INDEX:

I. Market News: Another Ugly Day
II. Heroes: Geerlings & Wade, Oakley, Systemed
III. Goats: Hecla Mining, Philips Electronics, MAI Systems, Pyxis
IV. Investment News: Fool Focus on Industrial Services
V. Calendar: Friday's Economic Events

MARKET CLOSE

DJIA: 4703.82, down 49.86
S&P 500: 576.72, down 5.75
NASDAQ: 1017.59, down 8.88

MARKET NEWS

For the second day, both Blue-Chips and the technology stocks which most heavily comprise the Nasdaq Composite slumped considerably. Between worries about consumer credit worthiness and the seemingly endless preening and posturing of politicians fighting the budget battle, traders decided to watch from the sidelines. Nothing for a Fool to do but turn on the ball game tonight and root for whichever politically-incorrect team you fancy!

HEROES

Geerlings & Wade <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GEER)") else Response.Write("(NASDAQ:GEER)") end if %> rose $2 to $6 today, despite reporting a third-quarter loss of $0.06 per share, reversing a $0.05-per-share profit in the year-ago period. How did the stock go up? Despite the bottom-line earnings, sales increased 47% over the same period a year ago and President Phillip D. Wade expects the company to be profitable again in the fourth quarter. The EPS numbers can be misleading because they represent Pro Forma net income which includes an adjustment to record the full effect of C Corporation tax rates which would have applied to the company. Geerlings & Wade is a direct marketer of premium imported and domestic wines to individual customers.

Oakley <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:OO)") else Response.Write("(NYSE:OO)") end if %> picked up $2 3/8 to $31 3/8 after reporting third-quarter pro forma net income of $0.30 per share. In the period a year ago, Oakley earned $0.20 per share and analysts were expecting that to rise to $0.24 for the third quarter. Oakley makes those flashy sunglasses worn by sports stars and us wannabes. The company came public in August and snagged the very visual ticker symbol "OO."

Systemed <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SYSM)") else Response.Write("(NASDAQ:SYSM)") end if %> jumped $1 1/8 to $6 3/8 after its third-quarter earnings report as well. Systemed's third-quarter profit increased 10% to $1.2 million, with earnings per share of $0.05. The company has been able to increase revenue by growing its existing accounts as well as adding new businesses. While profit margins slipped to competitive pressures, the company was able to offset some of this decline by increasing its volume in processing electronic claims. Systemed is an integrated full-service pharmacy benefits manager for health care buyers and insurers.

GOATS

Hecla Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:HL)") else Response.Write("(NYSE:HL)") end if %> dropped $2 1/8 to $7 1/2 after reporting results for its Grouse Creek Unit. The Grouse Creek gold mine reported higher-than-expected operating costs as a result of lower-than-expected gold grades. The poor quality of the reserves at the mine have prompted Hecla to reconsider the mine's feasibility. If Hecla, which holds an 80% interest in the mine, decides to abandon the project, it will result in a write-down of the property.

Philips Electronics NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:PHG)") else Response.Write("(NYSE:PHG)") end if %> short-circuited $5 to $36 7/8 today after reporting weaker-than-expected third-quarter earnings. Profits from normal operations were expected to be 590 million guilders, but Philips reported profits of only 539 million guilders. One reason for the shortfall is the strong guilder, responsible for as much as 700 million guilders less in operating income over the first nine months of 1995. In addition, borrowing levels rose in 1995 as Philips pursues an expansion plan and the consumer electronics division is fighting lagging demand and heavy price competition.

MAI Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX:NOW)") else Response.Write("(AMEX:NOW)") end if %> slumped $3/4 to $7 1/8 after reporting what the company believes are good third-quarter numbers. Net income for the quarter was $2.4 million ($0.29 per share), reversing a loss of $1.2 million in the third quarter last year. MAI reported strong sales in the gaming industry and computer products. MAI, which installs and supports total information systems solutions, primarily in the gaming and hospitality industries, commented that it sees no reason for the stock's sell-off.

Pyxis <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:PYXS)") else Response.Write("(NASDAQ:PYXS)") end if %> dropped $5 to $11 3/4 as analysts slashed their ratings based on the company's third-quarter results. Montgomery Securities analyst Len Yaffe lowered 1995 estimates from $1.09 to $0.95 per share and 1996 estimates from $1.39 to $1.15. After Pyxis reported earnings of $0.22 per share compared to expectations of $0.27, Yaffe dropped his long-term growth rate to 20% from 25%. Dean Witter also cut its rating to Neutral from Accumulate and dropped estimates.

INVESTING NEWS: Fool Focus---Robert Half International

Over the last several weeks, the industrial services sector has been a quiet top-performer amid the gnashing of teeth on Wall Street surrounding the sell-off in technology and financial services companies. In April and May, the personnel-placement firms in the industrial services group were punished after reports across the country of job losses. But as employment numbers have improved through the summer and fall, the share prices of these firms have been rewarded. With the economy growing slowly but steadily, and corporate America turning more and more to outsourcing their temporary and ancillary personnel needs, these firms seem poised to continue growing at above market average rates in the foreseeable future.

Let's look at a single company in this industry as an example, Robert Half International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:RHI)") else Response.Write("(NYSE:RHI)") end if %>. Robert Half is the world's largest specialized provider of temporary and permanent personnel in finance and accounting. The company also supplies administrative and clerical, paralegal, legal support, and information technology personnel. The company has more than 180 offices in 36 states, Canada, the United Kingdom, Belgium, France, and the Netherlands.

On Monday, Robert Half posted third-quarter fully diluted earnings of $0.35 per share, 46% better than the year-ago result of $0.24, and 9% better than analyst expectations of $0.32. Net services revenue grew 39% from the year-ago period, to $159.3 million. Despite a domestic slow-down in the overall temporary placement market, Robert Half focuses on the niche accounting and finance segments, which have seen virtually no let-up in demand. With temporary worker placement representing over 90% of Robert Half's revenues, the steady demand looks favorable for the quarters ahead.

Much of Robert Half's growth has been through acquisitions. The company has acquired 14 smaller competitors and has grown internally as it expands its niche markets into new areas. The acquisitions have allowed Robert Half to expand geographically as well. With margins twice the industry average, the company should be able to continue expanding its market share through even further acquisitions.

Robert Half's price has nearly doubled since its 52-week low of $19 5/8. Yet its earnings growth seems to justify the P/E multiple of 30. Using estimated 1996 earnings of $1.55 per share, Robert Half commands a YPEG target of $46 or $47 a share, another 25% higher than today's level. Of the group of major competitors including Manpower <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MAN)") else Response.Write("(NYSE:MAN)") end if %>, Kelly Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:KELYA)") else Response.Write("(NASDAQ:KELYA)") end if %>, and Olsten <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:OLS)") else Response.Write("(NYSE:OLS)") end if %>, Robert Half seems perhaps the best situated in today's corporate climate and economic cycle. On the day, Robert Half shares rose $1 3/8 to close at $37 1/4.

CALENDAR: Friday's Economic Events

---3Q '95 Gross Domestic Product (Advance)

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