Tabell’s Market Letter – June 24, 1966

Walston &- Co. Inc INVESTMENT BANKERS MUTUAL FUNDS MUNICIPAL BONOS Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER June 24, 1966 Insofar as the Dow-Jones Industrial Average is concerned, the market remains on dead center. One possible interpretation of the action since early May is that a base is presently being built in the 866-904 range to sustain a market advance later on in the Sum- mer. Currently, the most optimistic upside implications of this base are 924-948. Obviousl the longer the market continues to back and fill around present levels, the greater this poten- tial becomes. Alternatively, failure to generate enough buying interest to move decisively through the 905 level could lead to a test of the former lows. Such a test, if it did occur, would probably be a relatively low risk buying opportunity. Meanwhile, asrepea empha -theinvestor-'sbest7pr-otection '. lies not in trying to guess the course of an uncertain market, but in making sure that the stocks he owns combine good upside opportunities with relatively limited downside risk. A few stocks in our Recommended List, which fall into this category, are discussed below. ALUMINUM CO. OF AMERICA (86), the industry leader in aluminum, continues to appear attractive at current levels. While the consumption of aluminum has grown dramatic- ally over the past years, the company's earnings have remained relatively stable as margins have trended sharply downward due to excess capacity and increasing costs. It now appears this downward trend has been arrested. In 1965, margins continued to improve as company's earnings of 3.41 were up from 2.72 in 1964, showing a much better percentage increase than sales. This should continue throughout 1966 and earnings this year should approach 4.50 – 4.75 on estimated sales of 1. 3 billion. The tight supply situation might be eased a bit in 1967 due to new production facilities coming on demand for aluminum is indicated for the coming years. T r, price increases in fabricated products, should wideW0J\-t maintain its relative industry position. 1\ gin . continued long term ith further selectiv a enable Alcoa to GILLETTE (37), the leader in the e field, appears to have suc- .. offered similar improved pro has now been captured an the W y as tio -s of this stainless steel razor blade market distribution on a national level Super Stainless blade. T i , w' he introduction of the new Techmatic razor, 'em- ploying a continuo a steel coiled in a replacement snap-in cartridge, gives Gillette representatio single and double-edge blade markets. Other divisions contributing to Gillette th include the Toni divisi()n, the Paper Mate companies, and a men's and women's etry division. A marked turn-around in earnings is now apparent. Earnings for 1966 should approach 1. 70 vs. 1. 49 in 1965. Sales for 1966 are projected at 380 million or more, up from 339 million in 1965 – the ninth successive sales increase in a row. Although the stock historically sells at a high price/ earnings ratio, we continue to fee the current price does not begin to fully discount expected improvements in the company. UNITED FRUIT (31), the largest producer, transporter and seller of bananas, has successfully begun to restore operations to the former level of profitability. This has been accomplished with the development of the new strain of Valery bananas which is more resist ant to windstorms and disease. Although banana selling prices averaged well below those of a year earlier, profit margins widened substantially, reflecting the success of this new bana Although further banana prices are likely to continue to decline, United- Fruit's costs-appear- to be declining at a greater rate. With the outlook substantially improved for the Valery banana, the company has embarked on a program of diversification through acquisition, in the institutional food service field. In April, United Fruit acquired J. Hungerford Smith &. Som- pBny which makes and markets beverage bases, fruits and flavors. United must. sub- mit to the U. S. District Court by the end of this month a plan to divest itself of properties capable of importing into the United States about 9 million banana stems a year. ,remain, however, uncertainties related to this consent decree compliance. Sales and servic revenues in the current year are expected to exceed the peak 381. 5 million of 1965. Earn- ings for the year could approach the 2.75 level per share compared with 2. 17 for 19,65. Dow-Jones Ind. 897.16 Dow-Jones Rails 231. 56 A WT RJS -amb —-ANTHONY W. TABELL WALSTON & CO. INC. .. ThiS market letter Is pubhsht!d for your convenience and .IHCormatlOn and IS not an offer to sell or II. solicitation to buy ftny M!eUrltU'!5 dl8C!USM'd. The InformnUon WftS obtamed from Bourees w(' bdleve to be Tehabll', but we do not RllRTantee its accumcy Walston &. Co, Inc. and Its officels, dlrerwTS or empIO)et'B may have an mtereBt m or purchase and Bell the bccurltics referred to herem WN.801