Sat12202014

Business & Real Estate

Federal Reserve pressure continues

Both the Dow Jones industrial and transportation averages have slumped more than 6 percent from their recent all-time highs, underlining that there is no doubt this year’s pullback qualifies as a significant correction.

However, after Thursday’s positive jump in share prices, investors sought more information from Friday’s January jobs report. Despite only 113,000 jobs added to the workforce, the weaker-than-expected news didn’t faze the market.

With no reason to panic over the jobs report, by noon Friday the market climbed more than 100 points. There is no need to panic, because the onus is now on the Federal Reserve, which is scheduled to start its bond-buying tapering process soon.

For now, look for buying and selling opportunities on a stock-by-stock basis.

Two Town Crier “50” stocks made headlines recently.

• Northern Trust Corp. ($60.82; NTRS) reported fourth-quarter net income of $169 million, with earnings per share of 70 cents. Net income per common share for the full year was $2.99, compared with the previous year’s $2.81. Fourth-quarter results include an $11.9 million, or 5 cents per share, after-tax charge to resolve class-action litigation.

Northern Trust has undergone numerous changes in the past year since it moved out of downtown Los Altos. In addition, several local executives have left the company and there has been considerable insider selling. Still, the share price is up 0.3 percent in this hectic first two months of activity.

Northern Trust provides investment management and other services to individuals and large institutions. The company reported an improved fourth-quarter profit, as its fees and net interest income rose.

Numerous analysts suggest holding the stock, with one analyst this month recommending a strong buy. The median target price is $64, with a high of $71. The dividend yield is 2.1 percent, 31 cents per share, payable April 1.

• Applied Materials Inc. ($17.24; AMAT) stock was recently downgraded by RBC Capital from outperform to sector perform, because earnings season is here again and that raises questions. The chip-equipment company’s stock surged approximately 80 percent between late 2012 and late last year. However, shares are down 0.3 percent year-to-date because of the recent market drop.

Applied Materials’ merger with Tokyo Electron is responsible for the increase in the share price in the second half of 2013. The consensual merger between the two companies could result in substantial cost savings.

After the deal is approved this year, the combined company plans to buy back 10 percent of its stock within 12 months, with Applied Materials shareholders owning two-thirds of the company. The stock currently yields a dividend of 2.4 percent.

The company’s return on equity improved over the same quarter the previous year, which can be considered a modest strength of the company. Net operating cash flow has decreased to $19 million, or 95.37 percent, when compared with the same quarter last year. Applied Materials has a market cap of $20.9 billion.

Seven analysts currently rate Applied Materials stock a buy, one deems it a sell and seven consider it a hold. The median target price is $19, with a high of $23.

Clyde Noel is a Los Altos Hills resident and longtime investor in stocks.

Schools »

Schools
Read More

Sports »

sports
Read More

People »

people
Read More

Special Sections »

Special Sections
Read More

Photos of Los Altos

photoshelter
Browse and buy photos