INDEX:

I. Market News: Drab Down Day.
II. Heroes: Advantage Health, Cobra Golf, Sight Resources, Sutton Resources
III. Goats: Discount brokers, Steris, James River, BTU Int'l, Manhattan Bagel, Internet stocks
IV. Investment News: Ouches for Everyone.

MARKET CLOSE

DJIA: 5075.21, down 101.52
S&P 500: 606.81, down 9.53
NASDAQ: 1002.47, down 28.47

MARKET NEWS

Mergers provided the vast majority of the winners today in an otherwise ugggggglllly day. All the major indexes bled red ink today. Every last one of them. Take a deep breath before you check your portfolio. Basically, if you owned anything and it was not involved in a merger of some kind, you lost money today.

HEROES

Advantage Health <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ADHC)") else Response.Write("(NASDAQ:ADHC)") end if %> rocketed ahead $8 1/4 to close at $45 today after Healthsouth <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:HRC)") else Response.Write("(NYSE:HRC)") end if %> bought the company for $325 million. Healthsouth sees the acquisition adding to 1996 earnings. The acquisition makes sense for Healthsouth, as Advantage operates 150 rehabilitation centers in the New England area while Healthsouth operates 700 in the south. The exact payoff for Advantage shareholders depends on where Healthsouth trades in the coming weeks -- they have been promised about $47.50 in Healthsouth stock per share unless the price of Healthsouth goes into the tank.

American Brands <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMB)") else Response.Write("(NYSE:AMB)") end if %>, a long-time member of the elite Dow 30 until Philip Morris bought out General Foods in the late '80s, has built its business by acquiring name brands in diverse industries. Today it acquired Cobra Golf <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CBRA)") else Response.Write("(NASDAQ:CBRA)") end if %> for $36 in cash a share -- driving the stock up $7 7/8 to close at $35 1/2. The price tag on this deal is a whopping $700 million. Cobra Golf is most famous for its King Cobra line of clubs. With $181 million in trailing revenues according to Zacks Analyst Watch, this puts the price tag at almost four times sales -- which is not cheap. With only $383 million in cash on the balance sheet as of last quarter, American Brands might need to take on some debt to complete the acquisition. Investors apparently thought that this was a little expensive, as American Brands was down $2 1/4 to $44 1/8 on the news. American Brands does alcohol, insurance, cigarettes and personal productivity planners, among others.

Sight Resource Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:VISN)") else Response.Write("(NASDAQ:VISN)") end if %> jumped $1 1/2 to $9 5/8 today --- a move attributed by Dow Jones wires to comments made by an analyst on the "Nightly Business Report," a show on public television that covers the stock market. Alan Ackerman, president of Fahnestock & Co., stated that the excimer laser industry had good growth potential and the FDA approval of Summit Technology's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BEAM)") else Response.Write("(NASDAQ:BEAM)") end if %> laser to correct nearsightness was a positive development. Summit, Sight Resource and Lasersight are covered out on the stock board's by the roving MF ETurkey. Tune into any of the folders for some in depth talk about lasers and don't forget to bring your flak jacket --- laser talk can get fanatical.

Even in today's brisk sell-off, a few stocks managed to move higher. One of those was Apogee Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:APOG)") else Response.Write("(NASDAQ:APOG)") end if %>, rising $1 3/8 to close at $14 1/2. The fabricator and installer of glass and aluminum received positive comments from a Piper Jaffray analyst who called the stock "undervalued," putting estimates of next year's earnings about $1.30 EPS to $1.35 EPS. The stock has tumbled this year along with the rest of the domestic construction industry, but according to Piper Jaffray, APOG has market-dominating glass-coating technology and a king-size market share.

A boardroom brawl in a mining stock sent investors digging for shares today. Sutton Resources <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:STTZF)") else Response.Write("(NASDAQ:STTZF)") end if %> rose $2 3/8 to $11 3/8 after James Sinclair was ousted from the chairmanship and replaced by Roman Shklanka. Barbara Sinclair, the company's largest shareholder with 20% of the outstanding stock, has called for a shareholder meeting to remove all of the board with the exception of her husband. Will she get her husband's job back? The company says it will continue with "business as usual" until this mess works itself out.

GOATS

On a day where there was a lot of trading, you would have expected discount brokerages like Charles Schwab <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SCH)") else Response.Write("(NYSE:SCH)") end if %> and Quick & Reilly <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BQR)") else Response.Write("(NYSE:BQR)") end if %> to be having good days. Not a chance. Schwab was down $2 5/8 to $17 today in pretty heavy volume, with Quick & Reilly <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BQR)") else Response.Write("(NYSE:BQR)") end if %> tagging along right behind, losing $2 1/8 to $20 7/8. The reason? Brokerage stocks, particular those of discount brokerages, do very well when the market is good and very bad when the market tanks. Many institutional investors, convinced by all the scaremongers that a money market will return more than the stock market next year, are getting out of the brokerage stocks. Consider it a market call, of sorts.

One merger today was not so well-received ... Amsco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:ASZ)") else Response.Write("(NYSE:ASZ)") end if %> and Steris Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:STRL)") else Response.Write("(NASDAQ:STRL)") end if %>. In fact, the shares were treated quite roughly, with the acquirer Steris down $9 3/4 to $32 1/2 and the acquired, Amsco, losing $2 5/8 to finish at $15 1/8. So what's the story here? Amsco is getting 0.46 shares of Steris for each share of Amsco, which is why the bloodbath in Steris has carried over to Amsco. Investors are fearful that Steris, a manufacturer of infection prevention systems, would grow more slowly when combined with Amsco. Steris had been growing at 40-50% while Amsco has been shrinking in the past 12 months. Amsco makes infection control products as well, focusing on surgical capital equipment like autoclaves. Steris swears the acquisition will be "highly accretive" to earnings, but investors apparently disagree. The merger is worth $500 million ... it had been worth $660 million at the open but the drop in Steris dropped the cost of the buy-out as well.

James River <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JR)") else Response.Write("(NYSE:JR)") end if %> fell $6 1/8 to $25 1/4 today after the company announced that the fourth quarter would come in below analyst estimates of $0.43 EPS. The company cited production cuts and weaker demand in all product categories. Today was probably not the best day to announce this, given the market's mood. James River primarily makes pulp and paper products and in fact announced today that it would sell its flexible packaging and CZ ink business to focus more on its core paper operations. The paper group has been hit pretty hard in the past few weeks over slackening demand.

BTU International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BTUI)") else Response.Write("(NASDAQ:BTUI)") end if %> led the percentage losers today dropping 33%. Closing down $2 11/16 at $5 5/16, the manufacturer of thermal processing capital equipment for the electronics industry told the Street on Friday that its fourth quarter and first quarter earnings would come in way below expectations because one customer pushed orders out to the second quarter. Whether or not BTU International is a bargain here or not depends on whether or not this customer keeps the orders or cancels them later.

Why Manhattan Bagel Company <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BGLS)") else Response.Write("(NASDAQ:BGLS)") end if %> lost $5 7/8 to close at $15 1/8 is a little unclear here in the Fool newsroom right now. It was reported on Thursday to the SEC that three company insiders had sold a total of 1.45 million shares in late November at about $19 5/8, each reducing their holdings by about 50%. They all had substantial stakes remaining, though. Insiders are legally allowed to sell if and only if there is no impending bad news. However, many times insiders get out before the business slows down. Manhattan Bagel, which runs a chain of bagel stores affiliated in some regions with Starbucks, had been on quite a roll until today.

Investors cashed out of the Internet with just about everything else today. Quarterdeck <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:QDEK)") else Response.Write("(NASDAQ:QDEK)") end if %>, which makes a bunch of cheap software to browse the Internet and make webpages, fell $6 15/16 to close at $24 1/2. Global Village <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GVIL)") else Response.Write("(NASDAQ:GVIL)") end if %>, a modem manufacturer with an Internet access subsidiary, lost $1 1/2 to end up at $17. Checkfree <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CKFR)") else Response.Write("(NYSE:CKFR)") end if %>, which does electronic commerce for some Quicken users, slipped $3 1/4 to $20 7/8. Mecklermedia <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MECK)") else Response.Write("(NASDAQ:MECK)") end if %>, which publishes magazines about the Internet, ended lower, losing $3 1/4 to close at $12 3/4. Netcom Online Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:NETC)") else Response.Write("(NASDAQ:NETC)") end if %>, an Internet access provider, lost a whopping $11 1/4 points to close at $40 3/4. Pity anyone who bought that stock at $11 1/4. MF Shorty over in the Shorting Stocks folder recently shorted Netcom in his Shortfolio, so he is a happy guy today. Check out the informative Shorting Stocks folder over in Let's Talk Investment Approaches for more details.

INVESTING PERSPECTIVE:

The follow events contributed to today's massive sell-off:

1. A few weeks back, Packard Bell pulled down Cirrus Logic and Intel Corp. due to problems selling lower-end computers. PB had vastly overrated demand.

2. Right around that time, DRAM companies took a hit because the spot market went crazy, falling below the contract price.

3. SRAM companies also got smashed after all the Taiwanese 486 plants with excess capacity switched production over to make SRAMs, killing prices there.

4. Multiple retailers of personal computers have been reporting slowing demand which will impinge on profit margins. Office Depot <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:ODP)") else Response.Write("(NYSE:ODP)") end if %>, Best Buy <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BBY)") else Response.Write("(NYSE:BBY)") end if %> and Circuit City <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CC)") else Response.Write("(NYSE:CC)") end if %> are among those seeing sales slip. Circuit City said 3Q sales were "disappointing." Best Buy said computer sales "hurt" margins -- no great surprise as they gave away monitors.

5. Cellular phone related stocks took a shellacking off of slackening North American sales. Motorola, Nokia and Ericcson took the heat here.

6. Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:AAPL)") else Response.Write("(NASDAQ:AAPL)") end if %>, which lost another $3 today to close at $32 1/4, told its shareholders that it would lose money in the fourth quarter on Friday. The fourth quarter for Apple includes Christmas, when about 30% of all PCs are sold.

7. Micron Technology missed estimates by $0.04 EPS when it reported on Friday. More alarming were the first comments from the company that contract prices for DRAM were going lower.

8. Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMD)") else Response.Write("(NYSE:AMD)") end if %>, down $1 1/8 to $17 1/8 today, reported this morning that quarterly profits would be off yet again due to lower than expected demand for 486 CPUs. This indicates a slowdown in lower end CPU sales and spare capacity for other 486 manufacturers.

9. Information Storage Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ISDI)") else Response.Write("(NASDAQ:ISDI)") end if %> also said its next quarter would be lame, citing slow sales of a telephone answering machine chip. The stock lost $3 1/2 to close at $9 1/2.

10. The government had its second furlough this month today after the President and the Republicans could not come to agreement on a balanced budget. This killed the bond market, which had priced in a deal. The bond market normally drives the stock market as both stocks and bonds compete for investment dollars.

11. The Federal Reserve meets tomorrow and people are unsure whether the fed will cut.

12. Buster Mathis Jr. was beaten by Mike Tyson on Saturday night.

13. It is pretty close to the end of the year and no manager wants to see his gains evaporate.

14. All sorts of investors are selling losers for tax-loss reasons.

So what does this all mean?

Not a lot. What really matters is what is going to happen tomorrow. And the day after tomorrow. And so on.

We've focused a lot on technology in our Investment Perspective, examining the issue with what we hope is a little more depth than is available in the Wall Street Journal or CNBC. What have we said about technology? The incredible surge in demand this year has made any company affiliated with technology look like an engine of growth, even if in fact it has just come along for the ride. Networking, including the Internet, is growing like wildfire and this will drive demand for networking hardware, networking software and database software to support the massive projects being. More and more chips will be needed in more and more gadgets -- and more and more it looks like the semiconductor equipment makers will benefit in excess of the chip makers themselves, as the chip companies fall all over themselves to gear up fabs for anticipated demand in the year 2000.

After days like today, individual investors look a lot more at their losers than their winners, and they sometimes make impulsive decisions. Particularly when it comes to technology stocks. Here are some questions that you might want to ask yourself before you either sell a dog or take advantage of a bargain:

- Do I know which companies this company competes with?
- Do they have anything proprietary in their products?
- Does this company play into one of the big growth waves or simply try to be a low cost-producer of a non-premiere product?
- Has this company made solid, regular profits over the last one year? Three years? Five years? Ten years?

Don't believe all of the negative stuff you hear right now. Just like Ben Graham said 50 years ago, Mr. Market is a manic-depressive. Pause, reflect and buy into long-term growth.

Be Foolish.

Byline: Randy Befumo (MF Templar)

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