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Dow Theory Forecasts Inc.

Stock market watchers, particularly conservative ones, have been on a roller coaster ride that many of them would like to forget.

But the ups and downs of the market are not new. That is the way it has been since the turn of the century. The breathtaking ups of the stock market have been followed by predictable slides. Declines following major run-ups have averaged about 32 percent of the market. And if that trend holds true, the current market has another 12 percent to go.

Since flirting with the magic 3,000 barrier this past summer, the Dow Jones average of 30 industrials has been going down steadily, and, in fact, has fallen a bit more than 20 percent. But while that may take the average investor aback, for a northwest Indiana company it is all a part of doing business. The various ups and downs are responsible for the bottom line of Dow Theory Forecasts Inc., publisher of a 44-year-old newsletter that has its editorial offices in Hammond.

Dow Theory Forecasts purposely maintains a low-profile, operating from a nondescript 17,000-square-foot building a few blocks north of the Borman Expressway. Thomas R. Pressler, who joined the company in 1958, is its president and oversees its day-to-day operation. Robert Evan-son of LeRoy Evans, who founded the company four decades ago-is sole owner and CEO.

LeRoy Evans was educated in Iowa and moved to northwest Indiana when he went to work for LaSalle Steel in Hammond. Evans began studying the Dow Theory then, says Pressler, and eventually it evolved into a small newsletter business he could run from his home. "Mr. Evans was very much an entrepreneur," says Pressler. "In 1946, it took a lot of courage to undertake that venture." And as it grew, Evans eventually quit his job at LaSalle Steel to concentrate on the newsletter.

The Dow Theory--which is not a secret, Pressler says-examines stock market patterns first recognized by Charles Henry Dow, a financial journalist and first editor of The Wall Street Journal. Charles Carlson, editor of Dow Theory Forecasts' weekly newsletter, explains that the basic premise examines the movement of the Dow jones Industrial Average and the Dow Jones Transportation Average.

"In its simplest form," says Carlson, "you like to see both averages moving in sync. Generally speaking, you basically establish the market using those two averages." When both averages are moving up, he explains, that is generally favorable for the market. Conversely, if both are moving down, it is generally bad for the market. The theory is most useful, Carlson says, when the averages are moving in opposite directions. "That is a potential red flag," he says. The theory doesn't predict when the market will rise or fall, but is an indicator of general trends.

As Pressler tells it, Evans, the risk-taking entrepreneur, was able to differentiate between his business gamble-which is what the newsletter was in the beginning-and the risk he was asking subscribers to take. The company is still guided today by LeRoy Evans' recognition that other people are using their money based on his recommendations.

"If you have no conscience, you can publish a newsletter and make all kinds of wild speculation," says Pressler. "But we operate more along the lines of the tortoise and the hare. We have been in this business long enough to have lived through a lot of the fad investments." While not disputing the quick returns that some fad investments provide, Pressler says more people than not take a loss on those kinds of investments.

Throughout the company's offices are upbeat slogans, reflecting the basic-is-best philosophy of the founder. A sign on the mail room bulletin board reads: "Every piece of mail going out must be perfect in appearance, or it is better not to send it out at all." In the newsroom, where Carlson oversees the weekly newsletter, is another: "Concentrate on earning power; market value will take care of itself."

Dow Theory Forecasts sends out 15,000 newsletters a week. In addition, the company has 9,000 subscribers to the 26-issues-a-year publications The Low Priced Stock Survey and The Stock Service Digest. Also under the company's umbrella is Lithographic Communications Inc., which offers typesetting, printing, labeling (1.75 million names filed on computer disks) and mailing (more than 15 million pieces last year).

Subscriptions to the various newsletters bring in more than $5.1 million. Even though the number of subscribers has fallen from about 21,000 to 15,000 in the last three years, Pressler says the company continues to grow. "With the population exodus from Illinois into northwest Indiana, and being only 30 to 40 minutes from the (Chicago) Loop, we are an effective competitor with companies there," he says. "And as our readership has declined, we have sought to develop other business."

According to Carlson, the newsletter's credibility is its biggest selling tool. Its accuracy rating is higher than those of Standard & Poor's and Value Line, according to Hulbert Financial Digest, an independent rating firm.

"We look at investments over an extended period of time," explains Carlson. We don't worry about the day-to-day fluctuations of the market. What we do is longer term."
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Ventures
Author:Richards, Rick A.
Publication:Indiana Business Magazine
Date:Dec 1, 1990
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