The Zacks Analyst Blog Highlights:Facebook, Microsoft, Google, Yahoo and Travelers

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Mar 17, 2014, 09:30 ET

CHICAGO, March 17, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Facebook (Nasdaq:FB-Free Report), Microsoft (Nasdaq:MSFT-Free Report), Google (Nasdaq:GOOG-Free Report), Yahoo (Nasdaq:YHOO-Free Report) and Travelers Companies, Inc. (NYSE:TRV-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Friday's Analyst Blog:

Will Obama Listen to Zuckerberg?

Since the revelation of Edward Snowden's documents and National Security Agency 's (NSA) controversial surveillance practices, Facebook's (Nasdaq:FB-Free Report) founder and Chief Executive Officer (CEO) Mark Zuckerberg has criticized the U.S. government several times in public.

However, for the first time, Zuckerberg directly telephoned President Obama after a media report indicated that NSA has the technology to infect millions of computers globally through malware. The report also alleged that NSA can impersonate a Facebook server and easily infect targeted computers.

Although the discussion has been confirmed by White House, the exact details were not made available. Apparently, the discussion did not satisfy Zuckerberg, who later lambasted U.S. government's stance in a public post:

"The US government should be the champion for the Internet, not a threat. They need to be much more transparent about what they're doing, or otherwise people will believe the worst.

I've called President Obama to express my frustration over the damage the government is creating for all of our future. Unfortunately, it seems like it will take a very long time for true full reform."

The statement sums up the overall mood in the Silicon Valley, as the concerns over Internet's security and privacy continue to escalate each day. Although NSA's denial tried to soothe nerves, the growing mistrust between the government and Industry is a major concern.

Although the spying allegations affect most of the IT companies including Microsoft (Nasdaq:MSFT-Free Report), Google (Nasdaq:GOOG-Free Report) and Yahoo (Nasdaq:YHOO-Free Report), we believe Facebook stands to lose the most as its business is entirely dependent on trust. The company handles huge amount of data and sensitive information of its 1.2 billion users.

To protect it from any kind of espionage, including impersonation, Facebook started encrypting all its pages from 2013. However, increasing government surveillance may alienate users, who will fear that using Facebook will put their privacy at stake. Moreover, this can significantly jeopardize Facebook's dream project Internet.org.

The initiative aims at connecting billions of people, particularly in emerging markets, who will be able to access basic data services such as search and Facebook. For this, Facebook is looking to partner regional carriers. However, the spying allegations may prevent local carriers to join this initiative on the ground that it will bring them into direct surveillance of the U.S. government.

Hence, Zuckerberg's outrage and the resultant phone call to the President are justified. But will it be enough to move Obama? We will be eagerly awaiting the outcome.

Currently, Facebook has a Zacks Rank #2 (Buy).

Travelers Shows Fundamental Stability

The Travelers Companies, Inc. (NYSE:TRV-Free Report) is witnessing solid bottom-line growth fueled by its robust operational strategies. Moreover, the company is also engaged in enhancing its shareholders' value through consistent share repurchase and dividend payments.

Travelers exited 2013 with the bottom line for both the fourth quarter and the full year 2013 surpassing the respective Zacks Consensus Estimate. The fourth quarter witnessed improvement in underlying underwriting gains aided by benign catastrophe activities. Travelers also witnessed higher net investment income and higher net favorable prior-year reserve development. Lower share count, at the same time, boosted the bottom line. Travelers reported record earnings for 2013.

Travelers is focused on reducing operating expenses and acquisition costs in order to improve underwriting margins and enable itself to come up with a more competitively priced product. The company's expense reduction initiatives include the announcement of a plan to cut down on certain claim and other insurance expenses with the majority of the impact in the Agency Automobile line of business. This, when fully implemented, should lead to an annualized savings of $140 million in 2015.

Travelers remains upbeat about its new product Quantum 2.0. It expects this lower cost, lower-priced Auto insurance product to help it improve volumes at attractive returns. Also, the company remains focused on implementing pricing actions that should continue to result in improved returns. With successful implementation of pricing actions, the company effectively revamped its portfolio with better performing classes of businesses.

With respect to enhancing shareholders value, Travelers returned about $27 billion since mid-2006 via share repurchases and dividends. The company noted the amount is nearly reaching its market capitalization. While over the last 5 years, the company increased dividend at a CAGR of 10.8%, its dividend yield of 2.39% betters the industry average of 2.12%. The company also has a new $5 billion share repurchase authorization.

It is also noted that written rate gains continued to exceed expected loss cost trends in all segments. High retention rate, pricing gains, positive renewal rate changes, and a strong capital position are among the positives.

However, exposure to catastrophe events always remains a headwind for property and casualty insurers and Travelers is no exception.

Nonetheless, the solid fundamentals are reflected in the company's Zacks Rank. Travelers currently sports a Zacks Rank #2 (Buy).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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