Monday, March 11, 1996
MARKET CLOSE
INDEX:
I. Market News: Technology Stocks Rebounding
II. Heroes: America Online, Netscape, Infrasonics, Harris, C-Cube
III. Goats: Immulogic, Northeast Utilities, Volt Information
IV. Investment Perspective: The Alex Brown New Media Conf.--part 1 of 5
V. Another Foolish Thing: The Weekly Fool on Paper
MARKET CLOSE
DJIA: 5573.77 +103.32 (+1.89%)
S&P 500: 639.57 +6.07 (+0.96%)
NASDAQ: 1079.09 +15.36 (+1.44%)
To the relief of many investors, the markets rebounded strongly today after Friday's free-fall. Technology stocks, including semiconductor issues, showed particular strength. If you're still scratching your head about *why* the markets fell apart on Friday's very positive economic news, check out our Special Section---in our main screen listbox---which tries to make sense of it all with several Foolish perspectives. Another good source for the low-down on economic news is MF Merlin's Economic Indicator area, accessible from the Evening News screen.
Also be sure to look at the Special Section on the deals announced today between America Online, Netscape, and CompuServe, as well as a Special Section on this month's semiconductor book-to-bill numbers, if they are released. For those of you who enjoyed MF Templar's detailed multi-part look at the Digital World---hold onto your hats---"Technophrenia" is coming March 18th!
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %>, after a brutal past week, bounced back strongly today, up $4 3/8 to $48 3/8, after it was announced that AT&T would be offering its WorldNet customers access to America Online at reduced rates. Steve Case, chairman and CEO of America Online, explained that, "As more consumers opt to use Internet access providers, such as AT&T WorldNet Service, we want to make it as easy and affordable for them to also experience the magic of AOL." This demonstrates that AT&T's entry into the online world is suddenly being seen as an opportunity more than a threat. In addition, today also marked the launching Ziff-Davis's presence on America Online. The new area will offer AOL subscribers online versions of many Ziff-Davis consumer-oriented computing magazines.
Another factor giving America Online a boost was a deal announced today with Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %>, whereby Netscape's World Wide Web browser would be incorporated into America Online as well as its Internet access company, GNN. CompuServe, a unit of H&R Block <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRB)") else Response.Write("(NYSE: HRB)") end if %> also announced adoption of the Netscape browser. These developments helped prompt J.P. Morgan to start coverage of Netscape with a buy rating, setting a 12-month target of $55 and estimating earnings per share (EPS) of $0.17 in 1996 and $0.40 in 1997. Morgan expects a growth rate in sales of 168% in 1996, and 72% in 1997. In response, Netscape shares, which had been spiraling downward all last week, recovered $6 1/4 to $46 1/4.
Shareholders of respiratory equipment manufacturer Infrasonics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IFRA)") else Response.Write("(NASDAQ: IFRA)") end if %> breathed easier today, watching their shares appreciate $1 to $6 1/2. The reason? Nellcor Puritan Bennett <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NELL)") else Response.Write("(NASDAQ: NELL)") end if %>, another respiratory-related concern, announced it would acquire Infrasonics for roughly $66 in stock, promising Infrasonics shareholders at least $6.25 per share.
Harris Computer Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NHWK)") else Response.Write("(NASDAQ: NHWK)") end if %>, the only pure play in Internet firewall stocks, rocketed ahead $10 1/2 to $44 3/4 today, when it was revealed that Tudor Investments has taken a 5.9% stake in the company. On Thursday, the company announced a 3-for-1 stock split to take effect on March 18. Keep in mind, folks, that the stock price sat at $9 in November. For MF Templar's detailed Investment Perspective on this interesting company, check out the Feb. 9 back issue of the Evening News. Other Internet-related stocks enjoying strong come-backs today included CyberCash <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYCH)") else Response.Write("(NASDAQ: CYCH)") end if %>, up $7 1/4 to 39 1/4, Raptor Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RAPT)") else Response.Write("(NASDAQ: RAPT)") end if %>, up $4 1/8 to $29 3/4, and Global Village Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GVIL)") else Response.Write("(NASDAQ: GVIL)") end if %>, up $2 1/2 to $15 5/8.
C-Cube <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CUBE)") else Response.Write("(NASDAQ: CUBE)") end if %> climbed $3 1/2 to $67 1/4 today, after introducing its new CL484VCD MPEG-1 VideoCD Decoder chip. The company also announced a partnership with Philips Sound & Vision, a division of Philips Consumer electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %> to jointly market and deliver VideoCD solutions, using the new chip, to the rapidly growing Asian market. Similar deals have also been sealed with Aiwa, DVS, and LG Electronics. If you had bought C-Cube a year ago at $7 1/2, the stock would be a nine-bagger for you today!
QUICK CUTS: AMERICAN VANGUARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMGD)") else Response.Write("(NASDAQ: AMGD)") end if %> soared $3 3/8 to $13 1/8 after releasing a fine earnings report on Friday, featuring net income doubled over the previous year. ANNTAYLOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> jumped $1 1/4 to $19 when Alex Brown raised its rating from neutral to buy. . . In line with general support for the retail sector today, discount retailer FRED'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FRED)") else Response.Write("(NASDAQ: FRED)") end if %> rose $1 to $8 1/2, a few days after announcing earnings considerably lower than last year, due to a lower price strategy, increased sales, and lower margins. . . Also benefiting from a strong day for retailers was SEARS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %>, leaping $2 5/8 to $48 1/2 in the wake of last week's strong sales numbers. . . ORACLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ORCL)") else Response.Write("(NASDAQ: ORCL)") end if %> increased $2 7/8 to $49 7/8, on a wave of support for technology, as well as in anticipation of earnings to be released later this week. . . GILEAD SCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GILD)") else Response.Write("(NASDAQ: GILD)") end if %> advanced $1 to $35 3/4 after announcing very positive preliminary results for their treatment against CMV retinitis, an infection which leads to blindness and is common in AIDS patients. . . GOLDEN STAR RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GSR)") else Response.Write("(AMEX: GSR)") end if %> hurtled forward $4 3/4 to $15 1/2 today, after a recent announcement by the exploration firm regarding a very promising microdiamond mine in French Guyana. The share price has nearly tripled in the past 52 weeks.
Anti-allergy pharmaceutical developer Immulogic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMUL)") else Response.Write("(NASDAQ: IMUL)") end if %> dropped $3 3/4 to $13 1/4 today, when Hoechst AG announced that its Hoechst Marion Roussel subsidiary would no longer be holding a 6.29% position in Immulogic for investment purposes. Instead, it will be selling "some or all" of its shares whenever it seems like a good idea to do so---not exactly a ringing endorsement. While it is possible that Hoechst merely has found other, even more attractive places to invest its money, the move might also signal flagging confidence in Immulogic. Immulogic has recently reacquired the right to commercialize its products, including ALLERVAX RAGWEED, which was proven effective in recently-released test results. The company is expected to announce phase III clinical trial results of its ALLERVAX CAT vaccine in 1996's second quarter, and reiterates its excitement at its prospects.
Northeast Utilities <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NU)") else Response.Write("(NYSE: NU)") end if %> saw its shares decompose $1 3/8 to $20 3/8 when the U.S. Nuclear Regulatory Commission announced it was considering closing two more of the company's reactors. The issue is safety and Northeast has 30 days to verify its safety procedures. Two reactors have already been shut down, and the NRC is investigating claims that the company has dismissed whistle-blowers. The company is currently spending roughly $15 million per month to compensate for the idled reactors, and maintains confidence in its safety practices. At this rate, shares of NU can be expected to have a half-life of 11 days!
Volt Information Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VOLT)") else Response.Write("(NASDAQ: VOLT)") end if %> handed the market a hefty surprise today, with its earnings coming in at $0.03 per share, fully 88% lower than the $0.25 analysts expected. This news was enough to send the shares down $ to $. Volt was recently spun off from Autologic Information International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AIII)") else Response.Write("(NASDAQ: AIII)") end if %>. Autologic blamed acquisition costs and other Volt-related charges for the loss. Volt shares lurched down $2 1/4 to $19 3/4.
QUICK CUTS: KEY TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KTEC)") else Response.Write("(NASDAQ: KTEC)") end if %> slumped $1 to $16 1/2 after a recent warning that due to delays in shipping customer orders, it expected a loss in its second quarter earnings. . . FIRST AMERICAN FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FAF)") else Response.Write("(NYSE: FAF)") end if %> had its near- and long-term ratings cut from accumulate to neutral by Merrill Lynch, sending the stock down $2 to $30. . . National physician practice management company EQUIVISION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EQMD)") else Response.Write("(NASDAQ: EQMD)") end if %> fell $1 3/8 to $12 3/8 today, four days after announcing the acquisition of a Florida oncology practice and after being given an initial "buy" rating from Interstate Johnson/Lane. . . Gensym <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GNSM)") else Response.Write("(NASDAQ: GNSM)") end if %> demonstrated the volatility of initial public offerings (IPOs) when it retreated $1 1/8 to $14 today, after a rise from $11 to $16 in its first month of trading. . . HCC Insurance <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HCC)") else Response.Write("(NYSE: HCC)") end if %> dropped $1 7/8 to $51 7/8 after Oppenheimer and Co. lowered its rating from outperform to market perform. Everen Securities had announced an identical downgrade on Friday. Since the stock has risen nearly 50% already this year, analysts appear to be sensing an end to the remarkable run.
INVESTMENT PERSPECTIVE:
The Alex Brown New Media Conf.--Part 1
An efficient market presupposes an efficient and equal distribution of information. If the Motley Fool has taught you anything in its short life, it is that information distribution is neither efficient or equal. In fact, it is downright inefficient and unfair sometimes, allowing certain individuals to make investment decisions based on news that the public knows nothing about.
Surprise---I am not talking about insider trading. So you can sweep that little bugaboo right out of the way. I do not believe in any way, shape or form that the trading of insiders amounts to a hill of beans over the long haul, unless they are insiders at a heck of a lot of companies. I am not talking about investment bankers cashing in on pending deals either. Yes, a little information because you work at a brokerage and a see a certain CEO enter your corporate offices may indeed cue you in to a merger, but again, I do not think this over the long haul a portfolio makes. I am not even talking about analysts telling clients before the public that they are about to upgrade or downgrade a stock---sure, this can move a stock a couple of points either way in the short term, but in the long term even an analyst cannot prop up a bad company or keep a good company down. Numbers, like the truth, will win out. So I am not talking about a midnight call to Jeff Vinik from Rick Whittington on the eve of a downgrade of the semiconductor stocks. Since the analyst works off of basically the same information a hard-nosed individual investor can get on a small or medium sized company (and some nice large ones), I don't think there is a significant enough inefficiency there to get concerned about.
What does concern me is two Wall Street institutions---the conference and the conference call. The two C's of investing that the little guy is systematically denied entry to---these bother me a lot. As the Fool who does news and is nominally in charge of Research (with the exception of Industry Research), I get to squeeze through a lot of doors that I would not be able to if I had a 9 to 5 job at a factory. Who the heck can take the afternoon off to listen to Micron Technology grumble about the 4 meg DRAM market even if they could get in on the call?
I am sure you have read it in the Evening News more than once. . . XYZ Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XYZ)") else Response.Write("(NYSE: XYZ)") end if %> surged $5 to $35 today when it was revealed in the conference call that ABC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABC)") else Response.Write("(NYSE: ABC)") end if %> was interested in buying them out. Film at 11:00 PM. Doesn't that just get your goat? To that end, here at Fool News we have taken to reporting earnings as they happen in what we call Special Sections, complete with a synopsis of the Conference Call---if we are allowed in. Heck, we also try to post the phone number for the recording, if there is one, so other Fools can listen to it themselves.
There is another event that will often cause a stock to surge. . . the presentation at a conference. Companies consistently try to break news at conferences of investment analysts because they have 'em all there at once. It actually is a strikingly efficient thing for the person at the company who is charged with being the liaison to analysts. The problem is that individual investors are not invited to attend conferences. In fact, more often than not, they have no idea some of the more expensive and important ones are even going on. For instance, how many of you either knew about or attended the Robertson Stephens Semiconductor conference two weeks ago?
This week the Fool got a slot to attend the Alex Brown New Media conference and I got the chance to zip out here to San Francisco and try to get every word down for you guys back home (wherever that may be). "New Media" is the buzzword for what I like to call digital companies (which has a much better sound). Heavyweights like America Online, Netscape, Spyglass, Intuit, CompuServe, CUC International and the Motley Fool have all sent representatives scurrying out here to give presentations to investment analysts hungry for ideas and information. Tom and Dave were coming as a courtesy to America Online to present on a panel of content providers and we leveraged this into my attendance.
The conference starts tomorrow and I must admit I am a little excited. I have brought my laptop and my hand-held cassette recorder and will, over the course of the next three days, develop all of the content I can based on what is done and said here. My goal is to give you a sense of the conference as much as the information therein, as part of the Fool's ongoing efforts to demystify Wall Street. Tune in all through this week for cutting edge news about what is going on in digital companies---straight from the horses' mouths, so to speak---as it happens.
ANOTHER FOOLISH THING: The Weekly Fool on Paper
For those among you who prefer paper and staples to chips and bytes, The Weekly Fool is now available in a paper format. Ideal for Fools on the run, The Weekly Fool is a compilation of the week's happenings. If you don't have time to scour every corner of Fooldom, yet you want to stay in the loop---sign up! This paper version is also an ideal gift for your friends or relatives who have Foolish inclinations but no Foolish technology. Share this unique newsletter with them, and help them learn about sound investing principles and strategies as well as potential stock picks. To subscribe, for more information, or for a sample copy, contact MF Numbers ([email protected] or 800-717-0701).
YET ANOTHER FOOLISH THING: Fools on the Radio!
That's right! David and Tom Gardner are bringing their Foolish outlook to the airwaves this weekend. Tune in to the Monitor Radio's Weekend Edition---stations and times are listed in the Radio page.
Byline: Randy Befumo (MF Templar)