Businesses will likely spend more on software this year, as the global economy continues to recover. That’s good news for these market leaders, but Symantec’s focus on security puts it in a better position to benefit as more companies adopt cloud computing.

ADOBE SYSTEMS INC. $65 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 497.7 million; Market cap: $32.4 billion; Price-to-sales ratio: 8.3; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) earned $151.3 million, or $0.30 a share, in its fiscal 2014 first quarter, which ended February 28, 2014. That’s down 14.9% from $177.9 million, or $0.35, a year ago. Revenue fell 0.8%, to $1.00 billion from $1.01 billion.

The declines are mainly because Adobe is now selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription instead of a one-time purchase. That hurts the company’s short-term growth, but it should provide stable revenue streams as more users switch over. Subscriptions now supply over half of Adobe’s revenue.

The company spends 21% of its revenue on research, which hurts its earnings. That’s partly why the stock trades at a high 59.1 times the $1.10 a share that Adobe will likely earn in fiscal 2014. A high p/e increases the risk of a sudden price drop if its growth stalls. As well, Adobe mainly serves customers in cyclical businesses, like publishing.

Adobe is a hold.

SYMANTEC CORP. $22 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 691.7 million; Market cap: $15.2 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.7%; TSINetwork Rating: Average; www.symantec.com) sells antivirus software and other computer security services.

In Symantec’s fiscal 2014 fourth quarter, which ended March 28, 2014, its earnings rose 4.1%, to $329 million from $316 million a year earlier. Per-share earnings rose 6.8%, to $0.47 from $0.44, on fewer shares outstanding.

The gains were mainly due to savings from a new restructuring plan that includes job cuts and simplifying the company’s product lines. Revenue fell 5.6%, to $1.65 billion from $1.75 billion.

The company now expects to earn $1.84 to $1.92 a share for all of fiscal 2015. The stock trades at just 11.7 times the midpoint of that range, mainly due to investor uncertainty after Symantec fired its CEO over the slow progress of its restructuring.

Symantec continues to spend a high 17% of its revenue on research, which helps it adapt to rapidly changing technologies. In addition to preventing viruses and other attacks, it is also working on products that help clients recover data from infected computers. That should help spur its revenue growth.

Higher revenue will help the company increase its gross profit margin (gross profits as a percentage of revenue) from 27.5% in the latest quarter to at least 30% in the fourth quarter of fiscal 2015.

Symantec is a buy.

SYMANTEC CORP. $24.28 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 692.7 million; Market cap: $16.7 billion; Dividend yield: 2.5%) sells computer-security technology, including anti-virus and email-filtering software, to businesses and consumers. It also offers data-archiving software.

In its fiscal 2015 first quarter, which ended July 4, 2014, Symantec’s earnings rose 0.6%, to $313 million from $311 million a year earlier. Per-share earnings gained 2.3%, to $0.45 from $0.44, on fewer shares outstanding. Revenue rose 1.5%, to $1.74 billion from $1.71 billion.

The gains were mostly due to savings from a new restructuring plan that includes job cuts and simplifying product lines. In addition, Symantec separated its sales force into two groups: one focuses on winning new clients, and the other serves existing customers.

Symantec’s stock has regained all of the ground, and more, that it lost after suddenly firing its chief executive officer on March 20, 2014. Symantec’s restructuring was taking longer than it originally planned, which was the main reason why it decided to replace its CEO.

The company is still searching for a new CEO, and that adds uncertainty to its outlook. But its restructuring is now paying off and should let Symantec report earnings of $1.85 a share this year. The stock trades at just 13.1 times that estimate.

Symantec is still a buy.

ADOBE SYSTEMS INC. $71.02 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 497.4 million; Market cap: $35.8 billion; No dividends paid) makes a range of software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use its software to create print publications and web pages.

In its fiscal 2014 second quarter, which ended May 30, 2014, Adobe earned $186.3 million, up 1.9% from $182.9 million a year earlier. Earnings per share rose 2.8%, to $0.37 from $0.36, on fewer shares outstanding. Revenue gained 5.7%, to $1.07 billion from $1.01 billion.

The improved results are mainly because Adobe is signing up more subscribers to its Creative Cloud package of photo editing and desktop publishing programs. The company added 464,000 Creative Cloud customers in the quarter and currently has a total of 2.3 million. It now expects to end fiscal 2014 with 3.3 million users, up from its earlier target of 3.0 million.

Selling these programs as ongoing subscriptions instead of one-time purchases hurts the company’s short-term growth, but it should provide more predictable revenue streams. Subscriptions and support services now account for 55% of Adobe’s revenue.

The company continues to spend a high 20% of its revenue on research, which will help it compete in its rapidly changing industry. However, the stock now trades at 60.2 times the $1.18 a share that Adobe will likely earn in fiscal 2014. That’s a high p/e ratio for a company that mainly serves customers in cyclical businesses like publishing.

Adobe is still a hold.

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SYMANTEC CORP. (Nasdaq symbol SYMC; www.symantec.com) sells computer-security technology, including anti-virus and email-filtering software, to businesses and consumers. It also offers data-archiving software.

In its fiscal 2015 first quarter, which ended July 4, 2014, Symantec’s earnings rose 0.6%, to $313 million from $311 million a year earlier. Per-share earnings gained 2.3%, to $0.45 from $0.44, on fewer shares outstanding. Revenue rose 1.5%, to $1.74 billion from $1.71 billion.

The gains were mostly due to savings from a new restructuring plan that includes job cuts and simplifying product lines. In addition, Symantec separated its sales force into two groups: one focuses on winning new clients, and the other serves existing customers.

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Tech stocks: As the search for a new CEO proceeds, Symantec restructuring pays off

Symantec’s stock has regained all of the ground, and more, that it lost after suddenly firing its chief executive officer on March 20, 2014. Symantec’s restructuring was taking longer than it originally planned, which was the main reason why it decided to replace its CEO.

The company is still searching for a new CEO, and that adds uncertainty to its outlook. But its restructuring is now paying off and should let Symantec report earnings of $1.85 a share this year. The stock trades at just 13.1 times that estimate.

Symantec is a buy recommendation of our advisory on more aggressive investing, Stock Pickers Digest.

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Last week our report on Best U.S. Stocks profiled the one strong stock left standing from the breakup of Motorola. You can read the article here.

STANTEC INC. $72.86 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.8 million; Market cap: $3.4 billion; Dividend yield: 1.0%) plans to split its shares on a 2-for-1 basis, effective November 14, 2014.

When a company’s share price goes up, it has an incentive to split the stock to make it seem cheaper to investors, who may then buy more. This can make the stock more liquid than if the firm refrained from splits and let its share price go to uncommonly high levels.

Shares of Stantec are up 1,982% since we first recommended the company (then called Stanley Technology Group) at $3.50 in one of our first issues of Stock Pickers Digest in 1998.

Stantec is still a hold.

DOMINO’S PIZZA $76.57 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.1 million; Market cap: $4.2 billion; Dividend yield: 1.3%) has opened its first store in Norway, in the city of Oslo. It plans to open three more outlets in the city by the end of this year.

The master franchisee for the Norwegian stores is Domino’s Pizza Norway. Its chairman is Birgir Bieltvedt, who is also chairman of Domino’s Pizza Iceland. He previously helped launch Domino’s in Denmark and Germany.

The company now operates in over 70 markets worldwide, and its international stores supply almost half of its sales and a third of its earnings. However, Domino’s still has considerable room to grow overseas.

Domino’s is a hold.

SYMANTEC CORP. $24.50 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 690.5 million; Market cap: $16.9 billion; Dividend yield: 2.5%) is one of two companies that Home Depot (New York symbol HD) has hired to help investigate its recently discovered data breach.

Stolen Home Depot credit card numbers have turned up for sale on a website called Rescator.cc, which has been linked to a Ukrainian dealer in stolen credit cards.

It’s not yet clear how many customers were affected, but the total could exceed 60 million in Canada and the U.S. Customers at Home Depot’s Mexico stores were not affected, nor were online shoppers at HomeDepot.com. Personal identification numbers (PINs) for debit cards were not taken.

Symantec has been trying to expand in the rapidly growing cyber-security software/services market, and the Home Depot contract will give it a lot of industry credibility.

Symantec is a buy.

These two software makers continue to invest heavily in research, which helps them dominate their niche markets. However, we prefer Symantec to Adobe(see next article) right now. That’s because its security expertise should be in high demand after recent high-profile data thefts.

SYMANTEC CORP. $24 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 690.3 million; Market cap: $16.6 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.5%; TSINetwork Rating: Average; www.symantec.com) sells antivirus software and other computer security services.

Home Depot (New York symbol HD) recently hired Symantec and another firm to help investigate a major data breach. Online intruders secretly installed software on Home Depot’s systems that let them steal about 56 million credit card numbers and related data, but not personal identification numbers for debit cards.

Symantec has been trying to expand in the fast-growing cyber-security software/services market, and this contract will give it a lot of industry credibility.

Meanwhile, the company earned $313 million in its fiscal 2015 first quarter, which ended July 4,2014. That’s up 0.6% from $311 million a year earlier. Per-share earnings gained 2.3%, to $0.45
from $0.44, on fewer shares outstanding. Revenue rose 1.5%, to $1.74 billion from $1.71 billion.

The gains were mainly due to savings from a new restructuring plan that includes job cuts and simplifying product lines. In addition, Symantec split its salesforce into two groups: one focuses on winning new clients, and the other serves existing customers.

The stock trades at 14.2 times the $1.69 a share that Symantec will probably earn in fiscal 2015. That’s a particularly low p/e ratio for a company that spends a high 18% of its revenue on research.

The company also feels that higher revenue and cost savings will increase its gross profit margin (gross profits as a percentage of revenue) from 24.6% in the latest quarter to at least 30% in the fourth quarter of fiscal 2015. That would give it room to raise its dividend. The current annual rate of $0.60 a share yields 2.5%.

Symantec is a buy.

SYMANTEC CORP. $22.15 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517- 8000; www.symantec.com; Shares outstanding: 690.3 million; Market cap: $15.5 billion; Dividend yield: 2.7%) plans to break itself into two publicly traded companies.

One will keep the Symantec name and focus on antivirus and security software and services. The other will consist of its information management (IM) operations, which include data backup and recovery software.

Symantec aims to hand out shares in the IM business by the end of 2015.

Spinning off the IM division will let Symantec focus on products with strong potential, like security software for mobile devices.

Spinoffs are a great way for companies to unlock hidden value. In our experience, and according to most academic studies on the subject, the parent and the new firm generally do better than comparable companies for at least several years after the spinoff takes place.

As well, both the security software and IM businesses could become attractive takeover targets as independent companies.

Symantec is still a buy.

SYMANTEC CORP. $25.19 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 690.1 million; Market cap: $17.4 billion; Dividend yield: 2.4%) sells computersecurity technology, including antivirus and emailfiltering software, to businesses and consumers.

In its fiscal 2015 second quarter, which ended October 3, 2014, Symantec’s earnings fell 7.5%, to $332 million from $359 million a year earlier. Per-share earnings declined 5.9%, to $0.48 from $0.51, on fewer shares outstanding. Revenue slipped 1.2%, to $1.62 billion from $1.64 billion.

The declines are mainly because consumers bought less security software and Symantec spent a high 17% of its revenue on research. But the company continues to restructure, including cutting jobs and simplifying product lines. That should lift its profits.

Symantec expects to earn $1.88 to $1.93 a share for all of fiscal 2015. The stock trades at a low 13.2 times the midpoint of that range.

The company still plans to split in two by the end of 2015. One firm will keep the Symantec name and focus on antivirus and security software and services. The other will consist of Symantec’s informationmanagement operations, which include products for data backup and recovery.

Symantec is a buy.

ADOBE SYSTEMS INC. $74.00 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 498.7 million; Market cap: $36.9 billion; No dividends paid) makes software that lets computer users create, edit and share documents in the popular PDF format. Graphic designers also use its programs to create print publications and web pages.

In its fiscal 2014 fourth quarter, which ended November 28, 2014, Adobe earned $180.3 million, up 9.5% from $164.6 million a year earlier. Per-share earnings improved 12.5%, to $0.36 from $0.32, on fewer shares outstanding. Revenue rose 3.0%, to $1.07 billion from $1.04 billion.

Adobe continues to shift to a subscription-based model for selling software. It now gets 66% of its sales from recurring subscriptions, up from 44% a year ago.

The company ended fiscal 2014 with 3.45 million subscribers to its Creative Cloud package of photo editing and desktop publishing programs, up 140% from a year ago. Revenue from Adobe Marketing Cloud, for improving online marketing efforts and website performance, rose to a record $1.2 billion in 2014.

Adobe has also agreed to pay $800 million for Fotolia, which sells over 34 million royalty-free photographs, graphics and video, mainly to website developers. Adobe plans to incorporate Fotolia into Creative Cloud and operate it as a stand-alone service.

The company continues to spend a high 20% of its revenue on research, which helps it compete in its rapidly changing industry. However, the stock now trades at 35.2 times the $2.10 a share that Adobe will likely earn in fiscal 2015. That’s a high p/e ratio for a company that mainly serves clients in cyclical businesses like publishing.

Adobe is still a hold.

CARFINCO FINANCIAL $8.80 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $232.9 million; Dividend yield: 3.4%) is down sharply since mid-January from $11.25 to today’s price. The company provides car loans to consumers who don’t meet the criteria of traditional lenders, like banks.

In November 2014, Carfinco’s shareholders voted to accept a friendly $11.25-a-share takeover bid from Spain’s Banco Santander SA (ADR symbol SAN on New York). The company’s directors and executive officers, who collectively own a 12.9% stake, also agreed to support the sale.

But neither Carfinco nor Santander have announced anything about the $268-million deal, which was expected to close by the end of 2014 or early this year. Santander has been in the news lately with the appointment of a new executive chairman, a share issue to raise 7.5 billion euros ($10.4 billion Canadian) to shore up its capital base and a dividend cut.

Carfinco recently cut its monthly dividend by 37.5%, to $0.025 from $0.04. It cited an increase in delinquencies in recent months, as well as expenses related to the takeover. The shares now yield 3.4%.

We’ll say more as news becomes available, but for now Carfinco is a hold.

HECLA MINING COMPANY $3.35 (New York symbol HL; TSINetwork Rating: Extra Risk) (208-769- 4100; www.hecla-mining.com; Shares outstanding: 367.4 million; Market cap: $1.2 billion) explores for, mines and processes silver and gold in the U.S. and Mexico.

In the three months ended December 31, 2014, Hecla produced 3.2 million ounces of silver, up 29.1% from 2.5 million a year earlier. Gold output rose 16.1%, to 54,671 ounces from 47,108.

All of Hecla’s mines have potential for higher output, although it’s cutting back on capital spending for now while it waits for higher gold and silver prices.

Hecla Mining is a buy.

SYMANTEC CORP. $25.62 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 690.2 million; Market cap: $17.7 billion; Dividend yield: 2.3%) is hiring engineers and licensing certain technology from Narus, a computer-security firm owned by Boeing Co. (symbol BA on New York). Narus has developed algorithms and software that can analyze large amounts of Internet traffic and filter out certain data. Its clients include the U.S. National Security Agency.

Symantec will use Narus’s technology to develop security software for corporations. Demand for these products should be strong, particularly after highprofile cyber attacks on Sony, Home Depot and Target.

Symantec is a buy.

In 2000, we picked Symantec as our very first #1 Stock of the Year. It was well-established as the leader in anti-virus software. We felt Internet banking and shopping were sure to fuel its growth.

Symantec was slow to get going, due to the end of Internet Mania, the 2001 recession, and the 9/11 terrorist attacks. It fell from our initial buy price of $6.63 to as low as $4.00 in 2001.

We stuck with it, and made it our #1 buy once again for 2001, and a third time in 2002. By 2004, it had soared to $34.

In 2005, Symantec bought Veritas, a maker of software that protects large databases. This turned out to be a classic case of a big takeover that failed to live up to expectations. Symantec drifted downward, and stayed between $15 and $25 for most of the next decade.

Now Symantec plans to spin off Veritas as a separate firm, to help unlock its hidden value. The stock is cheap in relation to earnings. More important, Internet-based fraud and identity theft are spurring cyber security worries. Symantec is once again our #1 buy.

SYMANTEC CORP. $25 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 690.2 million; Market cap: $17.3 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.4%; TSINetwork Rating: Average; www.symantec.com) began operating in 1982. It’s now the world’s largest maker of security software.

Symantec is best known for its Norton anti-virus software, which helps protect computers from viruses and online attacks. It mainly sells Norton to consumers, but it also has agreements to pre-install it on new computers.

In addition to virus protection, Symantec has developed a range of other security programs under the Norton name, including software that guards against identity theft.

The company gets a large part of its ongoing revenue by selling software as a recurring subscription. With new computer threats constantly emerging, customers are willing to pay to use Symantec’s Live- Update feature to periodically update their software.

In July 2005, the company paid $13.2 billion in stock for Veritas Software, whose products store and protect information in large corporate databases.

Symantec felt Veritas would cut its reliance on the consumer market. However, the integration didn’t go as smoothly as Symantec hoped, and the company ended up confusing customers with too many products and pricing structures.

Narrower focus will pay off

Symantec’s revenue gained 15.4%, from $6.0 billion in 2010 to $6.9 billion in 2013 (fiscal years end March 31).

However, revenue fell 3.0%, to $6.7 billion, in 2014. That’s because the company reorganized its salesforce to focus on specific products instead of taking a more generalized approach. As well, one sales team now serves existing clients, while the other pursues new contracts. The changes disrupted the closing of new sales.

Earnings fell 12.1%, from $635.0 million in 2010 to $558.0 million in 2011. Symantec is an aggressive buyer of its own shares, so earnings per share fell 9.0%, from $0.78 to $0.71. Earnings then recovered to $1.61 a share (or a total of $1.2 billion) in 2012 and rose to $1.92 a share (or $1.35 billion) in 2014.

Symantec now plans to split into two publicly traded companies. One will keep the Symantec name and focus on security software and services. This business currently accounts for about 65% of its revenue.

The other firm, called Veritas Technologies Corp., will focus on data backup and recovery software (35% of revenue). Symantec expects to complete the spinoff in December 2015.

Veritas Technologies faces strong competition from larger firms, including Hewlett-Packard, IBM and Oracle. Spinning it off will let Symantec focus on the more promising security-software market.

For example, the company should benefit as more corporations upgrade their computer security in response to high-profile cyberattacks on Sony, Home Depot and Target.

High research costs a hidden asset

Meanwhile, Symantec continues to spend heavily on new products in response to increasingly dangerous online attackers. In the company’s September 2014 quarter, its research spending rose to 17.1% of revenue from 15.1% a year earlier.

Symantec is also enhancing its expertise in other ways. It recently hired engineers and licensed certain technology from Narus, a computer-security firm owned by Boeing Co. (New York symbol BA).

Narus has developed algorithms and software that can analyze large amounts of Internet traffic and filter out certain data, mainly for governments. Symantec will use Narus’s technology to develop new security software for corporations.

Symantec’s balance sheet is strong. As of October 3, 2014, it held cash and investments of $3.8 billion, or $5.50 a share. Its long-term debt was just $1.7 billion, or 10% of its market cap.

Growth should offset currency drag

Europe and Asia account for 45% of Symantec’s sales, so the higher U.S. dollar will likely dampen its growth. As a result, its fiscal 2015 earnings per share will probably dip slightly, to $1.90. However, its 2016 earnings could rise to $2.02 a share, and the stock trades at just 12.4 times that forecast.

The higher earnings should also give Symantec more room to raise its dividend. The current annual rate of $0.60 a share yields 2.4%.

Symantec is our #1 buy for 2015.

SYMANTEC CORP. (Nasdaq symbol SYMC; www.symantec.com) sells computer security technology, including antivirus and email filtering software, to businesses and consumers.

In its fiscal 2015 third quarter, which ended January 2, 2015, Symantec earned $367 million, unchanged from a year earlier. However, per-share earnings rose 1.9%, to $0.53 from $0.52, on fewer shares outstanding.

Revenue slipped 3.9%, to $1.64 billion from $1.71 billion. But if you disregard the negative impact of the high U.S. dollar on the company’s overseas sales, revenue was flat.

Symantec recently cancelled some unprofitable deals to preinstall software on new computers. That has hurt its revenue. Its plan to simplify its product lines and sell software as a subscription instead of a one-time purchase has also dampened its growth.

However, Symantec is benefiting from its restructuring, which includes job cuts.

Growth strategy: Symantec plans to split into two firms by the end of 2015

The company now expects to earn $1.87 to $1.90 a share for all of fiscal 2015, and the stock trades at 12.6 times the midpoint of that range. That’s a low p/e ratio in light of Symantec’s high research spending (16.3% of revenue in the latest quarter).

The company has a plan to buy back up to $1 billion worth of its shares. If you include $283 million remaining under its previous plan, Symantec can now repurchase $1.3 billion of shares. That’s equal to 7.6% of its $16.9-billion market cap. There are no time limits for these purchases.

Symantec still plans to split into two publicly traded firms. One will keep the Symantec name and focus on antivirus and security software and services.

The other, called Veritas Technologies, will consist of Symantec’s information-management operations, which make products for data backup and recovery. The company expects to complete the breakup by the end of 2015, but it could sell Veritas outright even sooner if it gets a good offer.

Recommendation in Stock Pickers Digest: BUY.  

SYMANTEC CORP. $23.79 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 682.4 million; Market cap: $16.3 billion; Dividend yield: 2.5%) sells computersecurity technology, including antivirus and emailfiltering software, to businesses and consumers.

In its fiscal 2015 third quarter, which ended January 2, 2015, Symantec earned $367 million, unchanged from a year earlier. However, per-share earnings rose 1.9%, to $0.53 from $0.52, on fewer shares outstanding.

Revenue slipped 3.9%, to $1.64 billion from $1.71 billion. But if you disregard the negative impact of the high U.S. dollar on the company’s overseas sales, revenue was flat.

Symantec recently cancelled some unprofitable deals to preinstall software on new computers. That has hurt its revenue. Its plan to simplify its product lines and sell software as a subscription instead of a one-time purchase has also dampened its growth.

The company now expects to earn $1.87 to $1.90 a share for all of fiscal 2015, and the stock trades at 12.6 times the midpoint of that range. That’s a low p/e ratio in light of Symantec’s high research spending (16.3% of revenue in the latest quarter).

Symantec still plans to split into two publicly traded firms. One will keep the Symantec name and focus on antivirus and security software and services. The other, called Veritas Technologies, will consist of Symantec’s information-management operations, which make products for data backup and recovery. The company expects to complete the breakup by the end of 2015, but it could sell Veritas outright even sooner if it gets a good offer.

Symantec is a buy.

ADOBE SYSTEMS INC. $76.03 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 500.3 million; Market cap: $38.0 billion; No dividends paid) makes software that lets computer users create, edit and share documents in the popular PDF format. Graphic designers also use its programs to create print publications and web pages.

In its fiscal 2015 first quarter, which ended February 27, 2015, Adobe earned $0.44 a share, up 46.7% from $0.30 a year earlier. Revenue gained 10.9%, to $1.11 billion from $1.00 billion.

Like Symantec, Adobe is shifting from selling software as a one-time purchase and toward a subscription model. It now gets 70% of its revenue from recurring sources, up from 52% a year ago.

As of February 27, 2015, Adobe had 4.0 million subscribers to its Creative Cloud service. It aims to increase that to 5.9 million by the end of fiscal 2015.

The company continues to spend a high 20% of its revenue on research, which helps it compete in its rapidly changing industry. However, the stock trades at 36.2 times the $2.10 a share that Adobe will likely earn in fiscal 2015. That’s a high p/e ratio for a company that mainly serves clients in cyclical businesses like publishing.

Adobe is still a hold.

SYMANTEC CORP. $25.03 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517- 8000; www.symantec.com; Shares outstanding: 682.4 million; Market cap: $17.1 billion; Dividend yield: 2.4%) earned $0.43 a share in the three months ended April 3, 2015, down from $0.48 a year earlier. However, the decline was partly because the company is hiring more programmers to expand its cybersecurity operations.

Symantec still plans to split into two publicly traded firms. One will keep the Symantec name and focus on antivirus and security software and services. The other, called Veritas Technologies, will consist of the company’s information-management operations, which make products for data backup and recovery. Symantec aims to complete the breakup by the end of 2015.

Meanwhile, the stock trades at just 13.5 times this year’s forecast earnings.

Symantec is a buy.

SYMANTEC CORP. $24.10 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (650-527-8000; www.symantec.com; Shares outstanding: 680.7 million; Market cap: $16.1 billion; Dividend yield: 2.5%) continues to strengthen its fast-growing cybersecurity business while getting set to split off its Veritas Technologies division.

Corporations are spending more on cybersecurity following highprofile attacks on Sony, Home Depot and Target. Symantec is taking advantage of this trend by hiring more programmers. It has also cancelled unprofitable contracts and simplified its product lines.

These moves cut the company’s profits by 10.2% in its fiscal 2015 fourth quarter, which ended April 3, 2015, to $299 million, or $0.43 a share, from $333 million, or $0.48. Sales fell 6.2%, to $1.55 billion from $1.65 billion—though if you disregard the U.S. dollar’s negative impact on Symantec’s overseas sales, its revenue rose 1%.

The company spends a very high 19% of its sales on research; that’s keeping it at the forefront of new cybersecurity trends, including the need for mobile-device security, Internet traffic analysis and data protection in the cloud.

The Veritas business makes products for data backup and recovery and supplies 35% of Symantec’s revenue. These products don’t sell as quickly as cybersecurity systems, but companies are continuing to use more storage and data-analysis tools. That could make an independent Veritas an attractive takeover target. Symantec expects to hand out 100% of Veritas’ shares to its investors by the end of 2015.

The company now expects to earn $1.80 to $1.90 a share for all of fiscal 2016, and the stock trades at an attractive 13.0 times the midpoint of that range. It yields 2.5%.

Symantec is a buy.

SYMANTEC CORP. $21.86 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (650-527- 8000; www.symantec.com; Shares outstanding: 680.7 million; Market cap: $14.8 billion; Dividend yield: 2.7%) sells computer-security technology, including antivirus and email-filtering software, to businesses and consumers.

In 2014, Symantec said it would split into two publicly traded firms. One would keep the Symantec name and focus on antivirus and security software and services. The other, called Veritas Technologies, would consist of the company’s information management business, which makes products for data backup and recovery.

However, Symantec has now decided to sell Veritas to a group of private investors for $8.0 billion. It expects to close the deal on January 1, 2016.

The cash will let the company add $1.5 billion to its share repurchase program, bringing the total to $2.6 billion, or 18% of its $14.8-billion market cap (the value of all outstanding shares).

Symantec is a buy.

There are two fundamental things you should know about making growth stock picks.

Growth stocks are companies whose earnings growth has been above the market average, and is likely to remain above average. As well, most often, these firms pay small dividends or none at all. Instead, they invest their cash flow into promoting their growth.

Although these growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.

Here are two fundamental factors that will help you make winning growth stock picks—and avoid mistakes that can kill your profits:

1) Know the difference between momentum stocks and growth stocks: It’s very easy to confuse growth stock picks with momentum stocks. Like growth stocks, momentum stocks often move up faster than the market averages. But momentum stocks attract a different kind of investor. Growth-stock investors are in for the long haul, while momentum investors aim to profit from short-term trades. Momentum investors are particularly keen to jump in on a so-called “positive earnings surprise.” That’s when a company outdoes brokers’ earnings estimates.

Momentum investors see a “negative earnings surprise” (or lower-than-expected earnings) as a sell signal. They use a number of formulas to make buy and sell decisions, but all come down to “buy on strength and sell on weakness.” So they tend to pile into the same stocks all at once, and the gains that follow are something of a self-fulfilling prophecy.

The trouble is that when the stock’s rise falters, momentum investors also try to get out as a group. The trouble is, there are never enough buyers to accommodate them. That leads to violent fluctuations in the stock’s price.

2) Add Value stocks as well to lower your portfolio’s volatility: Most successful investors hold some growth stock picks and some value stocks at any given time, depending on where they discover the best opportunities.

Value stocks are stocks trading lower than their fundamentals suggest. They are perceived as undervalued, and have the potential to rise. Many technology stocks, for instance, start out as growth stocks and transition into value stocks. One company that appears to be making the transition, for example, is security and anti-virus specialist Symantec, symbol SYMC on Nasdaq (a stock we analyze in our Stock Pickers Digest newsletter).

Together, growth stocks and value stocks can form a winning combination. A growth stock can be a top performer while the company is growing. However, a single quarter of bad earnings can send it into a deep, though often temporary, slide. Value stocks can test your patience by moving sluggishly for months, if not years. But they can make up for it by rising sharply when investors discover their true value.

Our advice: If you invest as we recommend—by spreading your investments out across the five main economic sectors, investing mainly in well-established companies and staying away from stocks in the broker/media limelight—you will automatically have some growth stocks and some value stocks.

That helps you achieve good results while reducing volatility. But in the end, we think the relative amounts you invest in growth and value stocks should be secondary to your portfolio’s diversification and overall investment quality.

Have you had success in the past with growth stock picks? Share your experience with us in the comments.

Note: This article was originally published in 2011 and has been updated.

SYMANTEC CORP. $19.95 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (650-527-8000;www.symantec.com; Shares outstanding: 684.2 million; Marketcap: $13.5 billion; Dividend yield: 3.0%) continues to strengthen its fast-growing cyber security business. It’salso selling off its Veritas Technologies division.

Corporations are spending more on cyber security following high-profile attacks on Sony, Target and Ashley Madison. Symantec is taking advantage of thisby hiring more programmers. It has also cancelled unprofitable contracts and simplified its product lines.

These moves cut the company’s profits by 12.1% in its fiscal 2016 first quarter, which ended July 3, 2015,to $275 million, or $0.40 a share, from $313 million,or $0.45. Sales fell 13.6%, to $1.50 billion from $1.74billion.

Sale boosts buyback program

In 2014, the company said it would split into two publicly traded firms: Symantec (security software,antivirus and services) and Veritas Technologies (products for data backup and recovery). However, the company has decided instead to sell Veritas to a group of private investors for $8.0 billion. It expects to close the deal on January 1, 2016.

The cash will let Symantec add $1.5 billion to its share repurchase program, bringing the total to $2.6billion, or 19% of its $13.5-billion market cap (the value of all outstanding shares).

The company now expects to earn $1.80 to $1.90 a share for all of fiscal 2016, and the stock trades at an attractive 10.8 times the midpoint of that range. It yields 3.0%.

Symantec is a buy.

FAIR ISAAC CORP. $82.43 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 31.1 million; Market cap: $2.6 billion; Dividend yield: 0.1%) makes FICO Scores, the program that dominates the market for software that businesses use to evaluate customer creditworthiness. Fair Isaac also profits by selling programs that help credit card issuers control fraud and analyze cardholders’ spending patterns.

In its fiscal 2015 third quarter, which ended June 30, 2015, Fair Isaac’s revenue rose 5.9%, to $209.3 million from $197.6 million a year earlier. Sales at its applications division (61% of the total) fell 2.1% on weaker demand for marketing and fraud detection software. However, sales of credit-scoring programs (27%) jumped 23.0%, while sales of analytics software (12%) gained 18.1%.

The company earned $32.3 million, up 10.3% from $29.2 million. Earnings per share rose 20.5%, to $1.00 from $0.83, on fewer shares outstanding. Fair Isaac spends around 12% of its revenue on research, which lets it produce innovative products that keep it ahead of the competition.

Reliance on banks adds risk

Excluding unusual items, the company expects to earn $3.97 to $4.02 a share for all of fiscal 2015, and the stock trades at 20.6 times the midpoint of that range. That’s a somewhat high multiple, as the banking industry supplies 75% of Fair Isaac’s revenue, and the likelihood of rising interest rates later this year could slow mortgage demand and hurt sales of its credit-scoring software.

Fair Isaac is a hold.

Symantec and Fair Isaac (see next article) continue to spend heavily on research, which is helping them profit as businesses spend more on cybersecurity and fraud prevention. We like the long-term outlook for both, but Symantec is the better choice right now.

SYMANTEC CORP. $21 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 679.2 million; Market cap: $14.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.9%; TSINetwork Rating: Average; www.symantec.com) sells computer-security technology, including antivirus and email-filtering software, to businesses and consumers.

In 2014, the company said it would split into two publicly traded firms. One would keep the Symantec name and focus on antivirus and security software and services. The other, called Veritas Technologies, makes products for data backup and recovery.

However, the company has now decided to sell Veritas to a group of private investors for $8.0 billion. It expects to close the deal on January 1, 2016.

The cash will let Symantec keep paying its $0.15-a-share quarterly dividend, which yields 2.8% on an annualized basis. The company will also add $1.5 billion to its share repurchase program, bringing the total to $2.6 billion.

Meanwhile, in its fiscal 2016 first quarter, which ended July 3, 2015, Symantec earned $275 million, or $0.40 a share, down 12.1% from $313 million, or $0.45, a year earlier.

Revenue declined 13.6%, to $1.50 billion from $1.74 billion. If you exclude the negative impact of the high U.S. dollar on the company’s overseas sales and an extra week in the year-earlier quarter, revenue was flat.

Following the Veritas sale, Symantec will probably buy smaller firms that enhance its computer security technology.

Symantec can easily afford to expand: as of July 3, 2015, it held cash of $3.9 billion, or $5.68 a share. Its total debt was $2.1 billion.

The company expects to earn $1.80 to $1.90 a share in fiscal 2016, and the stock trades at 11.4 times the midpoint of that range. That’s a low p/e ratio in light of Symantec’s high research spending. It spent 18.9% of revenue developing new products in the latest quarter.

Symantec is our #1 buy for 2015.

SYMANTEC CORP. $24.10 (Nasdaq symbol SYMC; TSINetwork Rating: Average)(650-527-8000; www.symantec.com; Shares outstanding: 680.7 million; Market cap: $16.1 billion; Dividend yield: 2.5%) continues to strengthen its fast-growing cybersecurity business while getting set to split off its Veritas Technologies division.

Corporations are spending more on cybersecurity following highprofile attacks on Sony, Home Depot and Target. Symantec is taking advantage of this trend by hiring more programmers. It has also cancelled unprofitable contracts and simplified its product lines.

These moves cut the company’s profits by 10.2% in its fiscal 2015 fourth quarter, which ended April 3, 2015, to $299 million, or $0.43 a share, from $333 million, or $0.48. Sales fell 6.2%, to $1.55 billion from $1.65 billion—though if you disregard the U.S. dollar’s negative impact on Symantec’s overseas sales, its revenue rose 1%.

The company spends a very high 19% of its sales on research; that’s keeping it at the forefront of new cybersecurity trends, including the need for mobile-device security, Internet traffic analysis and data protection in the cloud.

The Veritas business makes products for data backup and recovery and supplies 35% of Symantec’s revenue. These products don’t sell as quickly as cybersecurity systems, but companies are continuing to use more storage and data-analysis tools. That could make an independent Veritas an attractive takeover target. Symantec expects to hand out 100% of Veritas’ shares to its investors by the end of 2015.

The company now expects to earn $1.80 to $1.90 a share for all of fiscal 2016, and the stock trades at an attractive 13.0 times the midpoint of that range. It yields 2.5%.

Symantec is a buy.

SYMANTEC CORP. $21.86 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (650-527- 8000; www.symantec.com; Shares outstanding: 680.7 million; Market cap: $14.8 billion; Dividend yield: 2.7%) sells computer-security technology, including antivirus and email-filtering software, to businesses and consumers.

In 2014, Symantec said it would split into two publicly traded firms. One would keep the Symantec name and focus on antivirus and security software and services. The other, called Veritas Technologies, would consist of the company’s information management business, which makes products for data backup and recovery.

However, Symantec has now decided to sell Veritas to a group of private investors for $8.0 billion. It expects to close the deal on January 1, 2016.

The cash will let the company add $1.5 billion to its share repurchase program, bringing the total to $2.6 billion, or 18% of its $14.8-billion market cap (the value of all outstanding shares).

Symantec is a buy.

SYMANTEC CORP. $19.95 (Nasdaq symbol SYMC; TSINetwork Rating: Average)(650-527-8000;www.symantec.com; Shares outstanding: 684.2 million; Marketcap: $13.5 billion; Dividend yield: 3.0%) continues to strengthen its fast-growing cyber security business. It’salso selling off its Veritas Technologies division.

Corporations are spending more on cyber security following high-profile attacks on Sony, Target and Ashley Madison. Symantec is taking advantage of thisby hiring more programmers. It has also cancelled unprofitable contracts and simplified its product lines.

These moves cut the company’s profits by 12.1% in its fiscal 2016 first quarter, which ended July 3, 2015,to $275 million, or $0.40 a share, from $313 million,or $0.45. Sales fell 13.6%, to $1.50 billion from $1.74billion.

Sale boosts buyback program

In 2014, the company said it would split into two publicly traded firms: Symantec (security software,antivirus and services) and Veritas Technologies (products for data backup and recovery). However, the company has decided instead to sell Veritas to a group of private investors for $8.0 billion. It expects to close the deal on January 1, 2016.

The cash will let Symantec add $1.5 billion to its share repurchase program, bringing the total to $2.6billion, or 19% of its $13.5-billion market cap (the value of all outstanding shares).

The company now expects to earn $1.80 to $1.90 a share for all of fiscal 2016, and the stock trades at an attractive 10.8 times the midpoint of that range. It yields 3.0%.

Symantec is a buy.