
Tabell’s Market Letter – February 26, 1954
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Walston &- Co. MEMBERS NEW YORI STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Swlt,ldj OFFICES COAST TO COAST CONNECTEti BY DIRECT PRIVATE WIRE SYSTEM TABEll'S MARKET lETTER February 26, 1954 The market continues to show excellent technical action. While the Dow-Jones industrials at the week's lr.w of 287.84 were down almost eight pOints from the early February high of 295.43, they are still within the broad uptrend channel in which they have hela since the Jeptember low of 254.36. Other technical indicators are also showing favorable action. Trading volume continues to ease during declining markets and pick up again on advances. My intermediate term technical indicator became overbought earlier in the month just as it did in December but, from all indications, it would app'ear that -it-'will 'correct 'itself by 'a corfsoiidating phase rather than a decline. The same type action occurred in December. Even if the in- dustrial average breaks below the uptrend channel mentioned above, there is strong support at 285-280. The rails also are showing an improved technical pattern and, while their advance has been below average as compared to the industrials, they are slowly building up rather substantial accumulation areas. The utilities, of course, have shown possibly the best action of the three groups. All of the above applies to the general market. Even more impressive has been the action of some of the individual issues on my recommended list. American Telephone, Babcock & V1ilcox, Cornell-Dubilier, Mead Corporation, National Gypsum, North American AViation, Penn-DixieCement and Shamrock Oil & Gas have advanced to new high territory despite the weakness in the general market. Very few individual issues have formed vulnerable top pat- terns. At the moment, my work indicates no more than a possible decline to the 285-280 level and there is no certainty that this will occur. Even if it does, the technical patterns of some indiVidual issues indicate that they could probably advance against the general trend. Most favorable recent technical action has been in the group that I have been stressing for the last year or more – the light blue chiPs)r\ Another issue in t1is group J riefly reviwed blow ' / .. BLACK & DECKER MANUFACTURING O. I Current Market Current Dividend Current Yield 38 2.00 -A 5.3 Funded debt Common Stock 4,370,000 408,955 shs. Net Per Share-1953 (9/30/53) 6.49 Net Per Share-1952 (9/30/52) 5.74 Sales 1953 (9/30/53) 36,650,000 Sales 1952 (9/30/52) 31,330,000 Current Assets Current Liabilities Net Horking Capital 20,550,000 7,090,000 13,460,000 The company is one of the principa producers of portable electric too. and accessories. Products include drills, jigsaws,screwdrivers,sanders, hammers, shears,grinders and many other small electrical tools. These are used in the automobile, aircraft, building and boat industries and for general industrial U;E but, in addition, the company is b 'r fiting from the greatly increased ciE- mand for hand electric tools from ;rr home owner and farmer. The high co;t of labor has expanded the do-ityourself market tremendously. The company's expansion program,be Market Range (1953-54 41 – 31 5/8 gun in 1951, has entailed addition A-Al paicJ .stk .dv .30/53.. to of its property, 6 million.in plant and equipme t the past three ye'fI s This expansion, plus its heavy investment in machine tools, has caused the company to pay only about 50 of earnings in recent years. The proposed chanlE in the tax laws to allow accelerated depreciation should benefit the company considerably. E.P.T. payments in fiscal year ended September 30, 1953 totale about 1.00 a share. The stock has built up a potentially strong technical pattern. It is selling at below its 1946 high of 46. Since late 1950, the stock has been building a potential accumulation base in roughly the 32-40 range. The 1951 high was 40 3/4. This was fractionally bettered recently when the stock reached 41, The next upside objective is 45-51 for the intermediate term and considerably higher levels for the longer term. There is strong support in the enti.re 38-32 range. The downside risk appears to be about 16 as against an upside potential of 35 for the intermediate term. EDMUND vI. TABELL , Walston &Co. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Sw;t,.,Id) OFFICES COAST TO COAST CQNNECTEC. BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER -2- It must be realized that prices were very high in May, 1946 and yields and price-to-earnings ratios were very low based on 1946 earnings and dividends. For example 20 Blue Chips 20 Light Blue Chips 20 Low-Priced Yield 3.5 3.1 1.4 Price Times Earnings 6.4 7.2 5.2 Here is how a continued holding of the purchases made in May, 1946 would have worked out at various stages of the market May June Sept. Jan. Jan. March 1946 1949 1951 1953 1954 1954 20 Blue Chips 20 Light Blue Chips 20 Low-Priced Dow-Jones Industrial New York Times 50-Stock 100 100 100 100 100 81 150 56 92 38 59 80 135 74 124 162 161 169 96 90 97 62 51 54 142 138 142 135 124 133 It can be plainly seen that the investment issues have far outpaced the other two groups. There is a fundamental reason for this. For example, here is how much in earnings were behind the three groups provided the original 1946 purchases were held intact 1946 1949 1953 20 Blue Chips 20 Light Blue Chips 20 Low-Priced 6482 7175 5215 11,458 11,458 3,608 15,219 12,196 6,695 , The dividends show about the same pattern I 1946 1949 1953 20 Blue Chips 20 Light Blue Chips 20 Low-Priced 3520 3080 1462 5456 5003 1538 7912 6175 2103 Fromthe above compilations, it would appear that the light blue chips are definitely behind the market. While earnings and dividends have not increased as sharply as those in the blue chip group, they are considerably above 1946, while the group is selling slightly below the 1946 price level. It is also evident that there is no reason to expect a sharp upward move in most of the low-priced group. There will be exceptions, of course. EDMUND W. TABELL WALSTON & CO. ThIS mcl'nordndum is not to be construed as an offer or sol.eltaiton of offers to buy or sell (lny seCI,Jrot,(!s From t,me to t,me Walslon & Co. or any pilrtner thereof, mily have an Interest .n some or alt 01 the securd,e! mentioned here,n The foregOIng male,1 h(ls been prep'Ired by us as a matler 01 mfa.matlon only It IS bo.lsed upon ''Ormd/lon believed relldble but not necelscHlly comple!e, .1 no! qUiHdn1eed dl dccurd!e or flndl, dnd , not Intended to foreclole .ndependent InQUirY