Looking at your increased portfolio, the present trend is still in the bullish camp. Investors anticipate a jolly good time in December.
With another month to go in 2013, you hear many conflicting opinions on the prospects for 2014. Knowing what to believe can be difficult, but if November was an omen for next year, we should all feel happy. November was a great month for stocks. The Dow is above 16,000, the S&P 500 is trading above 1,800 and last week the Nasdaq closed above 4,000 for the first time in 13 years.
Year-to-date the indexes have increased between 20 and 35 percent for a record-breaking year, thanks to the Federal Reserve’s bond purchases, a recovering economy and solid corporate earnings.
Stocks are not in a bubble position. At less than 19 times current-year earnings, the median S&P 500 stock trades at a 13 percent premium to 10-year norms. Valuations have reached much higher levels at previous market peaks.
Also, the stock market has not run out of potential catalysts. Bears argue that the good news has already played out because of the proposed Federal Reserve cutback, but takeover activity has yet to heat up given cheap financing and strong corporate balance sheets. A surge in takeovers would not be surprising, so look for more companies to increase their dividends and buy back their shares in 2014.
Two Town Crier “50” stocks made news last week.
• Intel Corp. (INTC; $23.74) last week reported that the company would begin to concentrate on chips for smartphones and tablets immediately, as consumers are using fewer personal computers.
Investors are befuddled by Intel’s guidance for the next year, when revenue will be down in the mid-single digits, at an estimated 1.4 percent in 2014.
According to new CEO Brian Krzanich, computing in the next few years will focus more on items for eyes and ears, as well as wristbands and watches. The company will pursue two important strategic shifts: expand its foundry business to a much broader range of customers and aggressively target tablets, where the unit volume is expected to quadruple in 2014.
Intel should not be viewed as a safe or undervalued tech play, but Krzanich said that under his leadership, Intel would give priority to its Atom microprocessor. Intel does not wish to fall behind in future technology trends that include wearable computing devices.
Analysts do not cite Intel as an investment for the average investor as long as the PC market continues to decrease. Most analysts recently have upgraded the stock to a neutral or buy, with a median target price of $24 and a high of $32. Intel’s dividend yields 3.8 percent.
• Microsoft Corp. (MSFT; $38.47) launched Xbox One last week to record sales of more than a million in the first 24 hours. It was the most successful premiere in Xbox history.
Microsoft plans to reach beyond the gamers with this console, as it intends to deliver innovative entertainment experiences by bringing movies, music, sports and live TV together in one box.
In another direction, Nokia shareholders approved a $7.2 billion deal to allow Microsoft to buy its ailing cellphone and services division plus the portfolio patents obtained by the Finnish tech giant.
Much has been made of outgoing CEO Steve Ballmer’s tenure with Microsoft, during which the share price fell from the high 50s in January 2000 to the 30s, where it remained stagnant. The stock recently started to rise again following the announcement of Ballmer’s departure.
The failure of Microsoft to grasp opportunities in big-growth areas led to the static share price. However, Microsoft remains highly profitable and last month beat Wall Street’s quarterly profit and revenue forecasts.
Analysts’ recent upgrade and downgrade history has downgraded Microsoft stock from a buy to a hold. The median target price is $36, with a high of $45. The dividend yield for Microsoft is 3 percent.
Clyde Noel is a Los Altos Hills resident and investor in stocks. He is a longtime holder of Intel and Microsoft stocks and intends to make no move at this time.