Sat07262014

Business & Real Estate

Quiet markets can determine decisions

The old Wall Street adage “Never short a quiet market” seems to be working, because we didn’t get anywhere with daily buys and sells last week. Large trading volume usually signals a rally to buy or sell.

Broadcaster and financial analyst Jim Cramer agrees that when the stock market looks horrible, resist the urge to sell. Selling into weakness is anything but strategic, according to Cramer, and sellers ultimately regret their decision.

At times, you can trace stock movements to other developments such as Federal Reserve policy, corporate earnings or international headlines, but they aren’t large enough to move the market on a large scale.

Market action Feb. 19 was determined after release of Federal Reserve minutes and the continued paring of the stimulus, driving the market down 89.84 points. Thursday, however, the market opened in positive territory.

Look for bargain hunting to ignite a market rally, and follow the Dow Jones industrial and transportation averages in unison for solid information. For now, the key is buying or selling on a stock-by-stock basis and keeping 10 percent in cash or in a bond fund.

Two Town Crier “50” stocks are in the news.

• Adobe Systems Inc. (ADBE; $69.16) made an appearance at the Winter Olympics, enabling NBC to show every Olympic event. NBC used Adobe to ensure that fans could use their smartphones and tablets to view all the Sochi digital events. Viewers could now watch an entire event on replay from start to finish – before, it was either clips or highlights.

Adobe is known for its software, but lately the company has embraced the cloud and altered its business model. While still offering Photoshop and other programs, the company is now touting its Creative Cloud.

Adobe provides a way to effectively monetize the streams across all devices with its Primetime TV platform, enabling subscribers to view more live sporting events. It’s a service that delivers all of Adobe’s software for a monthly fee.

Adobe’s push into media services is paying off, and its high profile during the Olympics could lead to more business.

All this leads to a buy, with Bank of America Merrill Lynch raising Adobe’s price target from $67 to $80. Numerous research firms recommend an upgraded status either to buy or to market perform.

• Intevac Inc. (IVAC; $7.85) recently announced its financial results for the quarter and fiscal year 2013, with positive long-term growth drivers. The Santa Clara-based firm, founded in 1991, has two businesses: equipment and Intevac Photonics.

In the equipment business, Intevac is a leader in the design, development and manufacture of high-production process equipment. In the Photonics business, the company develops and manufactures leading-edge, high-sensitivity imaging products and vision systems.

Net income for the quarter totaled $1.7 million, or 7 cents per diluted share, including a $3.7 million credit related to a previous acquisition. The result compares to a net loss of $42.7 million, or $1.82 per share, in the fourth quarter of 2012.

Revenues for the quarter ran $20.6 million – $12.8 million for equipment revenues, and $7.7 million for Photonics. The company ended the year with $81.4 million in cash and investments and $124.7 million in tangible book value.

Gross margin on the equipment totaled 38.1 percent, with Photonics at 36.8 percent. The consolidated gross margin was 37.6 percent, compared with 42 percent in the fourth quarter of 2012.

Recommendations for purchasing the stock are few. Zacks Feb. 4 issued a downgrade from neutral to underperform. The high and median target price for Intevac stock is $10.

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

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