Security analysts -- men and women who closely monitor a broad array of public companies for their brokerage firms -- regularly turn out large amounts of detailed research on the firms they follow. Many of the Washington area's better known companies are the subjects of these occasional studies. Here is a sampling of some of the current reports:
The Student Loan Marketing Association, known as Sallie Mae, which had a "buy" rating from John E. Keefe, research analyst at Drexel Burnham Lambert Inc., has now been placed on the firm's "priority selection list."
Next to the Federal National Mortgage Association (Fannie Mae), Sallie Mae is the second-largest financial company in the D.C. area.
With assets of almost $11 billion, Sallie Mae is a federally chartered, stockholder-owned corporation. It provides, through a secondary market, the nation's largest single source of financing for insured college and vocational school loans.
Keefe writes: "Against a background of slowing growth in the economy and corporate profits, we believe Sallie Mae is a superior choice and an important core holding in financial services by virtue of its expected growth in units, steady margins and the insensitivity of earnings to changes in interest rates . . . "
Keefe notes two possible risks, one legislative, the other funding. Because the Guaranteed Student Loan Program is federally sponsored and funded, he says, Sallie Mae is vulnerable to abrupt legislative changes. However, he adds, he foresees none in the offing.
As for funding, he writes, "If Sallie Mae were unable to maintain its matching of the cost of liabilities to its assets (which float with the 91-day Treasury bill), the company's fixed spreads would erode and its unique insensitivity to rate volatility would be altered." But Sallie Mae has excellent credit and market experience, he notes, and he does not foresee any problems ahead.
Sallie Mae, selling at about $33 a share, earned $1.37 a share in 1983. Keefe estimates 1984 and 1985 per-share earnings will be $1.90 and $2.50, respectively. The stock traded at between $20 and $34 in the past year.
Two regional airlines, USAir and Piedmont, are drawing the attention of airline analysts who expect their stocks to soar in the future.
The stock of Piedmont Aviation, which uses Baltimore/Washington International Airport as one of its three major hubs, is recommended as "attractive for growth-oriented accounts" by Michael L. Mead, director of research at Scott & Stringfellow Inc. of Richmond.
"In the sink-or-swim world of deregulation," Mead wrote recently, "Piedmont decided to swim, and swim fast. From a small regional carrier in 1978, the company has vastly expanded its network and fleet." In the most recent five years, revenue rose 270 percent "as the company upgraded its fleet, developed low competition hubs and turned a profit every year."
Mead estimates that the airline will have record earnings of $4.25 a share in 1984 and $5.25 in 1985 (compared with $2.18 in 1983). He notes, too, that the stock is selling at about $31 a share, near the lower end of its two-year trading range of 27 1/8 to 42 1/8, and should appeal to "aggressive investors."
Mead praises Piedmont's competitive strategy and its route system, which typically connects a small or medium-size city to a major city through one of three hubs (Charlotte, N.C., Dayton, Ohio, and BWI), leaving other airlines to fight over the New York-Chicago or Atlanta-Los Angeles runs. This year, Piedmont added flights to the West Coast.
Mead includes two caveats: First, Piedmont is sensitive to the economy and "a recession would retard earnings." Secondly, he warns, the airline industry remains highly competitive.
Meanwhile, the stock of USAir Group Inc., based in Arlington, has been "largely ignored by investors, despite excellent fundamentals," reports airline analyst Mark E. Daugherty of Dean Witter Reynolds Inc.
"Among the largest carriers, USAir has the highest profit margins, and its balance sheet, which includes $12 per share in cash, is second-best," Daugherty adds. "Currently selling at a price-to-earnings ratio of only 5.8 times our 1985 earnings projection of $5.50 per share, these substantially undervalued shares are recommended for aggressive investors seeking capital gains."
The sixth-largest company in the Washington area, USAir Group is the holding company for USAir, which has been expanding rapidly. Its revenue was $1.4 billion last year. The stock sells at about $32 a share.
Syscon Corp. of Washington is a 17-year-old computer systems and engineering company that derives most of its revenue from the Pentagon. Research analyst Joseph A. Rugilio Jr., of Dean Witter Reynolds, has lowered his estimate of company earnings for 1984 from $1.45 to $1.30 a share and for 1985 from $1.70 to $1.50 a share. Syscon earned $1.22 a share in 1983.
Rugilio says higher advertising and interest costs held down third-quarter profits to 30 cents a share, compared with 31 cents last year. Rugilio had estimated 38 cents.
"Higher interest expense was caused by the need to finance more accounts receivable as the U.S. government has slowed down making payments to Syscon and other contractors," he said. Despite this problem and slower-than-expected sales of high-margin commercial hardware and software, the analyst wrote, "we think the stock is attractive in growth accounts." Syscon, now at about $13 a share, traded between $11 and $20 during the last year.
Although women hold many responsible jobs in the investment business, it is still rare to find a woman managing a brokerage company's branch office. The newest in this area is Virginia A. Kelly, who recently was named manager of the Greenbelt office of Johnston, Lemon & Co. Until her promotion, Kelly was a sales manager in the downtown office. She worked at the U.S. Embassy in Saigon during the Vietnam war and at the National Institutes of Health, and has been active in Soroptimist International, an organization for executive businesswomen.
On the Virginia side of the Potomac, brokerage offices continue to proliferate in the suburban counties. Wheat, First Securities of Richmond has opened a new branch in Leesburg. Managing the new office is L. Ludington Sells, formerly with the firm's Tysons Corner office. Wheat First expects to have eight brokers in its new office, including current Wheat brokers Frank Courts, Ken Hoeffel and Dan McAuliffe.
Moving up in the NASD listings to the National Market is Biotech Research Laboratories of Rockville. The National Market list provides closing prices for the 1,142 stocks on its list. Over-the-counter stocks must move to the National Market when they have a bid price of $10 and an average trading volume of 600,000 shares a month for six months. Or, like Biotech, they can move voluntarily at a bid price of $5 and an average trading volume of 100,000 shares a month for six months.