August 7, 2000
MAINE STOCK TRENDS
It's decision time for Hannaford investors
Copyright © 2000 Blethen Maine Newspapers Inc.
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Some Maine investors smile, despite down week for the overall market (July 31, 2000) Maine companies begin to report Q2 results (July 24, 2000) Is the Great Internet Sell-off over? (July 17, 2000)
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The key question for Hannaford investors becomes whether to hold, sell, or buy more Delhaize America stock. Before making that decision, shareholders are encouraged to look at the fundamentals of the company and how those fundaments relate to it's stock price. Then it's a good idea to compare the fundamentals for Delhaize to those of the supermarket industry.
Some of the key measurements to examine: price to earnings ratio, price to cash flow ratio, price to book value, sales per share and dividend yield.
P/E, P/Cash flow, P/book, and P/sales ratios compare the stock price to the amount of revenue, assets and sales the company is generating. The lower, the better.
Dividend yield compares the amount of cash paid to shareholders with the latest price of the stock. For this measurement, in most cases, the higher, the better.
One other statistic to study is the analysts' projected increase in earnings per share for 1999, 2000, and 2001. Make sure the trend is up. It should be. That is what this merger is all about.
There are lots of on-line services that can provide the above referenced information. Most brokerage firms can also provide the information if you don't wish to spend your time searching the net or library.
The point is: don't buy of sell because you only own a few shares or because you don't understand the new company. Take the time to learn how a company measures up against other stocks that you own, as well as against its peer group in the supermarket industry. That's how to make informed investment decisions.
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Among last week's top performers, apparently, analysts liked what they heard from Banknorth Group (BKNG-17). Late last month, the $18 billion dollar bank holding company hosted securities analysts for a meeting at which senior management shared an update on the newly-merged company and laid out future plans. Last week, the stock managed to move up to 17, an increase of 12.9 percent for the week. The $.125 per share dividend will be paid August 14 to stockholders of record as of August 4.
Fairchild Semiconductor (FCS-32 3/4) last week celebrated the anniversary of its initial public offering. The stock went public at 18 1/2 per share on August 4 last year. No complaints for those who bought on the IPO, but lately, the stock has been drifting lower and lower. The stock hit a high of 49 1/2 on April 28th and has drifted down ever since.
The stock moved below its 50-day moving average back in mid-June. Since late last month, the stock has been trading below its 200-day moving average. Both of these incidents augur for a lower stock. Moving averages are a means of measuring the direction of the momentum in a stock's price.
Although all news on Fairchild to date has been positive, semiconductor stocks have been poor performers since the spring. Fairchild's stock recent price history is an example of how stock prices can run contrary to the news. Right now, the technical analysts rule. Their predictions say that a lower stock price is ahead for the South Portland manufacturer.
Looking ahead to the week of August 7, UnumProvident (UNM-23 1/2) releases Q2 results right after the market closes on Wednesday. A conference call follows on Thursday morning. The disability insurer has shocked analysts with disappointing results in two of the past four quarters.
Unlike Fairchild, Unum's stock chart is beginning to look up. The stock's 50-day moving average began heading up in early May for the first time since the June 30, 1999 merger. The 200-day moving average appears to be flattening out also, yet another sign that the worst may be over. Shareholders watched in horror over the past year as $10 billion in market value was erased from the stock market capitalization of the company between the time of the merger announcement and March 2000.
Brad McCurtain is president of Maine Securities Corporation. Maine Securities Corporation is an investment firm specializing in Maine's securities. From time to time, the corporation, its employees, and its clients may buy, hold, and/or sell positions in companies mentioned herein. As a regulated securities broker/dealer, the company and its employees are required to abide by all securities regulations at all times when communicating with the public. Brad McCurtain may be reached at info@MaineSec.com. Web site: http://www.MaineSec.com