Quantcast
Get breaking news alerts via email

Click here to manage your alerts
Lucky investors gain big as M&A surges in new year


< Previous Page


Among the picks in a Morningstar report co-authored by Hottovy last month:

— Kohl’s: The department store chain has strong cash flow and its stock trades at 10.7 times per share earnings in the previous 12 months, which Morningstar considers attractive. The average for S&P 500 companies is 17 times.

At a glance

How the Dow Jones industrial average fared Friday; closed Monday

The Standard & Poor’s 500 barely kept a streak of weekly advances alive at seven weeks. The index has advanced every week since the start of the year.

The Dow Jones industrial average rose 8.37 points, or 0.1 percent, to 13,981.76.

The S&P 500 index fell 1.59, or 0.1 percent, to 1,519.79.

The Nasdaq composite fell 6.63, or 0.2 percent, to 3,192.03.

For the week:

The Dow is down 11.21 points, or less than 0.1 percent.

The S&P 500 is up 1.86 points, or 0.1 percent.

The Nasdaq is down 1.84 points, or less than 0.1 percent.

For the year:

The Dow is up 877.62 points, or 6.7 percent.

The S&P 500 is up 93.60 points, or 6.6 percent.

The Nasdaq is up 172.52 points, or 5.7 percent

Join the Discussion
Post a Comment

— Chesapeake Energy Corp.: The second-biggest U.S. gas producer is a target of investors looking to get the share price up. Embattled CEO Aubrey McClendon was pushed out last month. The stock is down 12 percent in the past 12 months.

— City National Corp.: Morningstar likes that the Los Angeles-based bank courts wealthy business owners as customers and has increased earnings per share by 63 percent in two years. The stock is up 17 percent in the past 12 months.

Conditions seem ripe for plenty more deals.

Borrowing money to buy has rarely been cheaper since interest rates are near record lows. And many companies can pay for M&A out of their own pocket. Companies in the Standard and Poor’s 500 index have more than $1 trillion in cash on their books, up 66 percent in five years.

If the means are plenty, so are the motives.

Before the Great Recession, buyout firms raised hundreds of billions of dollars from investors. They promised to use the money to buy companies within a set time or return it. Some of those deadlines are fast approaching. As of September, buyout firms had $193 billion left to spend by the end of 2013, according to Triago, which helps raise money for the industry.

About a quarter of the money spent to buy U.S. companies this year has come from leveraged buyout firms. That is about the same as before the recession, according to Dealogic.

The Dell deal recalls the era of the super-sized buyouts, a heady time before the recession of bidding wars and overpriced purchases. The motive was to cash out after a few years by flipping the acquired company to another buyout firm or by selling stock in a public offering.


story continues below
story continues below

Most buyout deals today, though, are smaller and involve much less debt.

Experts say many companies are buying rivals in the hope that the combined businesses will quickly add to profits. For years, companies have been cutting staff and squeezing workers. Now they are finding that path to higher earnings is tough. Earnings in the first quarter are expected to increase less than 1 percent from last year for companies in the S&P 500, according to FactSet, a financial data provider.

Morningstar’s Hottovy cautions investors not to get too excited about a big year for deals. Despite the good signs, CEOs can sour on M&A if their confidence evaporates. He says a flood of deals about a year ago turned into a trickle on fears that the European debt crisis would hurt U.S. companies.

"We thought we were back," Hottovy says. "But then Europe put a halt to all that."

———

AP Business Writer Steve Rothwell contributed to this story.



Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.