Shares of SouthTrust Corp. and Star Banc Corp. gained a place Wednesday on Goldman, Sachs & Co.'s widely watched "recommended list."
After the up-grades from "market outperform," Birmingham, Ala.-based SouthTrust's shares gained $1.9375, to $51.75, and Star Banc, Cincinnati, fell 43.75 cents, to $48.9375. Both companies got high marks from analysts for strong management and a commitment to growth and shareholders.
First of America Bank Corp. also gained 68.75 cents, to $56.875, after Goldman upgraded its shares to "outperform" from "market perform."
The recommendations offer reassurance to investors who-after last week's market volatility-want to put their money in companies with strong operations and growth prospects.
"Individual selection is very important," said Peter E. McGratty, bank analyst at NationsBank Montgomery Securities, San Francisco. "You can't just buy the group. It's not the way to go."
Mr. McGratty is bullish on Star Banc, saying the company has progressed "from an average performing bank to an exceptional one," under chairman and chief executive Jerry A. Grundhofer and chief financial officer David M. Moffett, both formerly of Security Pacific Corp.
The executives came on board in 1993, when Star Banc decided to revamp operations rather than give in to overtures from Fifth Third Bank. Over the past four years, return on assets at Star Banc has risen to 1.90% from 1.06% and return on equity rose to 23%, from 13.3%
At SouthTrust management led by chairman and chief executive Wallace D. Malone is fostering expansion into Georgia and Florida. "This is a very high growth company with the commitment of strong management," said Michael L. Granger of Fox-Pitt, Kelton, New York.
Elsewhere Wednesday, shares of BankAmerica rose 56.25 cents, to $74.50; BankBoston Corp. shares were up $1.4375, to $84.50; and Chase Manhattan Corp., rose 75 cents, to $119.6875. All three were recommended by NationsBank Montgomery Securities.
First Union Corp. shares rose 56.25 cents, to $50.50, after Frank J. Barkocy of Josephthal Lyon & Ross set $65 as a 12-month target price. Mr. Barkocy also raised his target price for Fleet Financial Group Inc. to $85, helping lift its shares 50 cents, to $65.0625., and KeyCorp rose 62.5 cents, to $63.875 after Mr. Barkocy set its 12-month target at $78.
Mr. Barkocy expects BankBoston's shares to reach $106 in 12 months.
"With prospects for favorable earnings momentum over coming quarters, combined with a still benign rate and economic environment and favorable pricing conditions, financial institutions' shares remain an attractive sector," Mr. Barkocy said.
The markets showed little response to one report of continued strength in the economy. Orders placed with U.S. factories unexpectedly rose in September for the fourth consecutive month, with demand for primary metals, industrial, hardware and high technology leading the way, the Commerce Department said.
The Standard & Poor's bank index rose 0.43%, while the Dow Jones industrial average was up 0.04%. The Nasdaq bank index was up 0.05%, and the S&P 500 increased 0.21%.
Market watchers are looking ahead to Friday, when the federal government will release the non farm payroll report for October. Expansion is expected to be reported, with payrolls swelling by about 230,000, economists said. The report will also give indications about wage pressures, another key barometer of economic activity.