Tuesday, January 2, 1996
MARKET CLOSE

INDEX:

I. Market News: AT&T Sparks Blue-Chip Rally
II. Heroes: Beating the Dow, Aldila, Viasoft, MSB Banc, Toys 'R Us
III. Goats: Silicon Graph., Dig. Link, Stolt-Nielsen, Xeta, Medtronic
IV. Investment Perspective: Five Tasks To Begin 1996
V. Calendar: Wednesday's Economic Events

MARKET CLOSE

DJIA: 5177.45, up 60.33 (+1.18%)
S&P 500: 620.73, up 4.80 (+0.78%)
NASDAQ: 1058.65, up 6.52 (+0.62%)

MARKET NEWS

The Dow picked up where it left off in 1995, with more than a one percent gain today. Weak economic news and AT&T's announcement of restructuring and 40,000 layoffs heading into its spinoff helped the Blue Chip indicator steal the show. The S&P 500 and Nasdaq both posted decent gains as well, but failed to keep pace with the Dow.

HEROES

Own some Beating the Dow stocks? Odds are you made money today. As the "unit trusts" weighed in today (the big brokerage house mutual funds that charge you 1.5% and above annually to do the Dow 10 for you), all sorts of Dow stocks popped up multiple points. International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IP)") else Response.Write("(NYSE:IP)") end if %> was the biggest percentage gainer, racking up $1 1/4 to close at $39 1/8. Among the other members of the Dow Five class of '96---3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> moved ahead $1 3/8 to $67 3/4, Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:EK)") else Response.Write("(NYSE:EK)") end if %> surged $1 5/8 to $68 5/8, DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:DD)") else Response.Write("(NYSE:DD)") end if %> gained $2 1/8 to close at $72 and Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %>---1995's disappointing PPP stock---only rose $1/2 to close at $52 7/8 despite the heavy general buying. Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %>, David Gardner's Beating the Dow pick for the Fool Portfolio, has been a stinker thus far---will the massive oil company turn it around? Beating the Dow says odds are strong that it might.

The buyout of Cobra Golf <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CBRA)") else Response.Write("(NASDAQ:CBRA)") end if %> by American Brands <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMB)") else Response.Write("(NYSE:AMB)") end if %> has apparently caused investors to speculate as to who might be next in high-stake golf mergers. Aldila <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ALDA)") else Response.Write("(NASDAQ:ALDA)") end if %> was the main beneficiary of this today, rising $1 to $5 1/4 on heavy volume. Aldila was smashed in recent months as the Street fretted whether or not big golf-related profits were a fad or here to stay. Aldila makes the shafts for a number of popular clubs. Once upon a time it had an exclusive contract with Callaway Golf <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:ELY)") else Response.Write("(NYSE:ELY)") end if %>, but when that faded so did Aldila's fast profit growth. It has been an on-again, off-again speculation for a while that Callaway might be interested in buying Aldila, although both companies have denied this rumor vehemently.

Every Fool's favorite buy-side analyst house, SoundView Financial, was out today with a short-term and long-term "buy" rating on VIASOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:VIAS)") else Response.Write("(NASDAQ:VIAS)") end if %>, driving shares up $3 1/8 to $15. Analyst Kris Tuttle expects the company to earn $0.65 in fiscal 1996 and $0.92 a share in fiscal 1997. VIASOFT provides software and consulting services. VIASOFT's Enterprise 2000 software supposedly reduces maintenance and re-development costs on "mission-critical" software applications to help them solve the looming year-2000 conversion problems. Many software applications, according to VIASOFT, will freak out when we hit the millennium mark and VIASOFT is here to save them. Despite solid earnings and revenue growth, however, little of VIASOFT's gains have trickled down to the bottom line because of their propensity to issue more shares. Insiders have been selling quite a bit, as well. Still, if the company can grow earnings like it says it can, it does look somewhat cheap here; do your homework.

MSB Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MSBB)") else Response.Write("(NASDAQ:MSBB)") end if %> turned down First Empire State's unsolicited $26-per-share offer, but it was enough to drive MSB shares up $3 1/2 to $22 nevertheless. Furthermore, MSB reaffirmed its intention to proceed with the purchase of eight branches from First Nationwide Bank---virtually doubling the size of the nine-branch bank system. MSB Bancorp is the holding company for Middletown Savings Bank and is based in Goshen, New York.

Toys R' Us <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:TOY)") else Response.Write("(NYSE:TOY)") end if %> had a good day in spite of a lackluster holiday season, rising $2 1/4 to $24. Same-store sales slid ahead less than one percent for the entire holiday season, although CEO Michael Goldstein did boast of a two-percent gain in December. The company announced its new "Babies R' Us" concept, an arrow pointing straight at Baby Superstore's heart. Given the dismal performance of the Kids R' Us clothing stores, however, it might be a tad early to perform last rites for Baby Superstore <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BSST)") else Response.Write("(NASDAQ:BSST)") end if %>. Merrill Lynch saw enough in the results to upgrade Toys R' Us from "neutral" to "above average," which might account for some of today's activity. Investors might be a little too quick to hope for a turnaround in Toys R' Us, though. Alex Brown and NatWest both downgraded Gymboree <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GYMB)") else Response.Write("(NASDAQ:GYMB)") end if %> today, citing promotion sales that would hurt gross margins. Given that about 20% of Toys R' Us units are in the Kids R' Us format, this division could continue to plague overall results. For its part, Gymboree was down $2 1/8 to $18 1/2 today.

GOATS

Silicon Graphics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SGI)") else Response.Write("(NYSE:SGI)") end if %> led the charge downward for some tech stocks today, falling $4 3/8 to $23 1/4 after it announced profits for its fiscal second quarter would only come in at $0.30 a share, compared to the $0.42 analysts were expecting. What the heck is the problem here? The company blamed, among other things, the government shutdown for slowing orders of its graphics intensive personal computers. Increased competition from Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SUNW)") else Response.Write("(NASDAQ:SUNW)") end if %>, which sells a lower cost workstation, as well as a number of product launches that have customers holding off on new purchases contributed to the shortfall. There have been rumblings in the Silicon Graphics folder here on the Motley Fool for a while of slowing revenues, along the same lines which brought high-flying Avid Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AVID)") else Response.Write("(NYSE:AVID)") end if %> down two weeks ago. A short-term blip or a long-term trend? The documentary evidence suggests the former given, among other things, the huge contract to equip the DreamWorks studio will kick in at some point in the next fiscal year. Adjusted estimates are $1.45 EPS to $1.50 EPS this year and $1.65 EPS to $1.70 EPS next year, suggesting the stock is trading at about 15 times this year's earnings and 13 times next year's estimates. Given that the company will be growing at 13% from the end of the current fiscal year into the next fiscal year, this might not be as low as it could get.

For most of the year, investors have thought making high-speed digital access products was like having a license to print money. This is no longer so for Digital Link <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DLNK)") else Response.Write("(NASDAQ:DLNK)") end if %>, down $5 1/2 to $8 5/8 in torrid trading today. Friday, after the market closed, the company came out with a fourth-quarter profit warning---enough to make the shares of any tech stock swoon. Softer demand for domestic carriers coupled with light international business was the reason for the shortfall. This is the second disappointment in a row for Digital Link, which surprised analysts last quarter with only $0.18 a share as well as announcing that President and COO Dan Palmer would resign. Just another example of the pitfalls of dealing with the Baby Bells. Boston Technology's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BSTN)") else Response.Write("(NASDAQ:BSTN)") end if %> on-again, off-again revenue stream is another example.

How far can a company's shares fall without generating a speck of news? Pretty far. Stolt-Nielsen SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:STLTF)") else Response.Write("(NASDAQ:STLTF)") end if %> tumbled $ to $ today and the wires have absolutely no news on it. The international firm, based in London, provides distribution services for bulk liquids. Stolt-Nielsen SA recently acquired its Norwegian subsidiary, Stolt Partner SA. Three weeks ago, the company reported that its fourth-quarter net would come in between $0.89 and $0.96 a share on $320 million in revenues, substantially higher than the $0.61 that analysts had been expecting. This, however, included a $0.09 one-time gain. The only potential fly in the ointment was the public offering of 6.5 million shares announced back in October, without any mention of when or how much the shares would go for. An object lesson on the native volatility of stocks and the perils of buying shares in international corporations?

December wonder Xeta Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:XETA)") else Response.Write("(NASDAQ:XETA)") end if %> is quickly becoming a January disaster. The thinly-traded stock ran as high as $20 bucks early in December but crashed $3 1/4 to close at $13 today after it released baleful earnings. Revenues increased 33% even as earnings per share (EPS) decreased 15% in the fiscal fourth quarter. With less than two million shares outstanding, this has never been a stock for the faint of heart. It could have been had for $5 a share as late as November 1st, meaning that it basically quadrupled in a little more than a month. The same hot, CANSLIM money that drove it up is mashing it right back down, with more than 10% of the outstanding shares trading hands today. Xeta Corp. creates value added phone systems targeted at hotel and motel operators.

Medtronic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MDT)") else Response.Write("(NYSE:MDT)") end if %> got pummeled today as a result of long-standing news released last week regarding advancements by its main competitors, Guidant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GDT)") else Response.Write("(NYSE:GDT)") end if %> and Ventritex <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:VNTX)") else Response.Write("(NASDAQ:VNTX)") end if %>. Down $3 7/8 to $52 in a post-holiday frenzy, the news surrounded defibrillators. Guidant's Ventak (released last week) and Ventritex's Cadet (approved by the FDA last week) pose a threat this year to Medtronic's Jewel. All three products are tiny, surgically-implanted electronic devices that deliver a shock to the heart when it starts to beat irregularly. MF Uptrend, our healthcare analyst (professional nephrologist and amateur phrenologist) has done a lot of work on these three companies. Check out his offerings in our newest content area---Keyword:Sector.

INVESTING PERSPECTIVE: Let's Start 1996 Right!

New year. . . new beginning. A time to take stock (if you will) and get some financial issues straightened out. Here's my Foolish list of five things I think every Fool should do (or review) to begin the new year.

1) GET A WILL. If you don't have one yet, get a will drawn up. Plain and simple, no excuses, it's necessary. None of us wants to face mortality, but by being a Fool, you're already taking care of your future by investing well. It only makes sense to make sure your wishes are carried out regarding your Foolish endeavors if something should happen to you unexpectedly. Sorry for the morbid start, but this is one time conventional wisdom is right. If you have assets and relatives (or friends) to whom you want them to pass on the occasion of your death, it's irresponsible not to have a will. If you already have one, read it over and make sure it's still adequate for your needs. While you're at it, make sure your life insurance is adequate too. All those horrible topics no one wants to bother with? Your family will be glad you bothered. Then, put these things away and move on to more pleasant topics.

2) PAY OFF CONSUMER DEBT. A number of our Foolish commentators have discussed this topic lately, and with good reason. Where else can you get a guaranteed 15%-18% rate of return like you can by simply paying off those usurious credit cards? Bite the bullet and pass up the next gizmo on your "I want" list and pay those credit cards down, and then let's get to item #3.

3) PAY YOURSELF FIRST. Most Americans have the wrong attitude toward savings and budgeting. They think they need to plan out every expenditure so that something's left each month to save. Wrong! If you would simply put 5-10% of each paycheck into your portfolio account before you pay anything else, you'll be amazed not only at how quickly that monthly infusion grows when you invest Foolishly, but also at how little you missed that extra cash out of your paycheck. Then, after paying your regular expenses, you don't have to feel guilty if you decide to blow every last penny of what's left. You've saved for your future, you've paid your bills (get rid of that credit card debt), so enjoy the rest guilt-free on whatever your heart desires. Too many people agonize over budgets that are simply impossible to stick to; they're worse than diets. Just pay yourself first and you'll make yourself happy AND wealthy.

4) INVEST THAT NEST-EGG FOOLISHLY. Where do you turn to invest that 5-10%? Why, The Fool, of course. Check out the various strategies we teach in the forum, from Beating the Dow, to Investing for Growth, to the Fool approach used in the online portfolio. The best place to get information on these approaches is in our online store (Keyword:FoolMart). For well under $100, you can get the two Motley Fool Primers and our Trio pack of investment books, and still have money left over for the Gardners' book due out later this month. A great stock education for less than the price of one-year's subscription to many of the newsletters published by the Wise.

5) VISIT ALL OF OUR NEW AOL CONTENT AREAS. The Fool has a number of enhancements either debuting recently or in the works for the near future---all designed to make you a better investor. Check out our new Industry Research area (Keyword:Sector), our new and improved Port Folly game (begins January 8), and in the near future, you'll be able to navigate the entire area more quickly when we launch our new look (with updated AOL architecture).

Things are looking very Foolish for 1996. Take part, won't you?

CALENDAR: Wednesday's Economic Events

---ABC/Money Magazine Consumer Confidence Poll (6:30 p.m.)

***All government reports are contingent on the Washington silliness currently taking place courtesy of our elected officials.

Byline: Robert Sheard (MF DowMan) & Randy Befumo (MF Templar)