The big buzz on Wall Street today was the resignation of Fidelity Magellan mutual fund manager Jeffrey Vinik. Vinik is leaving the country's largest mutual fund to hang out his own shingle, starting Vinik Asset Management. Meanwhile, Sunglass Hut and Petco reported earnings, and we've got coverage of their conference calls for you.
MF Merlin's Economic News today covers the Labor Department's report on new claims for jobless benefits. You'll find the Economic News, as well as all our Special Sections, FoolWires, and earnings reports, on the Evening News. In tonight's Fool on the Hill, MF Templar explores market inefficiency. Enjoy!
Nimbus CD International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NMBS)") else Response.Write("(NASDAQ: NMBS)") end if %> reported very strong earnings today, posting $0.12 per share (EPS) when $0.09 was expected, sending shares up $2 1/2 to $16 5/8. Net income was up 92.9% and sales up 32.6% from the year-ago quarter. Nimbus is one of the nation's largest independent CD makers, and it announced last week that it would invest $25 million in ramping up its capacity and developing digital video disc (DVD) capability. DVD is a new technology with 7 times the capacity of standard CD-ROMs. For a lot more on DVD, check out MF Ben's Desktop Video industry area (keyword: dtv).
JLG Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: JLGI)") else Response.Write("(NASDAQ: JLGI)") end if %>, which specializes in elevating work platforms and is held in the Port Folly House of Trinculo, let loose a flurry of bullish news today, and was rewarded with a whopping $11 1/4 to $82 1/4 rise in share price. Record third quarter results of $0.84 per share beat estimates by two cents, for one thing. The company also announced a three-for-one stock split and a 50% increase in its cash dividend -- the third split and dividend increase in sixteen months.
Technical Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TCCO)") else Response.Write("(NASDAQ: TCCO)") end if %>, which specializes in encryption for networks, shot up $10 to $24 1/2 today, a week after landing a $3.9 million deal with AT&T. The company's devices scramble information relayed along networks, securing communications for radios, telephones, fax machines, and equipment which uses wires, fiber-optic cables, and microwave links. Its main clients are government agencies, law enforcement agencies, and multinational companies.
It was a dramatic day for several initial public offerings (IPOs) today. Security First Network Bank <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SFNB)") else Response.Write("(NASDAQ: SFNB)") end if %> was spun off from Cardinal Bancshares <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CARD)") else Response.Write("(NASDAQ: CARD)") end if %>, with the electronic virtual bank, originally priced at $20, ending the day at $41 and its parent rising $15 1/4 to $99 1/2. Suburban Lodges <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SLAM)") else Response.Write("(NASDAQ: SLAM)") end if %> slam-dunked its first day of trading -- sort of. It was priced at $17, but opened with its first trade at $29 1/4, settling down $2 1/2 to $26 3/4 by the end of the day. The company deals in extended-stay lodging establishments. Meanwhile, skin-care, cosmetic, and fragrance company Garden Botanika <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GBOT)") else Response.Write("(NASDAQ: GBOT)") end if %>, which started trading yesterday priced at $20 per share and quickly rose, settled down $3 7/8 to close at $31 1/8 today.
QUICK TAKES: Private prison company WACKENHUT CORRECTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAK)") else Response.Write("(NYSE: WAK)") end if %> shot up $3 to $29 3/4 after recently being awarded several new contracts in Arkansas and New Mexico. . . Shares of microelectronic component and storage technology company INTERPOINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTP)") else Response.Write("(NASDAQ: INTP)") end if %> continued to rocket, up $11 to $33 1/2, following blow-out earnings posted earlier this week and bullish analyst comments. . . Music and computer software supplier NAVARRE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NAVR)") else Response.Write("(NASDAQ: NAVR)") end if %> surged ahead $7 5/8 to $32 7/8 after announcing a 2-for-1 split. . . Internet company QUARTERDECK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QDEK)") else Response.Write("(NASDAQ: QDEK)") end if %> advanced $2 1/2 to $16 1/2 two days after it was announced that its recently-acquired Future Labs would distribute the ConferEase XCS product line of OutReach Technologies. . . Food company-turned-networking concern DIANA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> rose again, up $7 3/4 to $97 3/4, with no explanations offered.
Oak Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OAKT)") else Response.Write("(NASDAQ: OAKT)") end if %> revealed today that it expects a loss in its 4th quarter, when analysts were expecting $0.26 in income. Needham & Co. downgraded the company from "buy" to "hold" and shares of the CD-ROM maker plunged $4 to $12 1/2. Soundview analyst Scott Randall added, "That there is an excess of CD-ROM drives. . . was known, but that Oak really did over-ship in the December and March quarters was not widely known."
Shares of Biovail <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BVF)") else Response.Write("(AMEX: BVF)") end if %> dropped $4 1/2 to $34 1/4 after Forest Labs revealed it had sold its stake in the pharmaceutical concern to an investing group led by George Soros. To quell any worries, the company's chief financial officer (CFO) Robert Podruzny said that, "There is nothing wrong with the fundamentals at Biovail" and that sales of anti-hypertension drug Tiazac were strong.
Computer Horizons <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHRZ)") else Response.Write("(NASDAQ: CHRZ)") end if %> dropped $7 1/8 to $39 5/8 after American International Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIG)") else Response.Write("(NYSE: AIG)") end if %> canceled two contracts that represented $5 million in revenues. In response, Robert W. Baird analyst Carla Newmeyer cut her estimate of 1996 earnings and maintained her "hold" rating on the stock. Among the applications that Computer horizons develops are ones to help mainframes switch over to new dates in the year 2000.
QUICK CUTS: REPUBLIC ENVIRONMENTAL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RESI)") else Response.Write("(NASDAQ: RESI)") end if %> took a breather today, slumping $3 to $19 3/4 after a recent run-up due to Wayne Huizenga's investment in the company and an intention to merge. . . SIGMA CIRCUITS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SIGA)") else Response.Write("(NASDAQ: SIGA)") end if %> announced it was withdrawing a plan to offer 2.7 million shares, due to price weakness, sending shares down $1 1/2 to $8 3/8. . . COMPUSERVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSRV)") else Response.Write("(NASDAQ: CSRV)") end if %> announced it would present the first-ever online multimedia concert, featuring Jimmy Buffet and the Coral Reefer Band. Investors must have been hoping for Michael Jackson, though, as shares fell $2 9/16 to $23 1/16.
Inefficient Markets
Optical Cable <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OCCF)") else Response.Write("(NASDAQ: OCCF)") end if %> surged $31 to $110 today. This double-digit price move is the fourth in as many days, a torrid rise that has taken executives at the Roanake-based manufacturer of fiber-optic cable products aback. What is behind this sizzling rise? Earnings tremendously ahead of expectations? A hot new product just announced? How about just the fact that of the ten million shares outstanding of the recently-public company, only 1.5 million are available to the public for trading. Such thinly-traded issues are usually volatile, and Optical Cable is clearly no exception.
What sent the tobacco stocks surging in late afternoon trading? Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> leapt $6 63/256 to $103 7/8, RJR Nabisco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %> surged $2 to $33 1/8 and UST Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UST)") else Response.Write("(NYSE: UST)") end if %> pounding ahead $1 3/4 to $34 3/8. The Castano class-action suit against the tobacco industry was reportedly decertified by an appeals court judge today. This was the lawsuit that consisted of a class of people who had tried to quit smoking but could not, a rather sweeping group of individuals that dozens of legal scholars had predicted would be decertified because of the loose definition applied. The situation with the tobacco companies is reminiscent of the slaughter of the online service providers when AT&T decided to enter the Internet fray with a five-free-hour deal. Pundits, including yours truly, had been saying for months that AT&T would most likely enter the fray with some really sweet Internet access deal as a benefit of their long-distance service. Even though this information was widely known, the stocks were absolutely crushed afterwards, with UUNet Technologies (NADSAQ: UUNT) pushed from $40 to $20 in a matter of two or three bloody trading sessions.
What do all of these situations have in common? Each instance involves information that could have been easily known by individual investors with minimal research effort. To find out Optical Cable's float just requires a phone call. The options on the Castano class action suit and AT&T's entry into the Internet access business required that you simply be breathing and read the newspaper. And still Wall Street's reaction was violent, with the subsequent price adjustments showing that much of the so-called "professional" money had failed to take any of this information into account prior to it becoming front-page news.
The efficient market theory supposes that all known information about public companies is distributed quickly. Thus, as no person in the market can have an informational edge over another, professionally managed money cannot outperform the market indexes. On top of the "random walk" work that conclusively showed short-term price movements to be entirely random, thus proving technical analysis worthless, what the efficient market theory suggested is that people should throw their money into index funds and forget about it.
Time and time again, however, Fools are confronted with huge market moves that can only suggest that information is distributed about as efficiently as tax refunds. Whether well-known incidents like analyst-only briefings and conference calls that subvert both the spirit and quite possibly the letter of the Security Exchange Commission's (SECs) laws against insider trading, or little gems like those above, it is plain to anyone that information distribution is anything but efficient.
Can an individual investor beat professional investors? Can Main Street really one-up Wall Street? The Fool has consistently revealed the one great secret to doing this, time and time again. The PEG? Nope. The Leibnez Harmonic Oscillator? Negative. Mindlessly duplicating the online, real-money portfolios? Negatory. The simple maxim that Fools espouse is to *do your homework*. It is through doing, through adopting the Foolish mindset that there is always more to learn and then setting out to ingest as much of that information as possible that Fools have built market-beating portfolios for decades -- most many years before they even knew they were Fools. With the Digital World unlocking the chains that previously kept information from the little guy, the best analysis in the world has suddenly left Wall Street and headed straight towards Main Street, with a good chunk of that going on the Motley Fool's message boards every day.
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