' basis. The stock would yield 5 at 180. Despite the numerous denials, it is I;. possible that the stock might be split in the future. The fact that there . are over 1 million shareholders with the vast majority holding small lots of' stock would appear to make this a feasible operation. A 4 for 1 split with 'the possibility of a 2.25 to 2.50 dividend could move the stock to the 20 .level. There is also the possibility of a distribution to stockholders of ;',. .the Western Electric subsidiary. American Telephone common stock appears to 'offer fair appreciation possibilities together with excellent defensive qual iities and good yield.It is an interesting purchase at this stage of the mar-;, ' ket pattern. .. . A number of issues in my long term investment list have reached new …- high territory recently. These include ALLIS CHALMERS, BABCOCK & WILCOX, BLAW( ; KNOX, ELLIOTT CO., GENERAL RAILWAY SIGNAL, LONE STAR CEMENT, PHILLIPS PETRO- ; LEUM, SHAMROCK OlL, SYLVANIA ELECTRIC and WESTERN AUTO SUPPLY. All of these t. ,.1ssues continue in uptrends and should be boUght on minor price concessions. .. ;,')ec ember 19, 1952 EDMUND W. TABELL i r -t, – Thh memorandum is not to b. construed al an offer or solicitation of offers to buy or F at, GoodWIn may 'f'- -;- – have an int.rest In some or 01111 of th securltllll mentiolllld hrein The foregoing matenal has been prepared by us as 0/1 matter of information only 1t IS based -xr-;- u;;f;,);;..;;;;,,-u; o,,; mPle. il ,not ;;raed rt o ';, S, ;t /oo let- ,

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