INDEX:

I. Market News: Bonds Drag Blue-Chips Lower
II. Heroes: Physicians Resource, Nike, LCS, Summit Technology
III. Goats: Caldor, VF, Lillian Vernon, Landstar
IV. Investment News: Re"tooling" Those Boring Sectors
V. Calendar: Tuesday's Economic Events

MARKET CLOSE

DJIA: 4780.41 down 17.16
S&P 500: 582.77 down 0.58
NASDAQ: 1050.18 down 0.92

MARKET NEWS

A stranglehold from Friday's higher-than-expected capacity utilization and production numbers and today's higher inventory numbers choked out much of the market's hope for another interest rate cut by the Fed later this month. Bonds sold off early and the stock market, aided by program trading, followed suit. Some technology stocks, however, recovered slightly from Friday's drubbing.

HEROES

Physicians Resource Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:PRG)") else Response.Write("(NYSE:PRG)") end if %> up $2 5/8 to $22 5/8. PRG announced that it will be merging with EyeCorp, Inc., the result of which will be the largest physician practice management company focusing solely on eye care in the U.S. PRG will issue approximately 6.9 million unregistered shares of stock to ECI shareholders, a deal worth around $138 million.

Nike <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NKE)") else Response.Write("(NYSE:NKE)") end if %> up $7 1/8 to $99 5/8. Nike reported record revenues and earnings for its fiscal first quarter. Net income was $2.26 per share, 58 percent better than last year's $1.43, smashing consensus estimates. In addition, the board announced a 2-for-1 stock split to occur at the end of October.

LCS Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:LCSI)") else Response.Write("(NASDAQ:LCSI)") end if %> up $4 1/4 to $31 3/4. LCS shares rose today after the company announced a 2-for-1 stock split in the form of a 100% stock dividend. The company also announced that it will pay a regular quarterly dividend of $0.0375 per share on the pre-split shares. Both dividends will be paid on October 24.

Summit Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BEAM)") else Response.Write("(NASDAQ:BEAM)") end if %> up $3 3/4 to $49. Summit announced today that it hopes to get final approval from the FDA for its laser system for correcting nearsightedness by the end of the year. The FDA has granted Summit an "approvable letter," pushing the company one step closer to final approval. An approvable letter usually indicated that all major issues have been resolved.

GOATS

Caldor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CLD)") else Response.Write("(NYSE:CLD)") end if %> down $1 9/16 to $3 7/16. The guessing game is finally over and the seemingly inevitable step in Caldor's reorganization efforts has happened---Chapter 11. Caldor filed for voluntary Chapter 11 bankruptcy protection from creditors, citing a downturn in sales and a decline in trade support. Caldor has arranged for $250 million in financing from Chemical Bank to enable it to continue operating while it restructures.

VF Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:VFC)") else Response.Write("(NYSE:VFC)") end if %> down $2 7/8 to $48 5/8. VF Corp. announced Friday that it has adjusted its earning outlook for the third quarter and second half because of a weak back-to-school season. VF suggested that third-quarter earnings could decline 20-25 percent, which includes a charge of roughly $0.10 per share to cover the planned closing of its European jeans plant.

Lillian Vernon <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX:LVC)") else Response.Write("(AMEX:LVC)") end if %> down $2 1/2 to $13 5/8. Lillian Vernon also predicted lower earnings and was punished. The company sees fiscal 1996 earnings falling and also announced that Freeman Spogli & Co. has ended plans to become the majority shareholder. Apparently, financing couldn't be arranged. Lillian Vernon cites a weak retail environment, especially for catalog retailers, as the culprit for the reduced forecast.

Landstar System Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:LSTR)") else Response.Write("(NASDAQ:LSTR)") end if %> down $3 to $22 1/4. Landstar is our third strike in the earnings warning department today. Warning that third-quarter earnings will fall below analysts' expectations, the company believes it will record earnings of $0.56 per share, flat compared to last year.

INVESTING NEWS: Time to Get Boring?

After months and months of market domination by the technology wonders of semiconductor and internet stocks, is the market telling us that it's tired of the ride? We've seen a rash of bank mergers in recent weeks; is that the next best haven for investors? Or are banks even too flashy for the current market? No one knows for sure, of course, but one overlooked segment of the market just keeps "grinding" away, "gearing" up for whatever comes in the months ahead. What is this new marvel? Would you believe the machine tool industry?

Over the last six weeks (through the first week of September), the machine tool industry has outperformed all of the others, piling up an 11% gain during the period. Whether such stellar performance is a defensive fluke in this unsteady market or a genuine sign of things to come remains to be seen, but let's look at some of the more promising companies in the industry and see just how boring they really are.

Acme-Cleveland <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMT)") else Response.Write("(NYSE:AMT)") end if %> targets two broad markets: operators of telecommunications networks and producers of metal parts and components. Acme-Cleveland makes the products that allow these telecommunications networks to be built. Some of Acme's products include electronic switches and sensors, multiple spindle bar machines, and quality assurance equipment. Acme-Cleveland has had quite a run in 1995, but of this group of five, it has been the recent laggard. Because of recent acquisitions, Acme has posted record earnings all year. AMT closed at $26 1/4 today.

Cincinnati Milacron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CMZ)") else Response.Write("(NYSE:CMZ)") end if %> is one of America's largest producers of machine tools and plastics processing machines. Like many of the companies in this industry, Cincinnati Milacron has a strong European market presence, and much of its earnings growth has come from demand for plastics manufacturing equipment and metalworking fluids overseas. The company, however, also stands to gain from the annual retooling by automakers bringing out their new models. Trading around $30 in late July, Cincinnati Milacron has risen to $33.

Gleason Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GLE)") else Response.Write("(NYSE:GLE)") end if %> has been the star performer recently, rising from $25 in late July to today's price of $35 3/4. Gleason builds machines for the manufacture of gears. A recent turnaround company, Gleason is close to tripling its earning per share over last year. In 1994, Gleason earned $0.84 per share and is expected to post results in the $2.50 range for 1995. Between recent acquisitions to assist in growing the company and the demand by businesses to replace aging equipment, the economic climate augurs well for Gleason.

Monarch Machine Tool <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMO)") else Response.Write("(NYSE:MMO)") end if %> has blossomed from below $10 a share to $13 5/8 since late July. Monarch manufactures manual and computer numerically controlled turning machines and vertical machining centers. Despite weak demand for manually operated lathes and their numerically controlled turning equipment, Monarch has been performing well. And even though Monarch is working within a depressed environment, it's attempting to shift its product mix through acquisitions. Monarch purchased Busch GmbH, a German manufacturer of coating and laminating machines, and paper, firm, and foil converting machinery.

Snap-On Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SNA)") else Response.Write("(NYSE:SNA)") end if %>, probably the most familiar to the typical consumer of the five, manufactures and distributes mechanics' hand tools through dealers who retail them from walk-in vans. North American business remains strong for Snap-On. The company is working on keeping margins in place by focusing on expense control. In addition, Snap-On repurchased 2.8 million shares of its common stock, enhancing earnings per share. In 1996, if automobile emissions testing equipment sales pick up, Snap-On stands to see strong demand from automobile service centers. Trading near $41 in late July, Snap-On has remained flat in recent weeks, closing today at $41.

True, no one can call these the sexiest stocks of the 1990s, but if you're looking for a Foolish alternative to the technology stocks which have pushed the stock market to new heights this year, machine tool companies may be a less volatile alternative. Don't forget that our Boring Stocks analyst (MF Boring) is happy to discuss these choices with you in his Industry and Analysis folder. Just shake him a few times; he'll wake up eventually.

CALENDAR: Tuesday's Economic Events

---August Housing Starts and Building Permits (8:30)

Byline: Befumo/Sheard (MF Templar/MF DowMan)