I. Market News: Blue Chip Rally
II. Heroes: Ins. Auto Auctions, Ann Taylor, Borland, Cimco
III. Goats: Fred Meyer, Fisher Scien., Davidson, Medarex, Gen. Magic
IV. Investment News: C-Cube Defies Street Expectations
V. Calendar: Thursday's Economic Events

MARKET CLOSE

DJIA: 4852.67, up 55.64 (RECORD)
S&P 500: 591.71, up 5.39 (RECORD)
NASDAQ: 1047.95, up 4.05

MARKET NEWS

Blue Chip stocks roared ahead today, blasting to a new record high for the DJIA. The technology-laden Nasdaq Composite tried to regain some of yesterday's lost ground, but gave back most of the day's gains by the end of the session. Semiconductor stocks continued to show weakness after yesterday's influential downgrades by the dynamic (DRAM) duo---Whittington and Kurlak.

After the close today, the October semiconductor book-to-bill ratio for October was announced at 1.18, the highest level since July. Wall Street analysts were predicting October's ratio would be around 1.08. Today's number means for every $100 in orders shipped (or billed), another $118 in new orders was recorded (booked).

HEROES

Insurance Auto Auctions <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:IAAI)") else Response.Write("(NASDAQ:IAAI)") end if %> rose $1 3/4 to $8 3/4 today in spite of yesterday's earnings that were terrible at best. Steps announced by the company to deal with the dramatic drop in profitability include freezing management salaries, firing three vice presidents, centralizing some functions under the president and putting cost controls in place. Momentum investors focusing on disappointments pushed the stock down to its 52-week low recently after the problems with this quarter's earnings came to light. Did they overreact? Insurance Auto Auctions runs auctions for rebuilt and repossessed cars.

Ann Taylor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:ANN)") else Response.Write("(NYSE:ANN)") end if %> is another momentum favorite finding legs today after being creamed in recent weeks. The stock rose $1 3/8 to $15 5/8 when CS First Boston analyst Stacy Pak lifted it to "strong buy" from "buy." Ann Taylor has been one of the more high-profile victims of the weak retail economy. Their spring and summer lines were major failures with consumers, and inventory build-ups and increased debt levels pushed many investors out of the stock. The Evening News has been wondering since the stock hit $10 if investors may have been a little too zealous in their selling. Ann Taylor retails women's apparel.

Borland Intl <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BORL)") else Response.Write("(NASDAQ:BORL)") end if %> got its foot in the door of the Internet frenzy today, announcing that it will license Sun Microsystems's Java programming language. Rising $3 to $16 1/4, Borland reported that it will use the language to provide world-class development tools based on this product. Java is a programming language that can be used to build development tools for Internet applications. Borland is best known for being a major loser in the applications wars. Some believe that the company can turn around on the strength of its Delphi development product. Borland would call its Java-based product "Latte," of all things.

Cimco Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CIMC)") else Response.Write("(NASDAQ:CIMC)") end if %> leapt ahead $1 1/4 to $9 5/8 on news that M.A. Hanna <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MAH)") else Response.Write("(NYSE:MAH)") end if %> will buy out the cash-flow negative operation for $10 1/2 per share---almost a godsend for investors. M.A. Hanna sees Cimco's Singapore plastics compounding business as a quick entry for Hanna into Asia. Singapore would serve as a focal point for expanding Hanna's chemicals business throughout the region. The company expects the acquisition to be accretive to earnings in 1996 but did not provide any detailed estimates.

GOATS

Fred Meyer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:FMY)") else Response.Write("(NYSE:FMY)") end if %> received the unkindest cut from Dean Witter today, dropping $1 to $18 when the stock was reduced from "neutral" to "swap" by Patrick McCormack. "Swap" is a nice way to say "sell," suggesting that customers should switch into the shares of another company in the same industry. The troubled northwestern retailer has been beleaguered by labor strikes, fierce competition from better positioned chains, a soft retail economy and massive job cuts in its region which have sapped consumer spending power. In fact, one wonders whether things could get worse, but then names like Caldor, KMart and Hills Department Stores spring to mind. MF Boring has been an intermittent follower of the stock but has hung the yellow "avoid" sign on its door in recent months.

Pessimism was the order of the day for the Goats. Fisher Scientific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:FSH)") else Response.Write("(NYSE:FSH)") end if %> chimed in, forecasting lower sales growth for the next "several years." Shares of Fisher sold off $2 1/4 to $29 3/4 as the company informed investors in its earnings release that the task of integrating the purchase of the Fisons plc subsidiary and the Curtis Matheson acquisition a few months ago would take time. The company believes that even though sales growth will slow, internal improvements will allow operating margins to improve, suggesting that Fisher Scientific is positioning itself for the long term. This seems an increasingly rare decision in this era of "increasing shareholder value" through the spin-off or sale of subsidiaries. Those with a long-term horizon might want to give Fisher Scientific shares a closer look tonight. Fisher Scientific sells laboratory supplies worldwide.

Davidson & Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DAVD)") else Response.Write("(NASDAQ:DAVD)") end if %> fell $6 1/2 to $27 after news was released that the Federal Trade Commission is looking closely at two majority-owned subsidiaries, NewMedia Express and Electronic Arts Distribution Inc. Maxis Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MXIS)") else Response.Write("(NASDAQ:MXIS)") end if %> recently refused to sell through these two distributors, which have exclusive contracts with Toys R' Us <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:TOY)") else Response.Write("(NYSE:TOY)") end if %>, because its competitor in the edu-tainment software industry (Davidson) holds a stake in them. The FTC has sent a letter of inquiry to "several other software publishers" in an effort to determine whether or not Davidson's ownership of these distributors violates fair trade practices. Davidson reached a high of $39 two weeks ago before Oppenheimer cut its rating on the stock on valuation concerns. That timely call probably saved clients quite a bit of money.

Medarex <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MEDX)") else Response.Write("(NASDAQ:MEDX)") end if %> slipped $1 to $5 3/8 today after it sold 2.19 million more shares on the open market in order to fund administrative and development costs. Given that the shares were trading at $6 yesterday and these new shares will be offered in a block trade directly to institutions at $5, it is no surprise that the price would gravitate towards $5 today. Medarex is a biopharmaceutical company.

General Magic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GMGC)") else Response.Write("(NASDAQ:GMGC)") end if %> will always be well-remembered by investors who want to warn neophytes on the dangers of hyped IPOs. With its first trade in February at $31, it has been nothing but a disappointment for investors ever since. Today General "Tragic," as it has been called around Fool HQ, made a break for its 52-week low, down $1 7/8 to $11 5/8 after Alex. Brown analyst Steven L. Eskenazi downgraded the company to "hold" after its earnings release. General Magic designs object-oriented programming platforms for personal digital assistants and other applications.

INVESTING NEWS: Are They Using the Same Numbers We Are?

Knowledge is everything when it comes to investing. Time and time again, investors armed with concrete information about the fundamental impact of a product or service on a particular industry have held tight to their shares while market seers cried "Overvalued, overvalued, sell." And they kept holding all the way up to new high after new high. The Motley Fool's founders, for instance, understood intuitively the long-term potential of online communications and the real value that a consumer service like America Online could add over the World Wide Web. Armed with this understanding, they have continued to hold their shares of America Online throughout its rapid ascent while nay-sayers have predicted that the Web and Internet access providers would overtake America Online's growth. The results to date speak for themselves.

C-Cube Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CUBE)") else Response.Write("(NASDAQ:CUBE)") end if %> is one of those companies where the people "in the know" are still ecstatic about the stock's potential even when the great unwashed are backing off, saying "It's overvalued," or "it's gone up too fast," or "it's just a chip stock. . . it's gonna sell-off." The people who understand the industry and the company, however, claim, that C-Cube Microsystems has a chip that is nothing short of revolutionary. The CEO of the company reportedly said in a closed conference closed that "the stock is still cheap." How can a stock which has gone from $22 to in May to $80 1/2 today, up $8 3/8, selling at 78 times trailing earnings, still be cheap? The Evening News sought out someone with industry knowledge to respond this enigma.

MF Ben, host of the Desktop Video folder, has been pounding the table for C-Cube Microsystems for some time. C-Cube is a leading developer of digital compression technology, which is absolutely crucial in order for desktop video applications to go mainstream. The bandwidth limitations in the conventional telephone system require compression in order to allow images to travel through phone lines with anything resembling speed. Announcement after announcement from C-Cube Microsystems about new products has been dissected in the Desktop Video folder by MF Ben and he, along with MF MOM and MF Stores, have been right all along as the stock continued to climb. The company held a conference with analysts that was closed to the press, prompting the big move today, but the Evening News caught up with MF Ben in order to see what light he could shed on this "riddle wrapped in an enigma."

"Cube makes MPEG and JPEG compression chips needed to reduce desktop video information to a throughput that storage and processors can handle. They have made some incredible deals recently, about 10 in the past 3 weeks, that can be found by a company search," reported MF Ben. "C-Cube OWNS the market [for compression chips] and that market is growing by leaps and bounds." A quick search reveals, for instance, that C-Cube introduced a PCMCIA card add-on that would support full-motion video for notebook computers. For $75 bucks, if you have CPU power enough to support it, you can use Video In Motion to play back full-screen, full-motion digital video for multiple applications.

"What will the size of the desk-top video market be? Who knows? It will be bigger than the Internet. Look at the market for video; then look at how much of that market is STILL analog! Compact disks have been out for ten years!" As for its current valuation, "C-Cube has ALREADY met fiscal year 1995 estimates WITHOUT their fourth quarter numbers; their third quarter was that good." Ben believes the long-term picture remains secure in spite of the recent growth. "Cube will see quarterly growth above 40% for a while."

Zacks Analyst watch reported an average compound annual growth rate forecast of 32.5%, putting MF Ben's number in the same ballpark. Based on the printed estimates alone, consensus for 1995 is $0.92 per share and $1.37 for 1996. Given the company currently has $1.04 per share in trailing earnings with one quarter left to go, that $0.92 estimate might be a *little* low. C-Cube reported $0.48 in its last quarter, 166% above consensus estimates of $0.18. Apparently analysts have been low-balling this stock all the way. Given that the analysts following the stock still have estimates for the year below the current trailing earnings and have missed the last three quarters in a row by more than 75% each time, why should anyone even pay attention to their numbers?

If C-Cube can just *meet* last quarter's result, it will have made $1.39 per share in 1995, two cents more than analysts were forecasting for next year. Assuming MF Ben's 40% rate of growth will kick in in two years and next year they can grow at 50%, which would represent quite a slowdown from current levels, more sensible 1996 numbers would suggest $2.09 per share for the year. It's funny; if you run a PEG based on *these* numbers, it comes out to 1.04, suggesting that the stock is *fairly* valued on relatively moderate growth assumptions. Hmmm. . . are these the numbers the institutions have been using when they have bought the stock? The numbers that analysts don't seem to want to give out, but that any Fool could have gleaned by reading the Industry Research area on the Motley Fool?

Stay tuned to the Desktop Video and Networking folders for MF Ben's and MF MOM's take on today's action. Maybe if you ask nicely, they will even give their estimates for the company so Fools can make informed investment decisions.

CALENDAR: Thursday's Economic Events

---Initial Unemployment Claims (8:30)
---October Producer Price Index (8:30)
---Weekly Fed Data (4:30)

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