Wed12172014

Business & Real Estate

Dow flirts with record high

The headline on a Barron’s financial column last week read “Stock Market Alert! Get Ready for a Record Dow.” Expect the Dow to hit an all-time high soon, because it’s just 1 percent short of the record mark, 14,165, set in 2007. Stocks are up 127 percent since 2009, with fallbacks every month. It will likely take more than a month of investing to move that needle 1 percent.

Last week the Dow retreated, leaving the bears happy. Structural problems in the federal budget, a weakening earnings outlook for numerous stocks presently flying high and conditions in Europe that leave many problems in Spain and Ireland unsettled combine for a pessimistic outlook.

Those bullish on the market claim that a lot of money will shift into stocks, as investors favored bonds over equities in the past. These days, good stocks with good yields are more favorable to the pocketbook. In addition, money from pension funds and endowments could enter the stock market.

A pair of Town Crier “50” stocks recently made headlines.

• Northern Trust Corp. (NTRS; $52.68) executives report that they love their new home in Menlo Park, even though it is much smaller than their former Los Altos digs. The company provides investment management and asset and fund administration, with banking solutions and fiduciary services for corporations and individuals. Northern Trust has more than $643 billion of assets under management.

In its latest quarterly report, Northern Trust fell short on its revenue projection. Net income increased 28.8 percent to $167.7 million in the quarter, versus a net gain of $130.2 million in the year-earlier quarter. Revenue decreased 6.63 percent to $969.7 million from the same quarter in the previous year.

The reported adjusted net income was 69 cents per share – analysts had estimated 75 cents per share.

Analysts have a more negative outlook for the company’s next-quarter performance. In December, the stock performed in the $47-$48 range. Since the first of the year, however, the stock has risen more than 4 percent, settling in the $52 range – not a reaction to the previous quarter’s results.

The boost could be due to a report that HSBC Holdings is interested in acquiring Northern Trust at $65 per share in cash, a 35 percent premium for Northern Trust investors. HSBC, a British multinational banking and financial services company headquartered in London, is the world’s third-largest publicly held bank, according to Forbes Magazine.

• Nvidia Corp. (NVDA; $12.58) manufactures graphic chips for use in smartphones, tablets and personal computers. The Santa Clara firm has a market cap of $17.7 billion and a price-to-earnings ratio of 15.4.

Shares have fallen recently as a result of a rumor – the immediate consensus seems to be that the next-generation Google Nexus 7 tablet will feature a Qualcomm chip instead of the next Nvidia chip. This could cut Nvidia’s mobile chip sales by 33 percent. On the positive side, the estimates for Nvidia’s Quadro line of professional graphics cards could increase.

The company plans to report its fourth-quarter results this week, and much emphasis will be placed on the loss to Qualcomm. Of importance, Nvidia has a cash pile of $3.43 billion, with long-term debt of $19.6 million.

Several analysts give Nvidia a wait-and-see recommendation, but others have downgraded the stock.

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