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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: LTK007 who wrote (24908)	9/4/1999 5:50:00 PM
From: johnsto1	Respond to of 99985

PART 2 September 6, 1999 Up and Down Wall Street, Part 2 Up and Down Wall Street, Part 1 Similar "tiering," con tinues Christopher, in the late 1960s and early 1970s had equally devastating consequences. Factoring in the vicious inflation of the 'Seventies, he reckons investors in the Favorite Fifty suffered an eventual loss of nearly 80%. Now, we realize that the 'Nineties have demonstrated conclusively that investors who fail to learn from history are destined to make a lot of money. But we suggest they reflect on the possibility, however remote, that recent history might prove no more reliable a guide in the immediate future than more extended history has proved in the immediate past. Archie MacAllaster, old chum and veteran Round tabler, knows all there is to know about banks -- and still invests in them. The banks have returned his favor by making him a ton of dough. Lately, the group has cooled a bit, partly in response to the uptick in interest rates. Partly too, though, because the merger fever that wracked the industry and animated its investment performance has subsided, with some of the more avaricious gobblers suffering digestive problems. Among the stocks that have felt the impact of the industry's waning acquisitiveness is that of Summit Bancorp, No. 1 in New Jersey. Back in '97 and '98, the bank was grist for the merger rumor mills -- BankAmerica, Fleet and Wachovia were among the supposed suitors -- and its stock topped 53. Friday, it closed at 34 and change. Archie thinks it's a buy. And definitely not because he expects it to be taken over. For one thing, Archie says, besides lapsed merger interest, the stock has been depressed by Street concerns over a loan that went sour. Those concerns, he feels, have proved overblown; the sum involved is quite manageable, and it's conceivable Summit won't have to make much if any addition to its loan-loss reserves. But our own hunch is that a stray bad loan never turned off an analyst so long as the aroma of a deal was in the air and he had a story he could peddle to institutional customers. Without that kind of lure, a regional bank, even a giant one like Summit, ranks as rather a hard sell. In any case, whatever the exact reason, or combo of reasons, of the 20 brokerage recommendations on the bank, only two are outright buys, while the rest pretty much are "holds" (an analytical euphemism for "forget it"). Such underwhelming interest is, to us anyway, a big plus for Summit since even the mildest upside surprise can have an outsized effect. More tangibly, the company has been growing nicely: Revenues in the past four years more than doubled, while per-share earnings climbed from $1.59 to $2.63. The gains, happily, are being extended. Archie figures earnings should come in around $2.85 this year, perhaps a few cents higher, and $3 next. Which means that Summit is trading for less than 12 times this year's likely earnings and slightly over 11 times next year's estimate. Both way below the market average. One other thing Archie likes about the stock -- and we blush to disclose it: Summit pays a dividend (a dividend is ... oh, go look it up). And not just a token dividend, but big enough to give the stock a 4% yield. Next Previous