Alex. Brown stock hits all-time high

January 25, 1995|By David Conn | David Conn,Sun Staff Writer Bloomberg Business News contributed to this article.

Alex. Brown Inc.'s stock closed at an all-time high yesterday, despite an analyst's downgrade and a flurry of selling this month by company executives.

Some traders said speculation that the 195-year-old investment banking firm could be the target of a takeover attempt was driving the stock, which gained 87.5 cents, or 2.6 percent, to close at a record $34.375. New York Stock Exchange composite trading reached 234,800 shares, four times the average daily volume during the past three months.

The company denied the takeover speculation. "We're not aware of any unusual buying patterns," said spokeswoman Geraldine Leder. "We have had no discussions with regard to a takeover of any kind."

Some traders told Bloomberg Business News that the takeover speculation may have started with a recent report in the Times of London that National Westminster PLC would like to buy a U.S. investment bank.

On Dec. 26, NatWest Chairman Lord Alexander told the newspaper that the bank is seeking to enlarge its capital markets operations in the United States. Two days later, NatWest said there were no "imminent" moves in that direction.

Yesterday's surge in Alex. Brown stock came after a dip earlier in the day that followed a negative recommendation from Prudential Securities Inc. analyst Dean Eberling, who lowered his opinion on Alex. Brown to "sell" from "hold."

Many Alex. Brown executives haven't waited on an analyst's signal to sell. Nearly 40 staffers, apparently capitalizing on the stock's run-up in price, have sold about 60,000 shares over the past three weeks.

The company's stock has been rising steadily since early December. Like almost all securities firms, Alex. Brown incurred lower earnings through 1994 because of higher interest rates and sharply reduced investment banking activity, but it's been among the stronger performers in the industry.

"The stock has moved up, but keep in mind that their third-quarter earnings were better than expected," said independent securities analyst Perrin H. Long.

Third-quarter earnings fell 12.5 percent, to $13.3 million, or 87 cents a share, from $15.2 million, or 95 cents a share a year earlier. The company is expected to release the fourth-quarter figures before the market opens tomorrow. The firm is forecast to earn $1.23 a share for the fourth quarter, according to analysts polled by Zacks Investment Research.

"I can't dismiss the possibility that there might be" a takeover, said Mr. Long. "But I would think that it would be highly unlikely.

Mr. Long noted that Alex. Brown is "an old-line Baltimore firm," and insiders hold a large percentage of its shares. Officers and directors held 12.4 percent of the 15.5 million shares as of the 1994 proxy statement, published last spring.

Mr. Long said that his discussions with Alex. Brown yesterday led him to believe the company will announce a stock split along with news of its earnings tomorrow. If word of a split had slipped out, that could account for increased trading.

The last such occurrence, a 3-for-2 split in 1987, came when the stock was trading at about current levels, Mr. Long said.

Ms. Leder of Alex. Brown said she had no information about a split.

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