Tabell’s Market Letter – May 13, 1960

Tabell’s Market Letter – May 13, 1960

Tabell's Market Letter - May 13, 1960
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Walst on &Co. FILE COff Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER May 13, 1960 The market turned strong and active on Friday, and the Industrials advanced 8.16 points to reach 616.03The rail average, which reached a new intila- day low for the move earlier in the week, also rebounded from its low. The broad advance on increased volume strengthened the breadth-of-the market pattern. The index is very dose to giving an upward reversal signal Current Dividend Current Yield 34 2.00 5.9 AMERICAN VISCOSE CORPORATION . -'The-hazards selecting sec- urities in today' s market are nowhere better demonstrated than by the recent – Long Tcrm Debt Common Stock None 4,953,915 shs. price action of American Viscose Corp. The stock was originally recommen l- ed by this letter less than a year ago in Sales-1959 239,800,000 Earned per Sh. -1959 5.18 the low 50's. At that time it was pointec out that consolidated earnings were expected to better 6.00 per share. with Market Range 1960-59 55 3/8-32 7/8 Note Sales & Earning Figures Include equity in subsidiaries half of thesp. earnings coming equit in the giant Chernstrand Corporation, th countryl s second largest producer of ny- lon and acrylic fibres. Subsequent developments altered the picturc rather radically. In effBrt to obtain the larger tire cord market, DuPont and ChemlOtrand posted successive price reductio 0 qire cord. The se were promptly met by Viscose and other rayon Ten sult, of course, was that American Viscose, itself a major rayon owni of an important – – its.elf in ng.hit fJ'9m.both side.f'i. iJ..a , price war. Consolidated earnings vs 1. 34 in the previous quarter. on e I quarter of 1959 dropped to n earnings were only 5. 18. The stock began a that the stock has situation has caused largely by '10 of 1960. Parent cotr,.panv. 1 carried it to a recent low of 32 7/2. ve 1 IS fair to ask just how badly the tire cord t l . That poor results in the final 1959 quarter were w -downs, was proved by the report for the first quarter nings were a share, while equity in the earnings of Chemstrand and another subsidiary, added bringing the consolidat- ed figure to 1.12. 'This would suggest that consolidated earnings for 1960 should con- siderably bctter 4.00 per share. A glance at the companys balance sheet and cash flow would indicate that there should be very little question regarding continued paying of the 2.00 dividend. In other words, a little more than 8 times earnings is being paid for the entire Viscose operation. One-half to two-thirds of these earnings derive from Chernstrand and Ketchikan Pulp. Both companies are in businesses where comparable operations are valued at anywhere from 15-25 times earnings by the market. In addition, a sub- stantial portion of parent company earnings are derived from cellophane of which aAmerican Viscose is the second largest producer. These earnings in the fast grow- ing packaging field alsO-appear deserving of more generouscapitalization. Practi cally no attention is being given by the market to American Viscose l 50 ownership of Avisun Corporation, one of the country1s largest polypropylene producers. Avisun is now in initial production. That the company itself considers the shares attractive at the present price was evidenced by the purchase of 165,800 shares for the treasury in the first quarter of 1960. From a technical point of view, the stock has reached its downside objective – and appears to be forming the beginnings of a base around current levels. The 2.00 dividend, providing a yield of almost 6, makes downside risk minimal and the sto('lr is re-recommended to long term investors both for new buying and for averaging high- er cost holdings. T-' nrkl l C !W… EDMuND IABLLLis to be construed UB, an offer to seU or n solICitation to VV. referred to herem The mformatJon rt0ntaincd. herem IS EJic;\l.uracy or completeness and the furnlshmg thereof 15 not,\a'fttC.ulidei! c hTnr..'Olfii'trucd as, a U0iVi,tr,.J'(l!Ie1S& IJ!.S A te'F'l!ls of opinion are subject to change without notlce wllrtat1r.!t 0', c. b'ti'nfets, –nilCt1frs, Stockholders and l'mplDYees thercif, pure ase se an 'may have an lnterest in the securities mentioned herein. Thl'' market letter IS intended and presented merely as a general. 'Pcommenbu-Y on day to dal' market news not as a complete analysis Additional mformation With respeet to any seCUrItlcs referred to herem be . furnished upon request . … . . \\ –

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