Today's Lunchtime News focused on HMOs and how, with some interesting valuations, they are becoming targets of acquisitions. Fool Portfolio holding Medicis split 3-for-2 yesterday and reported estimate-beating numbers today, and we've got a feature on the dermatological drug company. Also of interest is an interview with Nasdaq Stock Market President Al Berkeley. This feature contains some interesting stuff on Berkeley's background and his plans for Nasdaq's future.
MF Merlin's Economic News today discusses sales of cars and light trucks during July and the year thus far. 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 explains all about analysts. Enjoy!
MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MRRW)") else Response.Write("(NASDAQ: MRRW)") end if %>
Tuesday, 08/06/96
1-402-220-4857
available after 7:00 p.m. EDT
CALYPTE BIOMEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CALY)") else Response.Write("(NASDAQ: CALY)") end if %> shares jumped $2 to $9 5/8 once the Food & Drug Administration (FDA) licensed its diagnostic test which detects HIV-1 antibodies in urine. This is the first urine test for HIV, and it promises to be safer and easier than other tests. Calypte Biomedical Corp. is a Berkeley-based health care company which develops and markets urine-based diagnostic products and services for HIV-1, sexually transmitted diseases and other chronic illnesses.
Shares of energy services company MCDERMOTT INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDR)") else Response.Write("(NYSE: MDR)") end if %> gushed up $1 3/4 to $20 1/8 on news that Chairman and Chief Executive Officer (CEO) Robert Howson is retiring, and that Merrill Lynch has been retained to examine the company's business strategy. As if that wasn't enough news for the day, McDermott also declared a $0.25 per share dividend. Last week McDermott stated that, "While first quarter's results in the [Babcock & Wilcox joint venture] operations were very disappointing, most of our markets remain strong."
US LONG DISTANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USLD)") else Response.Write("(NASDAQ: USLD)") end if %> rang up an enormous gain of $2 11/16 to $7 1/16 today. Why? Interstate/Johnson Lane upgraded the company from "neutral" to "buy," explaining that, "We believe recent selling pressure related to the spin-off (of Billing Information Concepts) has presented a buying opportunity." And apparently, when Interstate/Johnson Lane speaks, investors listen! The company might also make for an attractive takeover candidate. Interstate expects shares to hit $10 in a year.
QUICK TAKES: ICTS HOLLAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ICTSF)") else Response.Write("(NASDAQ: ICTSF)") end if %> popped up $1 7/16 to $11 9/16 this morning after Brian Finnerty of Unterberg Harris made positive comments about the company, an airport security training firm that Unterberg helped bring public, on CNBC's Squawk Box... EMCARE HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMCR)") else Response.Write("(NYSE: EMCR)") end if %> drove ahead $2 3/4 to $23 1/4 today after reporting decent quarterly results and confirming it would not go ahead with a 1.8 million secondary offering that would have diluted shares by more than 25%... SUNQUEST INFORMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUNQ)") else Response.Write("(NASDAQ: SUNQ)") end if %> shares surged $1 3/8 to $14 after the company posted earnings of $0.15 per share for its second quarter, roughly 9 cents ahead of estimates... NETSCAPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %> popped up $3 7/8 to $48 as CJ Lawrence initiated coverage with a "buy" rating.
MORE QUICK TAKES: WESTELL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WSTL)") else Response.Write("(NASDAQ: WSTL)") end if %> surged $2 5/8 to $31 1/4 on no news in particular, except recent press coverage focusing on the company's rosy prospects with its ASDL communication technology. A volatile issue, it has bounced between roughly $10 and $56 in the past year... AMERICAN COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACNS)") else Response.Write("(NASDAQ: ACNS)") end if %> shares advanced $1 1/2 to $10 after the company decided not to offer 7 million shares now, due to less-than-perfect market conditions... BT OFFICE PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTF)") else Response.Write("(NYSE: BTF)") end if %> climbed $1 1/2 to $15 1/2 after beating estimates by a penny and posting $0.12 per share, compared to $0.02 in the year-ago quarter.
HYAL PHARMACEUTICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HYALF)") else Response.Write("(NASDAQ: HYALF)") end if %> plunged $1 7/8 to $5 5/8 after it announced that preliminary statistical results for its Hyanalgese-D topical gel that were not as positive as investors were hoping. Hyanalgese-D, which was proven to relieve osteoarthritis pain during the day, does not offer statistically significant relief in the twelve hours after the dosage period expires. In other words, its a no-go for overnight relief. President and Chief Executive Officer (CEO) Dr. S.S. Asculai noted that development and other trials will continue, but will push out the release date by a year or more.
Watch-maker FOSSIL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FOSL)") else Response.Write("(NASDAQ: FOSL)") end if %> shares wound down $2 1/16 to $9 1/16 after the company reported $0.19 EPS, four cents below consensus expectations, and 14% below year-ago levels. In the company's conference call, management expressed comfort with consensus estimates for the rest of 1996, which will yield EPS of $1.05 for the year. Blamed for this past quarter's poor performance was Germany's crummy economy.
Unimpressive earnings dragged a bunch of companies down today. A $0.40-per-share loss at A+ NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACOM)") else Response.Write("(NASDAQ: ACOM)") end if %> was enough to earn the stock a $7/8 to $9 1/8 drubbing today. Consensus estimates were not available for the networking concern. PC DOCS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DOCSF)") else Response.Write("(NASDAQ: DOCSF)") end if %> also slumped after reporting earnings, down $1 3/8 to $15 7/8, without any estimates available as well. Hype about Internet payment and transactions is just not what it used to be.
QUICK CUTS: The shares of WALLACE COMPUTER SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WCS)") else Response.Write("(NYSE: WCS)") end if %> tumbled $2 5/8 to $27 3/4 today after MOORE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCL)") else Response.Write("(NYSE: MCL)") end if %> announced that it would not proceed with its proposed $60-per-share (pre-split) offer for the company... SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUNW)") else Response.Write("(NASDAQ: SUNW)") end if %> dropped $2 3/8 to $53 1/4 this morning after Donaldson, Lufkin & Jenrette downgraded the shares from "market perform" to "underperform"... HORMEL FOODS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRL)") else Response.Write("(NYSE: HRL)") end if %> found itself in a stew today, dropping $1 1/4 to $20 1/2 after warning that it expects to disappoint the Street with its third quarter earnings. Apparently, hogs and hog chow cost more than they used to... Sportswear concern SPORT-HALEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SPOR)") else Response.Write("(NASDAQ: SPOR)") end if %> sported earnings a penny ahead of analysts, but fell $1 5/8 to $13 nonetheless... OBJECTIVE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OSII)") else Response.Write("(NASDAQ: OSII)") end if %> met expectations of seven cents, but many must have been hoping for more, as shares slid $2 3/4 to $23.
An Investment Perspective
by Randy Befumo (MF
Templar)
FOOL ON THE
HILL
All About Analysts, Take One
Recently I have gotten more than a few questions in my e-mail box about analyst consensus estimates. I wanted to use today's column to explain what exactly an analyst is, how they normally go about making estimates, and how consensus estimates are derived. (As a sidebar, if you have a suggestion for a future column, feel free to e-mail me at [email protected] and ask away... the worst that will happen is I will point you toward a past column where I have dealt with the subject on your mind.)
"Analyst" is a term used for someone who analyzes a company relative to its stock and determines whether or not the stock is fundamentally or statistically cheap relative to the performance or potential of the underlying corporation. There are two types of analysts: buy-side analysts and sell-side analysts. Buy-side analysts are the guys and gals who work for money management firms and come up with ideas for the firms' funds. Rarely is their work distributed to the masses and it is very rarely included in consensus estimates, with the exception of a few professional buy-side firms that do work for hire for other fund groups or money management firms.
Sell-side analysts are the people that most people are talking about when they mention securities analysts. Sell-side guys are called "sell-side" because they are making recommendations that their firm's brokers can then "sell" to individual investors, as opposed to the buy-side where the recommendations are targeted at companies that the firm can "buy" for itself. Sell-side analysts are paid directly by the brokerage and normally give up their right to have their own portfolio, instead getting compensated in part by the performance of their buy or strong-buy recommendations (depending on the firm).
The sell-side analyst is curiously placed between the investment banking department and trading department of a brokerage. The analyst's relation to the investment banking part of the business is one that a lot of writers have focused on, but you really cannot underestimate the effect that this has on analyst ratings. Investment banking is stuff like initial public offerings (IPOs), secondary offerings, bond offerings, convertible offerings, and so on -- basically any time a new security is issued, it is investment banking business.
To secure all of this big-ticket investment banking business, the analyst has to write positive reports and make positive comments. This is why analysts are very reluctant to go lower than "hold" or "neutral" or "market perform" on a security, as words like "sell" or "strong sell" tend to piss off management at the company you are covering. Issuing a "sell" is tantamount to burning all bridges and removing the analyst's firm forever from the hope of doing investment banking work for the company in question.
The analyst's relations to the trading department is a little more subtle, but no less important than the investment banking side of things. When a company has an analyst who covers a stock, it almost always means that they "make a market" in that stock if it is on the Nasdaq Stock Market. This means that the firm is listed as market maker with the National Association of Securities Dealers and completes trades in the stock. If the stock is a very high-volume security, then the firm gets to make tons of money. If the stock is a very low-volume issue, this is much less exciting for the trading floor. You wonder why every software analyst covers Microsoft, every semiconductor guy covers Intel and every networking guy covers Cisco? Because the trading floor wants to make money.
The second part of the analyst's relationship to the trading side is that the brokers need to be able to "sell" the analyst's ideas. The analyst becomes the principle salesperson of their ideas, meaning lots of dinners on the firm with big clients, trying to convince them to buy their "buys." Unless they have a lot of clout in the industry and have built a name for themselves, the analyst almost always ends up as a salesperson for his or her own ideas and not the pure researcher that many individual investors imagine. The analyst also needs to focus on ideas that the brokers find exciting and communicate to the brokers how to sell those ideas to their clients. If the analyst cannot, the traders will get antsy even if the analyst's buy ratings do well, a perverse situation where the analyst ends up at a real disadvantage. In fact, there have been analysts who picked stocks perfectly well who have been fired because they simply cannot sell them.
In the big ol' word of securities, the sell-side analyst is actually low-person on the totem pole underneath the buy-side analyst, who does get to fly around and do the pure research with which most associate the analyst's business. Certainly, there are plenty of exceptions... when an analyst has done well enough that she is known by name amongst many investors, you often have a situation where her compensation is extremely high and her selling duties are fairly light. For the most part, being a sell-side analyst is just a stop along the way to being a buy-side analyst or starting your own research firm after you build your reputation.
[TOMORROW: How are estimates calculated? How are analysts compensated? All this and more...
Randy Befumo (MF Templar),
a Fool
Fool On the Hill
Selena Maranjian (MF Selena),
a Fool
Heroes & Goats & Editing
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