INDEX:
I. Market News: Dow Sets Record, Nasdaq and S&P Close
II. Heroes: The Gap, Amre, Int'l Game Tech, CMG Info, Best Buy
III. Goats: US West Media, Department 56, Albemarle
IV. Investment News: October Same-Store Sales Reults
V. Calendar: Friday's Economic Events
MARKET CLOSE
DJIA: 4808.59, up 41.91 (RECORD)
S&P 500: 589.73, up 5.51
NASDAQ: 1057.33, up 16.83
MARKET NEWS
Weaker-than-expected economic data pushed the markets higher today as traders have renewed hope that the Fed may ease monetary policy. The Dow tacked on more than 40 points and blasted through its previous record high. While the Nasdaq is still some 10 points away from its record high, today's impressive rally was the equivalent of a 75-point move on the Dow. The S&P 500 quietly added nearly 1% today also, drawing within one point of its record high.
HEROES
Although The Gap <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GPS)") else Response.Write("(NYSE:GPS)") end if %> reported a same-stores sales increase of only 2.0%, it actually looked pretty good compared to its peers. Investors piled into the shares, pushing them up $3 3/4 to $42 1/4 and bursting through a 52-week high. Foolish Editor Tom Gardner has been high on The Gap for weeks, and has added it not only to the Fool Portfolio, but made it a core part of his Simpleton Portfolio, outlined in the Cash-King Investing folder in the Fool's School. Tom is a big fan of brand-name companies with no debt and lots of cash which are selling at multiples below their 5-year growth rate. Tom has also a pronounced preference for consumer and technology stocks, as is evidenced by both portfolios.
Home Improvement is not only a hit TV show, it is one of the hottest stocks on Wall Street. Amre <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMM)") else Response.Write("(NYSE:AMM)") end if %> is a dull old home improvement company that has become rather volatile in the past few weeks, closing up $3/4 to end at $10 today. In mid-October, Amre announced it was ending its current contract to do home repairs under the Sears brand name and was going to take Century 21's brand name. Yesterday Amre decided that it wanted to get into the kitchen cabinet refacing business, announcing a merger with Facelifters <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:FACE)") else Response.Write("(NASDAQ:FACE)") end if %> valued at around $44 million, roughly $11.41 per share or 1.41 shares of Amre. Now that the deal has been announced, arbitrageurs from large brokerages have descended on the two stocks, playing them against one another in an effort to profit from the difference in value between Amre and Facelifters prior to the merger. As always, our advice to individual investors who want to play the arbitrage game is don't bother. You are up against big money players and inside information.
Sometimes, when things get real bad at a company, anything that can be construed as positive will push up the stock price. International Game Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IGT)") else Response.Write("(NYSE:IGT)") end if %>, which has spent most of the last 12 months hitting 52-week lows, received a boost of $1 1/4 to $12 3/4 today when the CEO stated that their 1995 earnings would be in line with an analyst expectations of $0.76 per share. The bear Stearns analyst in question started coverage on the company with a "neutral" rating. . . not exactly pounding the table on this stock. International Gaming Technology also reported that they are developing new gambling machines, some with Merv Griffin's "Wheel of Fortune" brand name, to entice non-gamblers who visit the casinos for the entertainment. Guess they think that these people will see the "Wheel of Fortune" name and buy some vowels.
A blistering few days for Internet-related stocks continues to suggest to the keen, analytical, and ever-humble staff at the Evening News that there is some hysteria going on here. CMG Information Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CMGI)") else Response.Write("(NASDAQ:CMGI)") end if %> was up $7 1/4 to $42 1/4, continuing to be rewarded for decided to sell its lucrative literature fulfillment business and focusing on its anemic list sales business and its ambitious Internet venture capital attempt, @Ventures. Perhaps it is because The Fool is in the industry, but the Evening News really does not see all that much that is venturesome in @Ventures portfolio. The Lycos Internet catalog is their best offering, with the recently added Point Communications subsidiary, which reviews and rates Web sites. However, Lycos is far from having the market cornered with an Internet catalog and can only hope to generate funds from advertising on the service. Hasn't stopped CMG Information Systems, though. The lurking suspicion that this company is all sizzle and no steak, though, continues to grow. Other Internet related stocks enjoyed today's action as well, including Spyglass <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SPYG)") else Response.Write("(NASDAQ:SPYG)") end if %>, up $13 3/4 to $70 1/2 on an upgrade from Alex. Brown.
Best Buy <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BBY)") else Response.Write("(NYSE:BBY)") end if %> was trashed two months ago when it announced same-store sales that weren't up to snuff. At the time, the Evening News was prompted to comment that same-store sales were not necessarily the best thing to look at in evaluating a retail company; often surges occur during sales that actually reduce earnings. True to form, however, Wall Street pushed the shares up $2 1/4 to $23 3/4 today when the company reported that same-store sales increased 13% over year-ago levels. The most exciting part for the Foolish, however, is that total sales increased 50%, suggesting that Best Buy's expansion has been rapid to say the least. Regardless, at almost 20 times earnings and with razor-share margins, investors actually might want to think about when to sell Best Buy rather than when to buy it, unless they believe that the company can continue to grow at 20% for a few years in this highly competitive consumer electronics retail market.
GOATS
US West Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:UMG)") else Response.Write("(NYSE:UMG)") end if %>, which came public yesterday in a split from its parent company, US West <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:USW)") else Response.Write("(NYSE:USW)") end if %>, fell $1 to $18 3/4 today for no apparent reason. All of the news on the stock seemed to be good; it is being added to the S&P 500, replacing Bassett Furniture, and Lehman Brothers rated the stock a Buy. US West Media is the brainchild of the Board of Directors at US West who wanted to increase shareholder value by allowing the market to value the media and the telephone businesses of US West independently. The hope in this kind of deal is that the parts will be worth more than the sum. The only way that is true today is if you are adding up the shares in base 8.
Department 56 <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:DFS)") else Response.Write("(NYSE:DFS)") end if %> lost $1 3/4 to $44 1/8 today despite posting better-than-expected earnings. Department 56 sells little dolls and other collectible knickknacks to shoppers throughout the US. It's been growing at between 20-30% a year since it came public three years ago. Why the stock was down on good earnings is that ol' bogeyman "profit-taking." Given that the PEG for the stock is currently 1.0, it is not that surprising that some people might be taking profits. As one of the few retailers which has beaten the downward bias for the group, Department 56 has accomplished quite a bit.
Albemarle <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:ALB)") else Response.Write("(NYSE:ALB)") end if %> was down $3/4 to $17 3/8 on news that it is negotiating the sale of some of its assets to Amoco Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AN)") else Response.Write("(NYSE:AN)") end if %>. Albemarle is looking to unload some of its chemical properties that manufacture polyurethane, synthetic lubricants, and detergents. Albemarle supplies specialty chemicals and intermediates for consumer product. Evidently, the market didn't think much of the sale.
INVESTING NEWS: October Same-Store Sales
Store Total Same Store
American Eagle +27.0% +0.0%
Ames Department -3.8% -4.4%
AnnTaylor +5.7% -13.2%
Bed, Bath & Beyond +3.2% +46.1%
Best Buy +50.0% +13.0%
Bon-Ton Stores -5.7% +2.4%
Cache Inc. +22.0% +7.0%
Carson, Prarie Scott -13.7% -3.9%
Catherine's Stores +4.1% -1.7%
Cato Corp. -6.0% -11.0%
Charming Shoppe +4.0% +2.0%
Chico's FAS +6.4% +4.9%
Claire's Stores +17.0% +7.0%
Consolidated Stores +14.0% +4.5%
Dayton Hudson +7.0% +0.7%
Designs Inc. +19.0% +5.0%
Dillard Dept. +6.0% +3.0%
Dollar General +23.2% +5.9%
Dress Barn +2.0% -7.0%
Edison Brothers -12.2% -8.4%
Family Dollar +6.6% -1.1%
Federated Dept. +86.6% -1.8%
Filene's Basement -11.0% -11.0%
Fred's Inc. +7.5% +0.9%
Gantos Inc. -4.0% -4.0%
Gap +17.0% +2.0%
Grossman's -13.4% -10.4%
Gymboree Corp. +29.0% +0.0%
Hechinger -1.3% -12.0%
Heilig-Meyers +18.5% -3.7%
Hi-Lo Autmotive +7.7% -6.0%
K-Mart +1.1% +2.4%
Kohl's Dept. +20.8% +6.5%
Lechters Inc. +6.0% -2.3%
Levitz Furniture -8.3% -10.5%
Limited +2.0% -5.0%
May Department +5.5% -2.6%
Melville +3.7% -1.1%
Men's Warehouse +30.3% +11.2%
Mercantile Stores -1.5% -1.7%
Michael's Stores +11.0% -4.0%
Natural Wonders -3.3% -6.0%
Neiman Marcus +3.0% +1.0%
Old America +12.9% +3.6%
Pacific Sunwear +33.0% -3.0%
Penney, JC -5.1% -8.3%
Perfumania +15.4% +0.4%
Profitt's +3.0% +3.0%
Ross Stores +15.0% +5.0%
Sears +6.9% +4.6%
Sharper Image +5.0% -3.0%
Shoe Carnival -8.0% -15.9%
ShopKo +3.1% -2.2%
Solo Serve Corp. N/A -11.0%
Starbucks Corp. +53.0% +6.0%
TJX Cos. +8.0% -4.0%
Today's Man +3.0% -16.0%
United Retail Group +0.0% -7.0%
Value City +5.6% -3.9%
Venture Stores -4.3% -6.2%
Waban +8.2% -2.0%
Walgreens +11.5% +8.6%
Walmart +10.3% +1.7%
Woolworth +0.1% -3.5%
Younkers Inc. -0.6% -0.6%
CALENDAR: Friday's Economic Events
---October Employment Situation (8:30)
---October Auto Sales (Noon)
Byline: Befumo/Sheard (MF Templar/MF DowMan)