Baby Superstore got whacked today for poor earnings, and we've got a Special Section on this development for you. Coming soon, by tomorrow, will be a look at the wireless Internet companies. which seem to comprise this month's "hot" sector. (By the way, this is the 100th anniversary of the Dow Jones Industrial Average!)
MF Merlin's Economic News today covers a quarterly macroeconomic outlook survey and reports on existing home sales and consumer confidence. 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. In tonight's Fool on the Hill, MF Templar focuses on the meaning of Fooldom. Enjoy!
Shares of Ligand Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LGND)") else Response.Write("(NASDAQ: LGND)") end if %> swelled $3 to $19 after the company announced that it and France's Institute Pasteur de Lille have found a DNA sequence linked to obesity. At issue is the obesity gene, leptin, which regulates metabolism, and which might be promoted by the newly-discovered sequence. Investors, delirious with visions of anti-obesity and metabolic control drugs, drove share prices up $ to $. They should be warned, though, that pharmaceutical products take many years to come to market, and face many FDA hurdles along the way. Ligand has exclusive rights to commercial applications of the leptin promoter.
What happens when a company snags the president and chief executive officer (CEO) of its rival to be its own president and CEO? Well, in the case of long-distance telecom concern MIDCOM Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCCI)") else Response.Write("(NASDAQ: MCCI)") end if %>, it meant a $3 1/8 to $12 3/8 increase in share price. Leading MIDCOM will be William Oberlin, formerly of rival Frontier Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRO)") else Response.Write("(NYSE: FRO)") end if %>. In addition, Frontier's former vice chairman, John M. Zrno, and former chief financial officer (CFO), Marvin C. Moses, joined MIDCOM as directors and consultants. For its part, Frontier shares slipped $5/8 to $32 5/8.
The news from Ranch Cucamonga, California today was that agricultural developer Cadiz Island <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLCI)") else Response.Write("(NASDAQ: CLCI)") end if %> is buying for $175 million the agricultural firm Sun World, which is currently in chapter 11 bankruptcy protection. Cadiz expects Sun World to help it expand and diversify its agriculture and water businesses. Shares of Cadiz Island rose $9/16 to $5 7/8. In other merger news, ClinTrials Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CCRO)") else Response.Write("(NASDAQ: CCRO)") end if %> announced it is buying privately-held Bio-Research Labs, and had its share price rewarded $3 5/8 to $47 3/8.
QUICK TAKES: Connectivity-equipment provider TADIRAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TAD)") else Response.Write("(NYSE: TAD)") end if %> rose $2 3/4 to $27 3/8 after reporting earnings of $0.95 per share (EPS) beating consensus estimates by a comfortable margin and boasting record profits and increased margins. . . SPECTRAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SPTR)") else Response.Write("(NASDAQ: SPTR)") end if %> rose $2 7/8 to $24 1/2 on increased interest among investors in fiber optics companies. However, OPTICAL CABLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OCCF)") else Response.Write("(NASDAQ: OCCF)") end if %>, which had an amazing run-up last week, surrendered $14 to $78 today. . . Alex. Brown raised its rating on AMERICAN TELECASTING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATEL)") else Response.Write("(NASDAQ: ATEL)") end if %> from "buy" to "strong buy" today, boosting shares of the wireless cable company $15/16 to $13 13/16.
Investors threw the baby out with the bath today. Baby Superstores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BSST)") else Response.Write("(NASDAQ: BSST)") end if %>, that is. The retailer of all that is baby-related missed its $0.21 EPS earnings estimates by three cents and got spanked $10 5/8 to $24 1/2. The high-profile specialty retailer had problems last quarter, as well. CEO Jack Tate said he was pleased with better-than-expected sales, due to successful new stores, but was disappointed with net income, which was affected by rising selling, general and administrative (SG&A) expenses and falling gross margins. Margins were down because of lower margins on commodities like diapers and formula.
Matrix Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MATX)") else Response.Write("(NASDAQ: MATX)") end if %> dropped a heart-stopping $7 5/8 to $19 3/8 today after it reported that its AccuSite product will be delayed due to "unanticipated results" in clinical trials. AccuSite treats squamous cell skin cancer and genital warts, and although trials for warts were successful, the cancer trials did not meet objectives. CEO Craig McCullen noted that, "While this delay is disappointing, we intend to proceed with clinical development of AccuSite as a treatment for basal cell cancer."
The fat lady singered today, as Singer NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEW)") else Response.Write("(NYSE: SEW)") end if %> warned that its second quarter earnings might be at half of year-ago levels, due to a significant economic slowdown in Europe and a strike in Brazil. This news, coupled with downgrades, sent shares bobbin' down $5 7/8 to $20 1/2. Donaldson Lufkin and Jenrette cut Singer from "buy" to "market perform", while Merrill Lynch downgraded the firm from "near-term accumulate" to "near-term neutral" and from "buy" to "long-term accumulate". (But how can you accumulate without buying? Are you supposed to steal? To borrow?)
QUICK CUTS: NIMBUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NMBS)") else Response.Write("(NASDAQ: NMBS)") end if %> shares slipped $1 1/8 to $17 1/8, despite increasing coverage of the company by technophiles looking for the next great wave. The producer of CD-ROMs and audio compact disks is gearing up to produce digital videodisks as well. . . Storage technology company Iomega saw its shares tumble $5 11/16 to $38 7/8 on no news today, while competitor SYQUEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYQT)") else Response.Write("(NASDAQ: SYQT)") end if %> continued to drop today, down another $1 1/2 to $9 3/8 as the company continued to aggressively issue press releases denying that any buy-out is in the works. . . INTELLICALL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICL)") else Response.Write("(NYSE: ICL)") end if %> responded today to New York Stock Exchange inquiries, stating it knows of no material reason why its stock closed up 43% on Friday. Shares dropped $1 1/4 to $6 5/8 today. . . PaineWebber slashed Paradigm Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRDM)") else Response.Write("(NASDAQ: PRDM)") end if %> to "neutral" from "buy", as Paradigm shifted down $1 1/8 to $8 5/8. . . AXENT TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AXNT)") else Response.Write("(NASDAQ: AXNT)") end if %> was started by Merrill Lynch with a "near- and long-term accumulate" rating. Investors must have expected something like "table-pounding buy", as shares slid $2 1/2 to $19 3/4. . .FRANKLIN ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FEP)") else Response.Write("(NYSE: FEP)") end if %> dropped $3 1/2 to $23 after the electronic publisher warned that next quarter's earnings would be below expectations.
First Time In Fooldom?
The hallowed halls of Fooldom welcome more and more new readers every single day. Many of these first-timers eschew almost all of our written content and head straight for the message boards. Upon entering the hurly-burly world of rapid-fire postings, these individuals can sometimes become consumed by the day-to-day nature of the message boards, regretfully missing some of the finer points of Fooldom. To that end, I wanted to write about what Foolishness is really about for today's column and point people towards the official compendiums of Folly that exist. If you want to simply cut and paste this article and send it to anyone out there who might not understand what Foolishness is, feel free.
The Motley Fool was founded on the notion that investing in stocks could actually be fun. Before the Fool (B.F.), investing for most people was a tiresome journey into the arcane that seemed at once overwhelming yet powerfully necessary. An entire financial industry had sprung up in this century that was maintaining a veil of mystery over investing in equities, keeping vital information out of the hands of the individual investor and effectively relegating them to professional money management.
A few words about professional money management: it ain't all bad. There are some fine portfolio managers out there who beat the market year in and year out, developing cooperative relationships with their clients and keeping portfolio costs to a minimum. Regretfully, we are of the opinion in Fooldom that these fine souls are few and far between. Rather, as Tom Gardner loves to point out, most money managers are compensated based not on your performance but on how much they churn your account. This backwards logic produces an incentive to try for short-term strategies, casting aside tried-and-true long-term approaches.
As for mutual funds, the curious instruments that most with under $5000 are left to, their track record is not all that extraordinary either. Even after you take out all of the bond funds and the sector funds that could never outperform the S&P 500, at the end of the day the majority of equity mutual funds end up lagging behind that famous index. After all loads and management fees are charged, the performance is a little worse.
It is for this reason and this reason alone that the emphasis of Fooldom is dedicated to investor education with an eye towards getting people to invest in the S&P 500 Index Fund or high-yield, blue chip, Dow stocks. Tom and David Gardner spent the first six chapters of the Motley Fool Investment Guide (a must-read for Fools, available in bookstores everywhere), telling investors that they should start out in an S&P Index Fund or some variation of the Dow Dividend Approach depending on the amount of money they have, their experience and their risk tolerance. No Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %>, no Vancouver penny exchange hype jobs, no high-fee mutual funds pushed by radio talk show hosts who double as paid spokesmen for mutual fund companies.
If you have less than $5000, you will find in our Getting Started Investing area on our America Online and our Web site, that you should be in an S&P 500 Index fund. If you have more, then consider the Dow Dividend Approach. This proven method to buying blue chip Dow stocks have beaten the return of the Dow 30 and the S&P by as much as 40% over the decades, the exact amount depending on what your starting date is. A Dow Dividend Spreadsheet is available in FoolMart that details the returns on these huge, well-run companies since 1960 and a full quarter of the Fool portfolio rests in these stocks -- contrary to the opinion of a nationally-syndicated radio host. The current representatives of the Dow in the Fool Portfolio are General Electric, Sears and Chevron.
Beyond these important foundations, the Fool was established with an eye toward providing a safe haven for investors tired of the penny-stock manipulation that characterized the majority of online investing. Ironically, more than a few columnists of late appear to have forgotten this, caught up in the "sourcing" game of writing columns off the cuff without first checking out the facts. A recent article in the Mercury News goes as far as to suggest that the Fool is simply "cyber-gambling", where "gullible people are making financial decisions of the riskiest sort". Apparently, the author had never bothered to tour the entire area on the Fool dedicated to the relative security of high-yielding Dow stocks, instead getting caught up in occasional articles on chatter in stock boards.
Reports caught up in establishment reactions toward the online discussion of stocks, safe from any authority's careful guidance, miss the full impact of what the information revolution has done to investing. With a modem, you can get more information about a company than was possible even eight years ago. This is a combination of technology and reform by the SEC. Reporting requirements for 10-Ks (annual reports), 10-Qs (quarterly reports) and 8-Ks (filings made after a material change in the business) have gotten significantly better in the past few years. The addition of the Statement of Cash Flows as well as the requirement of two years of operations data in Management's Discussion of Operations alone has increased ten-fold the amount of information that an investor can get. All of this is available with a World Wide Web connection open at EDGAR.
Even more significant is the community and communication between people. Contrary to popular opinion, some of the most detailed talk about company's core business occurs online. Detailed analysis of what this or that deal means for earnings, revenues or strategy occur constantly. In the Digital World, you can converse with engineers, CFOs, experienced investors and more than a few Fools, all from the relative safety and comfort of your living room. Beyond this, services like our conference call coverage that provide synopses of the high points of company's previously analyst-only conference calls, bring even more information home.
Rather than comparing online investing to gambling, I think it is more constructive to look at the big picture that Fooldom offers. On one side, you have professional money management, overpaid and underperforming, pushed by a Mandarin class with all sorts of ego and time invested in pushing the notion that they can call the market and can shepherd your money better than you. They would have you compute alphas and betas to pick the best fund managers, relying on qualitative judgments about what sort of "approach" is best-suited to you.
On the other side, you can invest in companies you are quite familiar with as a consumer, employee or customer. You can access reams of information free of charge from EDGAR to find all sorts of details about past financial performance. You can come online and discuss these facts, in detail, with other investors, judging for yourself what is true and what is not. You can learn all sorts of valuation approaches and helpful ratios to determine liquidity, inventory turns, days sales outstanding. You can apply your own special canon of wisdom to your investments, keeping an eye on the long term and in the end be responsible to no one but yourself and your family. Frankly, you can know more about a company than you *EVER* can about a mutual fund. I can tell you intimate details of the business plans, past financial performance and what management is saying about the future for any company I own, and therefore, I am able to make intelligent judgments about what can happen the future. Can you ever say the same about a fund?
Frankly, negative publicity is not unexpected. Ironically, it occurs without the tiniest apparent knowledge of what Fooldom is all about. It is ignorant of the ongoing revolution fostered by technology, the SEC, affordable information services and some parts of Wall Street (like discount brokers) that has allowed individuals to buy and sell stocks with full knowledge of what they are doing. Fools continue to believe that in the end, the only thing you have to lose if you take the simplest steps, buying an index fund and investing in the Dow Dividend Approach, is the chains that bound you to overpaid, underperforming professional money management.
Do you have what it takes to be a Fool? Is your investing outlook sufficiently Foolish?
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