The markets continued to plow ahead today, setting new records. The Fool Portfolio was up a staggering 8.99%, partly due to Iomega's $13 3/8 move on the eve of its 2-for-1 split. (Other Fool Port holdings also advanced handsomely -- check out the portfolio report which will be accessible from the main Fool screen by 7pm.) Former WMX chief Wayne Huizenga caused some big moves in the market, pleasing many shareholders, and we cover those in a FoolWire and in tonight's Fool on the Hill.
today MF Merlin covers discussion of the economic news since the first of the month and a speculation on how that news might influence the Fed's actions at tomorrow's Open Market Committee meeting. You'll find the Economic News, as well as all our Special Sections, FoolWires, and earnings reports, on either the Evening News or Stock Research screens. Enjoy!
Union Switch & Signal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: UNSW)") else Response.Write("(NASDAQ: UNSW)") end if %> rose $2 to $10 after the company told investors that it had authorized a special board of outside directors to examine a potential European business combination. The company has sunk four months of analysis into the deal and says it involves signaling assets in Italy, France and Ireland. This could potentially produce $450 million in revenues per year and would make the combined company the second largest signaling interest in the world.
OnTrak Systems's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ONTK)") else Response.Write("(NASDAQ: ONTK)") end if %> $4 to $21 1/4 gain is Applied Materials's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMAT)") else Response.Write("(NASDAQ: AMAT)") end if %> $5/8 to $36 3/4 loss. Vice-Chairman James Bagely jumped ship from the world's largest manufacturer of front-end semiconductor equipment to join OnTrak's Chemical Mechanical Planarization (CMP) boat. CMP, which is an area Applied just recently started competing in, is a fast-growing niche necessary for increasingly smaller geometries on high-end logic chips.
Gilead Sciences <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GILD)") else Response.Write("(NASDAQ: GILD)") end if %> reported today that injections of its PMPA compound reduced levels of the simian immunodeficiency disorder (SIV) by more than 99%. SIV is a close cousin to HIV and investors bid up the shares $6 to $39 on optimism about a treatment for HIV coming out of this work. The company also apparently has a gel that provides 100% protection against transmission of SIV. PMPA is a new type of antiviral therapeutic based on nucleotides, the building blocks of DNA and RNA.
Internet Follies: Radio on the Internet? Navarre <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NAVR)") else Response.Write("(NASDAQ: NAVR)") end if %> has run up two days in a row, up $5 3/8 to $17 1/2 today, after its 50% stake in Net.radio Network, an Internet radio company, became public knowledge. . . Amati Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMTX)") else Response.Write("(NASDAQ: AMTX)") end if %> rising $1 1/2 to $28 3/8 because its Asynchronous Digital Subscriber Lines (ADSL) *might* some day be widely used for the Internet. . . Optical Cable Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OCCF)") else Response.Write("(NASDAQ: OCCF)") end if %> soared $12 to $49 because they do fiber-optic cable for high-bandwidth transmission of data and apparently people think it has a license to print money. . . Ancor Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ANCR)") else Response.Write("(NASDAQ: ANCR)") end if %> was up $7 to $26 1/2 apparently because readers of the board in the Fool just keep plugging money into the stock.
Mixed Bag: CS First Boston lent cellular phone manufacturer Nokia <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOK/A)") else Response.Write("(NYSE: NOK/A)") end if %> a hand today, putting the shares of the beleaguered European company on its "featured stock" list and sending them up $3 to $39 3/8. . . Callaway Golf <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELY)") else Response.Write("(NYSE: ELY)") end if %> rose $3 to $31 3/4 after the company received a favorable ruling from the U.K. High Court of Justice on a patent infringement matter. . . Creative Computing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MALL)") else Response.Write("(NASDAQ: MALL)") end if %> rose $1 7/8 to $8 1/8 after the SC Fundamental Value Fund LP said it held 9.93% of the company.
File these under no news, big moves: Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> soared $13 3/8 to $82 5/8 on the eve of its 2-for-1 stock split. . . IMP, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMPX)") else Response.Write("(NASDAQ: IMPX)") end if %> rose $2 7/8 to $20 apparently just because Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> is going higher. . . Presstek <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRST)") else Response.Write("(NASDAQ: PRST)") end if %> skyrocketed $17 1/4 to $194 3/4 simply because this magical stock can apparently do no wrong. . . Syquest <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYQT)") else Response.Write("(NASDAQ: SYQT)") end if %> shot up $3 7/16 to $9 1/2 because a legion of late-comers to the Iomega party somehow believe the company's EZ-135 drive can compete successfully. . . x486 and flash-memory chip-maker OPTi <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OPTI)") else Response.Write("(NASDAQ: OPTI)") end if %> was up $2 5/8 to $8 1/2 on no news.
QUICK TAKES: Recent initial public offering (IPO) EXCEL COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECI)") else Response.Write("(NYSE: ECI)") end if %> continued its torrid rise, up $6 1/2 to $39 3/4 today. . . JOHN HARLAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JH)") else Response.Write("(NYSE: JH)") end if %> moved to diversify away from its ailing check printing business, acquiring Okra Marketing for $25 million and benefiting $2 3/4 to $29 3/8 as Wall Street applauded. . . Investors must have not liked the chairman of INTERNATIONAL MULTIFOODS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IMC)") else Response.Write("(NYSE: IMC)") end if %>, as it rose $2 3/8 to $21 3/8 when he resigned today. . . PS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PSG)") else Response.Write("(NYSE: PSG)") end if %> surged $1 to $12 1/2 when a shareholder activist was appointed to the board and the company said it would seek ways to "maximize shareholder value".
News that ValuJet <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VJET)") else Response.Write("(NASDAQ: VJET)") end if %> has cut its flight schedule in half to deal with increased Federal Aviation Administration (FAA) inspections finally weighed down the stock, causing the discount carrier to lose $1 7/8 to close at a 52-week low of $11 1/4. Gruntal cut ValuJet to "underperform" from "neutral" this morning. The company's move to cut its flight schedule to enable an "aggressive" safety review has significant short-term risk, although in the long run it will be actions like this that help rebuild the company's damaged brand.
High-flying Employee Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ESOL)") else Response.Write("(NASDAQ: ESOL)") end if %> slumped $4 5/8 to $28 3/8, continuing last week's sell-off on revenues that were slightly below analyst expectations. Although the employee benefits and temporary worker managing firm beat earnings estimates, many viewed the lower-than-expected revenues as a potential sign that growth was slowing. Some have suggested the light revenues might be a timing issue, meaning that it was subject to when work was billed for and could be included in the quarter versus moved into the next quarter. An acquisition that had not yet closed at the end of the quarter could also have been the culprit.
QUICK CUTS: Smith Barney's cut of aluminum and copper stocks sent KAISER ALUMINUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KLU)") else Response.Write("(NYSE: KLU)") end if %> into the cellar, down $1 to $12 5/8. . . VISHAY INTERTECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VSH)") else Response.Write("(NYSE: VSH)") end if %> crumpled $1 5/8 to $29 7/8 after a downgrade to "market performer" from DLJ. . . Thinly-traded AMERICAN LIST <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AMZ)") else Response.Write("(AMEX: AMZ)") end if %> fell $6 to $22 5/8 after the company reported on Friday that the first quarter's earnings would not exceed year-ago levels. . . HOLLYWOOD PARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HPRK)") else Response.Write("(NASDAQ: HPRK)") end if %> dropped $1 to $10 3/4 after it announced that a unit had filed for bankruptcy. . . Nervousness about an upcoming audit weighed on WellCare <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WELLE)") else Response.Write("(NASDAQ: WELLE)") end if %>, which slipped $1 1/8 to $12 1/8 today.
Wayne's World
What the heck is Wayne up to? That would be H. Wayne Huizenga, the guy who founded solid-waste giant WMX Technologies. Through his new majority-owned holding company Republic Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RWIN)") else Response.Write("(NASDAQ: RWIN)") end if %>, formerly Republic Waste, Huizenga has been collecting businesses in three diverse sectors in order to build a new empire. Apparently, investors want to make sure they are in on the ground floor on this one and are literally hauling the shares away by the truckload.
Huizenga joined forces with Dean Buntrock in 1971 to for WMX Technologies, starting with a little more than three waste hauling routes and 12 trucks. From this they expanded aggressively, taking America state-by-state. In 1975, WMX Technologies made its first overseas foray by bidding on a contract in Saudi Arabia and the rest is history for this giant in the solid-waste hauling and disposal industry. Huizenga retired in 1983, after the majority of WMX's growth was complete, and went on to purchase Blockbuster Video and sell that enterprise to Viacom <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: VIA/A)") else Response.Write("(AMEX: VIA/A)") end if %>. Although the premium in the takeover was not significant, the run-up Blockbuster enjoyed before it was taken-out was tremendous and has earned Huizenga the reputation of someone who can create industry giants from air and effort.
This perception is what drove Republic up $3 1/4 to $43 7/8 today after the company announced the acquisition of Continental Waste <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CONT)") else Response.Write("(NASDAQ: CONT)") end if %> in a $240 million stock-for-stock deal. This comes a little more than two months after Huizenga closed a deal to buy Mid-American Waste for $52 million and three privately-held routes for an undisclosed sum. Continental, Mid-American, the three routes and a security business called Denver Fire acquired in the past three months will add more than $102.5 million to Republic's revenues this year. Republic only closed out the year with $260.3 million in 1995, meaning the company has already guaranteed 50% revenue growth through these acquisitions.
Huizenga has turned Republic waste into a $3 billion company from less than $200 million a year ago by first grabbing a number of solid-waste haulers and consolidating them. Republic's general counsel confirmed today that Republic has acquired a staggering 40 companies in the waste, alarm and billboard businesses in the last seven to eight months. The one with the biggest price tag was AutoNation, a used-car chain that had been privately-held by Huizenga and three partners before Republic swallowed it up for $250 million in stock.
For those who think that Huizenga's power on the acquisition front might be drying up as the stock appreciates, they will be mollified by another piece of news today -- Republic announced a private placement of 5 million shares. Institutions will commit money at $40.50 a pop with the proceeds going to retire debt assumed in recent acquisitions, to fund capital expenditures and to be used for "general corporate purposes". Some of these capital expenditures include the aggressive plans to open AutoNation stores once a month until the end of 1997, meaning that the company will have a total of 18 stores by then. After that, the company plans to accelerate to one every three weeks and have 80 up and running by the year 2000.
Despite the fact that many have focused on the new lines of business like the used cars or the security services, Republic Industries is sticking to its knitting in the solid-waste business with its latest acquisition. With this move, Republic owns and operates landfills in more than eight states, collecting solid-waste for residential, commercial and industrial customers in more than 11 states and performing environmental testing in these markets as well. Mid-American gave Republic a crucial spot in the Atlanta market while Continental allows Republic to solidify its position in the mid-Atlantic region. The solid-waste business in the end is a game of regional dominance. Essentially, the land-fills become franchises, especially as they become more and more difficult to build.
Another move by Huizenga today that had nothing initially to do with Republic Industries also sparked some interest. Republic Environmental Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RESI)") else Response.Write("(NASDAQ: RESI)") end if %>, completely unrelated to Republic Industries, rose $5 3/8 to $10 after the company reached an agreement with Alliance Holding Corp. to acquire a majority interest. Alliance will get 7.5 million shares up front for $4 million plus purchase the options to buy more shares at varying rates out into the year 2000. Huizenga and Allied chairman Michael DeGroote both independently invested $5.25 million each to get 1 million warrants from Republic Environmental. Given Huizenga's recent predilection to fold his operations under one umbrella, investors perceived today's move as a potential prelude to a buy out.
Huizenga is also one of the principles in Extended Stay <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: STAY)") else Response.Write("(NASDAQ: STAY)") end if %>, a recent IPO focusing on building a chain of nationwide hotels for people who stay a long time, like executives. The shares have been bouncing back and forth between $22 and $30 since the IPO, giving the company a ridiculous capitalization for only having two units up and running right now.
Questions swirl around whether or not the tremendous run-up Republic has seen already discounts much of the tremendous growth the company will achieve with its acquisitions. The gobble-to-grow strategy always opens up the potential of a slip-up, especially if all was not as first seen in the disclosure period prior to the buy-out. Some have also questioned the price of some of the acquisitions as well. With AutoNation simply an idea and not even open for business, was the concept really worth $250 million? Circuit City's CarMax has yet to make any money -- it remains unclear whether branding the used car business and taking it away from small operators across the country is really a great idea or New Coke all over again. Although Huizenga now distances himself from the disasters that were Discovery Zone <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZONE)") else Response.Write("(NASDAQ: ZONE)") end if %> and Blockbuster Music, both happened under his watch and both have been total failures. In the end, at this level an investment in Republic waste is an investment in multi-billionaire Wayne Huizenga -- the stock has eclipsed anything resembling fundamental value given the risks involved.
Do you have what it takes to be a Fool? Is your investing outlook sufficiently Foolish?
Well. . . take The Fool Quiz! The Fool Quiz is a new primer by Jeff Robinson (MF Swagman) and is chock full of entertaining questions and situations where you have to make an investment decision. And no, you don't have to order the teacher's guide separately! The detailed answers are included. Learn all about investing from the stories of Wenceslas Widgets and Mercutio's Church Doors. Make sure you know when to buy, when to short, and when to sell. Find out what CANSLIM and the PEG and the PPP really are. A masterful Foolish overview, and as interactive as printed paper can get! The Fool Quiz is available for $14 (plus $1.50 s&h) in FoolMart or by e-mailing [email protected].