Business & Real Estate
- Published on Wednesday, 04 June 2014 01:03
- Written by Clyde Noel
The S&P 500 index scored its third record-high closing in four market days Thursday, reaching 1,920.03. The Dow Jones industrial average closed at 16,698.68. Sell in May and go away? Not this year.
As the market advances, investors’ money is not in doubt. The question is whether investors’ enthusiasm has declined amid the up-and-down market volatility. New claims for unemployment benefits fell more than expected and provided another incentive to purchase U.S. stocks.
Readings on current market sentiment are confusing. Investment newsletters are usually optimistic, with the bulls exceeding the bears by a wide margin since January. Yet polls of individual investors show a lack of enthusiasm for the market, even though its fair value continues to rise, with numerous companies increasing their annual dividends. Comparing U.S. stocks to bonds, they appear favorable, with the yield on the 10-year Treasury note below 2.44 percent.
Two Town Crier “50” stocks show promise.
• Hewlett-Packard Co. (HPQ; $33.51) reported its second-quarter earnings May 22, with shipments down 1.7 percent over the previous quarter. Software revenue remained flat, while Financial Services dropped 2 percent to $867 million. Printing revenues declined 4 percent to $5.83 billion, and total second-quarter revenues dipped 1 percent.
Consumers are buying fewer computers and printers as they embrace smartphones and tablets, prompting companies to begin building their own machines and shed workers.
This was HP’s 11th consecutive quarter reporting a decline in revenue. To show profitability and achieve its five-year turnaround plan, HP must lay off more employees.
CEO Meg Whitman is increasing profit by paring as many as 16,000 more employees in addition to the 34,000 already announced. The total number of layoffs could reach as high as 50,000. Whitman said the layoffs would result in an additional annual savings of $1 billion.
Despite the costs of its restructuring activities, HP last year produced $11.6 billion of operating cash flow and approximately $8.4 billion of free cash flow.
Even without a convincing turnaround strategy and with a shift away from computers, Hewlett-Packard’s stock price reached a new 52-week high at $34.09 March 23.
Companies like Deutsche Bank have recommended a buy for HP stock. Other research firms have suggested an overweight or outperform upgrade. The median target price for stock is $36, with a high of $40.20. HP’s dividend yield is 1.90 percent.
• Intuit Inc. (INTU; $79.28), maker of Quicken and TurboTax, expanded its software options last week by purchasing Check Inc. for $360 million in cash and other considerations.
The Palo Alto-based Check offers a smartphone app that allows users to pay bills with their mobile devices. The app tracks bank accounts and credit cards and notifies users when bills are due or funds low. The company has more than 10 million customers and processes half a billion dollars in payments annually.
Check began as Pageonce, an application designed to bring many disparate activities into a single mobile application focused on paying and managing bills. As Check, it will join Intuit’s Consumer Ecosystem Group.
Approximately five years ago, Intuit acquired the personal financial management application Mint for approximately $170 million. With the two acquisitions, Intuit will look for applications from both to deliver budgeting and financial functionality.
Intuit stock rose 1 percent in trading and reached an all-time high of $82.38 March 7.
The recent history from research firms reports Intuit stock a strong buy or a hold. The median target price for stock is $82.44, with a high of $94. Intuit pays a dividend yield of 1 percent.
Clyde Noel is a Los Altos Hills resident and longtime investor in stocks.