The Lunchtime News featured a look at U.S. Robotics, Zoom, and Boca Research. All were down today, and we'll be covering them in a special feature. In addition, we've got a conference call report on Paychex and an exciting collection on companies coming public -- The IPOzone.
MF Merlin's Economic News today discusses the results of today's Federal Open Market Committee meeting, the May Factory Orders report, and the latest weekly report on new claims for state unemployment insurance. 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 muses on the nature of rats. Remember -- the market will be closed tomorrow, so we won't be issuing a new Evening News
THE TEMPLETON RUSSIA FUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRF)") else Response.Write("(NYSE: TRF)") end if %> surged $2 3/4 to $27 as it becomes clear that Russian voters are saying "Da" to Boris Yeltsin and "Nyet" to his communist opponent, Gennady Zyuganov. The Templeton Russia Fund is a closed-end mutual fund, which trades like a stock. Since closed-end funds are designed, unlike most mutual funds, to not continually accept new investors, those interested in the fund must bid for the existing shares belonging to current shareholders. Closed-end funds frequently trade at a discount to their net asset value (NAV), but can trade at a premium to NAV when a situation is viewed as especially attractive.
Shares of mental-health outpatient group APOGEE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: APGG)") else Response.Write("(NASDAQ: APGG)") end if %> skyrocketed $1 1/8 to $6 1/2 today. Why? Well, it seems to be a sympathy play with NOVACARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOV)") else Response.Write("(NYSE: NOV)") end if %>, which received positive coverage in the Wall Street Journal's "Inside Track" column. In the column, Sheryl Skolnick of Robertson Stephens explained that, "Historically, when [founder and chief executive officer (CEO) of both companies] John Foster bought stock, if the public investor bought at the same time, the public investor made money." She also added that Apogee seemed to be turning itself around. Apogee is a thinly-traded stock, and thus is rather volatile. Novacare shares only rose $1/4 to $7 7/8.
Investors must have been happy with TEAM RENTAL'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TBUD)") else Response.Write("(NASDAQ: TBUD)") end if %> recent financing decision, as they sent shares up $1 7/8 to $14 1/4. The company announced that in order to pay down debt, it would issue 4 million shares of class A stock at $13 each, generating $52 million, a move which often makes investors worry about ensuing dilution. Team Rental is the largest Budget Rent a Car franchise worldwide, and is one of the largest domestic independent retailers of late model cars.
QUICK TAKES: GREENWICH AIR SERVICES CLASS A <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GASIA)") else Response.Write("(NASDAQ: GASIA)") end if %> rebounded $2 1/4 to $24 and CLASS B <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GASIB)") else Response.Write("(NASDAQ: GASIB)") end if %> recovered $1 to $18 this morning after getting clobbered all week when a newsletter recommended that investors take profits. Alex. Brown upgraded the Class B shares to "strong buy" from "buy" today based on valuation... CELERITEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLTK)") else Response.Write("(NASDAQ: CLTK)") end if %> rose $1 1/4 to $11 3/4 after being profiled in Investor Business Daily's famous "New America" puff-piece page that glowingly reports on up-and-coming companies... SEATTLE FILMWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FOTO)") else Response.Write("(NASDAQ: FOTO)") end if %> flashed up $1 7/8 to $19 1/8 after Smith Barney initiated coverage with a "buy" rating... Initial public offering (IPO) TREXMED <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TMD)") else Response.Write("(AMEX: TMD)") end if %> was well-received by investors today, being offered at $14 but closing at $24 3/4. Our own MF Prem has compiled short descriptions of current IPOs in the Fool's IPOzone -- check 'it out... MERCER INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MERCS)") else Response.Write("(NASDAQ: MERCS)") end if %> raised the price tag on its pulp, and encouraged investors tore into the stock, sending shares up $1 1/2 to $14 1/4... HEALTH MANAGEMENT ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMA)") else Response.Write("(NYSE: HMA)") end if %> rose $1 1/2 to $20 1/2 on a Merrill Lynch upgrade from near-term "neutral" to "buy". (Merrill kept its long-term "buy" rating.)
ZOOM TELEPHONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZOOM)") else Response.Write("(NASDAQ: ZOOM)") end if %> was hit with a baud-y blow today, down $4 1/4 to $11 1/2 in heavy trading. The modem maker estimated sales for the second quarter of 1996 would be below expectations due to "the intensified competitive environment". US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> is at least partly to blame, as its 28.8 Sportster is eating up market share, with the company having streamlined manufacturing in order to get product out into the marketplace. BOCA RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BOCI)") else Response.Write("(NASDAQ: BOCI)") end if %> was down $1 3/8 to $16 1/8 in sympathy, but ironically, US Robotics lost $5 1/4 to $84 3/4 on the mistaken assumption that Zoom's news means bad news for the industry in general.
FORD MOTOR COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> received an "F" grade from some investors today, as news that June domestic car sales were nearly 6% lower than last June's levels sent shares down $1 1/2 to $32. Down in sympathy were CHRYSLER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %>, dropping $3 5/8 to $59 7/8, and GENERAL MOTORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>, off $1 5/8 to $52 1/8. General Motors is currently among the Foolish Four stocks you would buy if you started following the Dow Dividend Approach today, and is actually positioned in the "Penultimate Profit Potential" spot.
ASTEA INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATEA)") else Response.Write("(NASDAQ: ATEA)") end if %> shareholders who haven't checked in on the company today might want to sit down and take a deep breath. The company, which closed yesterday at $23, opened today at $8, closing at $8 3/4. What caused this developer of software for customer-interaction software to see its value shrink by over 60%? Surprise, surprise -- it warned that instead of earning the $0.18 per share that analysts expected for the second quarter, it expects to lose $0.24 to $0.29 per share (plus a $1.00 EPS acquisition-related charge). Blamed were delays in orders. Alex. Brown cut its rating from "buy" to neutral" and reduced its estimates. Also warning of delayed-order-related disappointments was healthcare informatics concern QUALITY SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QSII)") else Response.Write("(NASDAQ: QSII)") end if %>, whacked for $4 3/4 to $12 1/2 today.
A host of other companies also issued warnings and paid a steep price. Communications hardware and software provider DIGI INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DGII)") else Response.Write("(NASDAQ: DGII)") end if %> reported this morning that it will miss estimates for the next quarter -- for the third time in a row -- and lost $9 1/4 to $16 3/4 on the news. Document image processing specialist FILENET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FILE)") else Response.Write("(NASDAQ: FILE)") end if %> warned that it would not make its second quarter numbers, and plunged $9 1/4 to $23 3/4 as a result. Healthcare informatics concern CERNER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CERN)") else Response.Write("(NASDAQ: CERN)") end if %> will only make $0.02 to $0.05 EPS when it reports second quarter earnings, compared to the $0.21 it earned last year. The stock lost $5 to $14 7/8. PARCPLACE-DIGITALK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PARQ)") else Response.Write("(NASDAQ: PARQ)") end if %> dropped $3 1/2 to $5 1/4 this morning after the company forecast a first quarter loss of $0.22 to $0.28 EPS on revenue of $11.5 to $12 million. Formerly-hot Integrated Services Digital Network (ISDN) provider GANDALF TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GANDF)") else Response.Write("(NASDAQ: GANDF)") end if %> dropped $1 7/8 to $5 15/16 today, well off of its 52-week high of $20 1/4. The company expects second quarter revenues of $18 to $19 million and a loss of $0.12 to $0.15 EPS. BOYD GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BYD)") else Response.Write("(NYSE: BYD)") end if %> predicted fourth quarter earnings well below the current $0.22 EPS estimates, causing the gambling concern to plunge $2 1/2 to $12 3/4 today.
QUICK CUTS: ANNTAYLOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> just cannot catch a break. The stock got mashed for $2 1/8 to $18 1/8 this morning -- a beating attributed to sickly June same-store sales numbers. Rumor is that with inventories down 25% to 30%, it will be virtually impossible for AnnTaylor to show positive same store sales... INTEGRATED PROCESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IPEC)") else Response.Write("(NASDAQ: IPEC)") end if %> disintegrated $3 3/4 to $16 1/2 this morning after reporting that sales for its fiscal fourth quarter would be only $48 million, meaning profits would be around $0.17 EPS, slightly below estimates... SPACETEC IMC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SIMC)") else Response.Write("(NASDAQ: SIMC)") end if %> dropped $2 1/2 to $12 1/8 this morning after it stated that revenues for the first quarter failed to meet the company's expectations and were flat when compared with last year's revenues. SMITH MICRO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SMSI)") else Response.Write("(NASDAQ: SMSI)") end if %> dropped $3 1/8 to $8 7/8 after Oppenheimer trimmed its estimates for the computer retailer... Eye laser system developer SUMMIT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BEAM)") else Response.Write("(NASDAQ: BEAM)") end if %> warned of a $11-12 million loss in its second quarter and took its own shares, down $3 9/16 to $10 11/16, and those of competitor VISX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VISX)") else Response.Write("(NASDAQ: VISX)") end if %>, off $7 1/2 to $24, down with it.
An Investment Perspective
by Randy Befumo (MF Templar)
FOOL ON THE HILL
Rats
Do you have a favorite behavioral science experiment? I do. And no, it is not Stanley Milgram's pioneering work in the 1960s. You know, the experiments where volunteers were told by authoritative men in white lab coats to administer painful electric shocks to strangers -- and they did. Nope, that's number two. My favorite behavioral science experiment actually involves rats and explains a lot about why people use bizarre investment approaches.
The experiments center on how long it takes to extinguish a learned response. A rat was placed in a cage with a pellet dispenser. When the rat pressed down on a lever, a food pellet would shoot out. Scientists outside of the cage could control when the pellet could come out, however, adjusting it so that the pellet would come out when the rat hit the bar two times, three times, etc. They could even adjust it so that the pellet of food came out randomly, without any regard to how many times the rat pressed the lever.
Now, the first part of the experiment involved teaching the rat that pressing on the bar made food come out of the dispenser. The rat was left alone in the cage and would occasionally stumble into the lever, causing a pellet of food to come down. A few run-ins with the bar and the rat would figure out the connection. This was one of the criteria for the experiment, as the rat had to have the learned response taught to it before it could be extinguished, or unlearned. After the response was learned, the real fun part of the experiment began.
Now, the scientists had quite a few rats in these contraptions at their disposal. Once each learned the response, the lever-push and food delivery relationship was adjusted. Some rats got a pellet for every push, some got one for every three pushes, some got the pellet for many, many pushes and then some were just randomly rewarded. They left the rats to keep pushing the bar for food for a significant period of time, each with his or her own particular push-metric. Then one day, they stopped the pellets from coming altogether.
This was the crux of the experiment. How long would the rat keep pushing on the bar before it gave up and realized that no more food was coming? How long would it take for the response to be unlearned? Well, most of the experiment is pretty intuitive. The fewer times the rat had to push the bar to get food, the quicker it figured out no more food was coming. The rat who only had to push once gave up first, then the rat who had to push two times, then the rat who had to push three times, and so on.
The relevant part to the world of investing, however, comes in with the rat who was rewarded with the food pellet randomly. This rat just kept pressing and pressing and pressing. Because it never learned any set schedule for reward, it took the longest to figure out that no more food was coming. Consequently, the rat who was intermittently rewarded developed the learned response that took the most time to extinguish.
What does this have to do with investing? Its pretty straightforward. Behaviors that are intermittently rewarded are the most persistent -- thus the success of the myopic science of technical analysis. Completely ignorant of the actual business dynamics represented by the company behind the ticker, the technical analyst relies on charts of past price movement which he swears foretell future stock appreciation. It's much like driving a car by looking in the rearview mirror, nonetheless occasionally the technical analyst is right.
The problem is that they are right on an intermittent basis. Which means they develop a learned response that becomes darn near impossible to extinguish. All kinds of justifications, ranging from the sublime to the ridiculous, are given for why past price performance determines future stock appreciation -- in spite of the fact that Malkiel's tremendous book "A Random Walk" clearly proved that no chart pattern had any predictive value above and beyond what was possible through pure chance. Even technical analysts will admit that their "science" is really more art than system, saying that experience informs the reading of charts.
Others might say that what is really going on is that they are still getting those pellets on an intermittent basis.
***FOOLISH CLARIFICATION: Some irate investors in INTERPOINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTP)") else Response.Write("(NASDAQ: INTP)") end if %> got upset when I characterized the company as a "beleaguered software" concern. My apologies. I was thinking of INTERLEAF <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LEAF)") else Response.Write("(NASDAQ: LEAF)") end if %> when I wrote that squib and regret the error. MF Templar***
ANOTHER FOOLISH THING: MF Uptrend's Healthfolio
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