Fri11282014

Business & Real Estate

Investors not pleased with events

With U.S. stocks lower Friday but up 1.5 percent for the week, investors remain concerned about tensions between Russia and the West. Federal Reserve Chairwoman Janet Yellen’s suggestion that interest-rate hikes would not occur until six months after quantitative easing ends has been a positive influence, but the market is still floundering.

The S&P 500 is up 177 percent since its March 2009 low, so the thought that decent values are not available in the stock market is foolish. There are plenty of deals available, depending on the course of corporate profits and low interest rates.

Share prices are not the only thing at all-time highs. When investors consider corporate sales, profits and dividends, the typical U.S. stock looks cheap relative to bond yields.

Banks added to gains last week after most received a passing grade on the Federal Reserve stress tests.

Small and midcap stocks are more expensive than big stocks on the S&P 500, but investors can find opportunities among stocks of all sizes these days.

Two Town Crier “50” companies made headlines last week.

• Symantec Corp. (SYMC; $18.89) stock dropped more than 15 percent Friday after the company announced that it fired CEO Steve Bennett. The Symantec board reported that it relieved Bennett of his duties after an “ongoing deliberative process and not precipitated by any event or impropriety.” Bennett was at the helm for less than two years and becomes the third CEO change in the past five years.

Bennett was the architect of Symantec’s “5/30 plan,” which calls for 5 percent revenue growth and a 30 percent margin target by fiscal year 2017. After Bennett’s departure, company officials said they would continue to pursue the plan.

According to TheStreet’s Jim Cramer, “Symantec didn’t change with the times and was still focusing on personal computers rather than mobile.”

Bank of America Merrill Lynch cautioned that Bennett’s departure could compromise the 5/30 plan and lowered its Symantec price target from $18 to $17 Friday.

Analysts currently rate the stock to outperform and issued a 12-month price target of $24.96.

• Northern Trust Corp. (NTRS; $65.36) stock was downgraded from neutral to sell by UBS last week and immediately fell 1 percent. UBS analysts reported that Northern Trust stock is currently at the high end of the valuation range among asset managers, without a recent track record of earnings growth.

Conversely, TheStreet Ratings deem Northern Trust a buy, because revenue growth came in higher than the industry average of 17.4 percent. The growth in revenue appears to have trickled down to the company’s bottom line, improving earnings per share. Northern Trust’s gross profit margin is currently high, coming in at 94.76 percent.

Northern Trust is a leading provider of investment management, asset and fund administration. The Chicago-based company maintained an office on Second Street in Los Altos for years but recently relocated to Menlo Park to be closer to the venture capitalists.

On the basis of net income growth from the same quarter a year ago, the company has underperformed when compared with the S&P 500 and the capital-markets industry average.

Of the 20 brokers following Northern Trust, 11 recommend a hold and only three suggest a buy. The stock’s mean target price is $64, with a high of $71.

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

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