Part I can be found here.
The estimate of normal based on the three principles above is valid only when applied to a diversified list of industrial common stocks. Different principles are needed if we attempt to appraise the normal for any particular stock. In order that our calculations may be always up-to-date, normal for stock prices is recalculated each month. In the latest 20 years normal has shown a strong upward tendency, partly because of the change in the purchasing power of the dollar but more importantly because corporations have retained (after payment of dividends) a large part of their earnings each year.
Normal for stock prices based on the principles expressed above has been computed consistently at a higher figure than the figure arrived at by any other agency attempting to calculate normal. This has meant that the clients of Templeton, Dobbrow & Vance, Inc. have been more heavily invested in common stocks and this has been a profitable situation so far.
John M. Templeton
May 17, 1954
This memorandum is confidental — for clients only.