Cisco Systems reports its earnings tonight after the bell, and we'll be bringing you coverage of the report and the ensuing conference call. We've already posted conference call reports for Daka International and Cyrk. Also of interest today are the Same Store Sales numbers, just out, and covered in a Special Section later tonight. MF Merlin's Economic News today covers the Labor Department's weekly report on new claims for state unemployment insurance. And lest you forget, the semiconductor book-to-bill ratio, which Fools find not-so-meaningful, is due out tonight. We'll be covering it with a Special Section once the number is out, but be warned that it has lately been issued a day or two late.
You'll find the Economic News, as well as all our Special Sections, FoolWires, and earnings reports, on the Evening News screen. In tonight's Fool on the Hill, MF Templar focuses on Ken Fisher's 12-step research process. Enjoy!
Retailers' Same Store Sales numbers were out today, revealing which chains are outperforming and which are underperforming. Faring well was Ross Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ROST)") else Response.Write("(NASDAQ: ROST)") end if %>, with sales up 7% in April and shares up $3 3/8 to $38 5/8. Sears's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> posted an amazing 10.9% increase, driving shares up temporarily, only to close unchanged, at $50 5/8. Most impressive was Pacific Sunwear's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PSUN)") else Response.Write("(NASDAQ: PSUN)") end if %> 11% rise, lifting shares $2 3/4 to $22. Not so fortunate was Wal-Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %>, which after posting 99 successive quarters of sales increases, got slammed with a 0.6% decrease, nudging shares down $5/8 to $23 5/8. AnnTaylor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>, meanwhile, had its same store numbers slip 4.1%, but this was less than expected, so shares rose $2 1/8 to $18.
Can a food distributor transform itself into a networking equipment provider and turn its fortune around? Diana Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> thinks so, continuing its climb, up $1 3/4 to $67 3/4 after yesterday's news that it would provide some networking equipment to Concentric Corp. and Sattel Communications. (Keep in mind that the stock opened at $48 3/4 only yesterday.) The stock is heavily-shorted.
Sealant and adhesive manufacturer Adco Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ADCO)") else Response.Write("(NASDAQ: ADCO)") end if %> shot up $2 1/8 to $9 1/4 on an upgrade from "short-term market performer" to "short-term market outperformer" by Everen Securities and on news that the company has retained the services of Schroder Wertheim to conduct a study of its strategic options, including a possible sale or merger. Everen also reiterated a long-term "outperform" rating and significantly increased its 6-month target price from $7 to $12.
QUICK TAKES: CLAYTON WILLIAMS ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CWEI)") else Response.Write("(NASDAQ: CWEI)") end if %> blew away estimates today, posting $0.19 per share, when only $0.05 was expected, and sending shares up 42%-- up $2 1/8 to 7 1/8. . . Semiconductor equipment company INTEGRATED PROCESS EQUIPMENT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IPEC)") else Response.Write("(NASDAQ: IPEC)") end if %> rose $1 7/8 to $29 on news that it had received $15 million in new orders. . . The management of ADC TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ADCT)") else Response.Write("(NASDAQ: ADCT)") end if %> waxed rosy today, forecasting stronger-than-expected revenues and a robust growth rate, and boosting shares $2 1/2 to $45. . . SEVENTH LEVEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SEVL)") else Response.Write("(NASDAQ: SEVL)") end if %> shares rallied today, up $1 to $12 1/2 on news that a deal was sealed with Sony Interactive Studios to develop real-time3D games. In addition, the company just released a new game, "Tracers". . . STREAMLOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: STLC)") else Response.Write("(NASDAQ: STLC)") end if %> shares rose $1 1/16 to $8 5/8 on expectations for its new Broadcast Browser product, which will transmit video over Intranets and cable.
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %>, after beating estimates by a penny yesterday, continued its slide, falling $5 1/8 to $57 5/8 as investors wax nervous about the company's new $20-for-20 hours pricing option. The company's comment in its conference call yesterday that it would focus on operations next quarter instead of growth caused additional jitters. Alex. Brown, apparently also concerned, lowered its rating from "strong buy" to "buy". As usual, most investors appear to be taking a very short-term view, not seeing that the future of online revenues may well lie in advertising, not subscribership, and that the new pricing plan and attention on operations improvement are likely to enhance customer retention.
Darden Restaurants <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DRI)") else Response.Write("(NYSE: DRI)") end if %> sold off $7/8 to $11 7/8 after being cut by Goldman Sachs from "buy" to "moderate outperform". The Red Lobster and Olive Garden company warned that fourth quarter earnings are likely to be in line with year-ago levels, due to sales seeming slow so far. It does, however, add that it "expects good earnings growth in fiscal 1997."
Advertising agency True North Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TNO)") else Response.Write("(NYSE: TNO)") end if %> was downgraded all the way from "buy" to "sell" by Dean Witter Reynolds today, despite meeting estimates by posting a $0.03- per-share loss on Tuesday. The company, after acquiring the Harrod & Mirlin agency earlier this week, is the sixth-largest agency in Canada. True North's revenues increased 11% from the year-ago quarter on record new business, but the company felt the pinch of costs associated with acquisitions and development of its proprietary global digital intranet software. Shares tumbled $1 5/8 to $24 3/8 today.
QUICK CUTS: Restaurant chain BUFFETS, INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BOCB)") else Response.Write("(NASDAQ: BOCB)") end if %> reported earning $0.18 per share, compared to the $0.22 it made in the year-ago quarter and that it was expected to make again by analysts. Shares dropped $3/4 to $13 1/8. . . METROTRANS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MTRN)") else Response.Write("(NASDAQ: MTRN)") end if %> missed earnings estimates by two cents, posting $0.17 per share and tumbling down $1 1/4 to $13. Revenues and earnings were at record levels, though, and the shuttle- and touring-bus manufacturer remains optimistic. . . DEVON GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DEVN)") else Response.Write("(NASDAQ: DEVN)") end if %> posted increased earnings of $0.61 per share, but the Street was expecting $0.63, so shares fell $3 7/8 to $29 3/8. . . ZENITH ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZE)") else Response.Write("(NYSE: ZE)") end if %> slumped a bit today, falling $1 1/4 to $17 1/2 after a fantastic recent run-up. . . UNIFORCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: UNFR)") else Response.Write("(NASDAQ: UNFR)") end if %> reported record sales, with earnings of $0.20 per share, well above year-ago levels. But the Street must have expected more, as shares deflated $2 3/4 to $26.
FOOL ON THE HILL:
Fisher's 12-Call Research Process
Most would have thought that being the eldest son of '30s and '40s growth-stock proponent Phil Fisher would have condemned Ken Fisher to a life of finding quality, fast-expanding corporate giants. Instead, he decided to go for companies whose market capitalizations were dramatically lower than their annualized revenues. This gave the price-sales ratio (PSR) one of its greatest champions. Fisher, whose 1983 classic "Super Stocks" by Dow/Irwin press is still the landmark book on the subject, had an additional wrinkle to his approach to finding growth stocks: the 12-call research process. This is striking to any Fool who has seen the Iomega message board flourish with detailed reports of retailers' wares.
For Fisher, the 12-call research process is the core of his value approach. Eight full-time staffers of Fisher Investments, mostly composed of ex-journalists, are given a list of companies that pop out of the firm's proprietary PSR and debt adjustment factor (DAF) screen and are told to call four suppliers, four competitors and four customers and ask them a battery of questions. Information from the sources is crucial to separating the wheat from the chaff and getting the straight poop from Main Street.
Callers will ring up and ask customers why they buy from the supplier versus other companies and what might make this change in the future. Competitors are asked why they sometimes win against the company in question and what they are doing to increase that win ratio, queries which always elicit quite a bit of information. The hardest calls to make, according to Douglas Donnelly's "The Money Monarchs", are to the suppliers, often required by non-disclosure agreements and competitive worries not to say a word. Simple questions like which of your customers are buying more, who is the biggest customer, who is gaining or losing market share and who might have cost advantages can give you quite a bit of vital information about a companies core business.
The reason I find Fisher's 12-call process so compelling is because it is the heart and soul of what is going on out on the Motley Fool's message boards. It is here that Main Street meets Wall Street and diligent Fools kamikaze-call all sorts of people who do business with a company. Despite all of the froth currently abounding regarding the Iomega board today, long-time readers probably see something familiar from the early days of the boards. Calls to retailers across the nation to assess supply and demand were reported in one central location in cyberspace. The original conversations about IMP, Inc. were focused on what demand there meant for Iomega and were not simply a half-baked way to "play" off of the success of Iomega. Thousands of customers across the nation chimed in with their opinion of the Zip drive versus various competitors. Finally, diligent Fools who poured over the specs for Syquest's EZ-135 simply shook their heads in bemused sadness for these hard drives in plastic boxes.
If you are a recent arrival to Fooldom, as a lot of you are, you have seen the success that an investment in Iomega has brought. Unfortunately, you probably have not seen why. As more and more accusations begin to float in the investment community about how the Fool is moving stocks, particularly after the Zytec <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZTEC)") else Response.Write("(NASDAQ: ZTEC)") end if %> incident, readers are getting farther and farther away from the formula that led to the discovery of Iomega -- a formula once the exclusive province of firms like Fisher Investments.
Without heaping scorn and derision on the Wise, I do find sad the convenient ways they explain the success of any Fool-related stock. The suggest market manipulation of small cap stocks, plain and simple. Or they attribute our successes to a frothy, toppy market, taking away from the true contribution that you, our readers make every single day on the message boards in sharing concrete and factual information about publicly-traded companies. You see chat-rooms emphasized in articles in USA Today and Investor's Business Daily, conjuring up images of smokey back rooms where MFs whose initials stand for anything but the Motley Fool push unwitting investors to dive into thinly-traded stocks in order to drive the price up and sell before we tell everyone we are out. Frankly, that is complete bunk and any Fool realizes that. We have set high ethical standards for ourselves, not allowing penny stocks in the forum, not front-running and keeping information about what is going on with the Fool portfolios in the strictest confidence-- despite the half-baked suggestions to the contrary by reporters who know more about Scrabble than investing.
So next time you go out to the boards, keep in mind Fisher's 12-call process and how we online investors can make a complicated process happen almost effortlessly if we all roll up our sleeves, chime in and do a little work.
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