Show i i Stock Market arket Anticipates Since the stock market tends to anticipate economic I de menu well in adt adI advance ad ad- t vance we feel Ceel that despite the current uncertainty in ine in inthe the e 1 market arket atmosphere this i is a 3 good time for the patient i investor in to consider some of i if I the cyclical companies whose whose r I common stocks are still att attractively attractively at at- t priced L IT IS during an economic t slowdown that these stocks should be bought for Cor their r next upswing the 70 1969 R market decline has opened up buying opportunities in inV V l' such issues I. I i Historically the more apPealing appealing ap ap- t. t pealing common stocks of r. r have I cyclical companies sold soldat at relatively low price earnings earnings earnings earn earn- ings rations f THE RESEARCH Staff of Babson's Batons Reports has sought 1 out issues which during the past five years based on annual low prices have sold soldat at less than 10 times earnings earnings earnings earn earn- ings and based on yearly high prices have seldom sold at more than 15 times earnings I To a great extent the modest modI modest mod mod- est pr price ce earnings multiples I reflect the companies companies' dependence s 's I dence Bence upon economic ity Babson's Reports researchers researchers researchers re re- re- re searchers selected those which though cyclical in varying degree have shown significant progress in both sales and earnings over the ther r past decade I THE GAINS represent internal internal internal in in- growth and also growth through acquisitions Thus while hile a low price earning ratio is often indicative of ofa a cyclical company it is not notI synonymous with stagnation stagnation stagnation I tion Though earnings in the current current cur- cur rent year will be restricted bv by the lower level of business busi usi ness activity and in s some o 0 m e cases cares may be down from the previous year the they should d respond favorably to the anticipated anticipated an an- economic recover recovery Thus cyclical companies companies' must be viewed in terms of probable renewed vigor in 1971 LOOKING further ahead these companies should have the potential to achieve even more significant gains in both sales and earnings Usually such co companies es maintain leading leading lead lead- ing positions in traditional areas and are well established establish establish- ed in their respective indus indus- tries Furthermore the better of the have diversified in recent years and product lines or and-or markets have been expanded hence operations operations operations oper oper- are now less subject to cyclical variations and should d increase at a steadier pace ALSO newer activities although not yet dominant in inthe inthe inthe the sales and profits picture should d possess good growth potential And it seems reasonable reasonable reasonable reason reason- able to assume future emphasis emphasis emphasis em em- on broadening the sales base for most com compan compan- pan pan- could significantly lift sales and earnings in the With most of the stocks which can meet the aforementioned aforementioned aforementioned afore afore- mentioned tests now selling at reasonable multiples of their price-earnings price range over the past 10 years they offer the patient investor a good opportunity for long- long term appreciation Since these companies have changed chang chang- ed their complexion in recent years and are therefore less dependent upon any anyone one indus industry industry in in- dus try their future earnings cOl could d well be accorded a higher ml multiple tiple than in the past by the investment com com- In this event the opportunity for capital appreciation appreciation appreciation ap ap- ap- ap would be enhanced WHILE THESE stocks are not likely to move marketwise marketwise marketwise market- market wise with the suddenness of the stocks they do nevertheless provide ample upside potential once a sustained sustained sus sus- tamed market recovery is under way In the meantime meantime meantime mean mean- time they furnish a reasonable reasonable reasonable reason reason- able yield and and anda a minimum of downside risks Their total composition makes for rewarding investment investment investment invest invest- ment opportunities for Cor patient patient patient pa pa- tient investors |