HEROES

TRANS-WORLD AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %> and bizarre stories seem to go together. Sold by Howard Hughes in the mid-1960s, embroiled in failed diversification efforts in the 1970s, and the target of corporate raiders in the 1980s, the company today rose $1 1/16 to $8 5/16 on what might be the most bizarre story yet. Former Kennedy administration press secretary Pierre Salinger alleged yesterday that the US Navy downed the company's Flight 800 off the coast of Long Island in July. Investors bid up the stock on the news, hoping that the company will avoid liability or profit from such a set of circumstances. Others think that Salinger, a former ABC correspondent, is angling for the head writer job on the next Oliver Stone movie. If the cover-ups that Stone put forth in JFK were real, those logistics would pale in comparison to gagging the entire crew of a US warship and every person working on one of the largest disaster salvage efforts in US history.

NOVELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NOVL)") else Response.Write("(NASDAQ: NOVL)") end if %> leapt $2 3/8 to $11 1/2 on no news today, the latest technology-related firm to come under takeover speculation in the past three days. Novell has long been rumored to be a potential acquisition for IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %>, although, frankly, some have legitimately questioned where the fit might be. Novell's legacy NetWare business has yet to significantly address internetworking from an Internet perspective and the firm continues to restructure after the disastrous attempt to do a head-on run at MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %>. INTUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTU)") else Response.Write("(NASDAQ: INTU)") end if %> also enjoyed another up day, climbing $2 7/8 to $36 1/2 on rumors that buyers like AMERICAN EXPRESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> are interested in the shares. Although Fools never buy just because of rumors, those who espied Intuit as an excellent software franchise with important financial implications in the $20s have done well for themselves this week.

Gaming company CASINO DATA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSDS)") else Response.Write("(NASDAQ: CSDS)") end if %> pulled back a bit from its fall funk in spurting ahead $2 1/4 to close at $16 5/8 today. Earlier this week, the company was granted a casino service industry license by the State of New Jersey, which will allow the company to generate sales in that state with less red tape. Atlantic City is still the volume gambling leader on the East Coast, too. The stock might have been goosed by the appearance of a small-cap mutual fund manager on CNBC this morning who outlined some of the company's merits and valuation.

QUICK TAKES: Military simulation/vending machine builder ECC INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECC)") else Response.Write("(NYSE: ECC)") end if %> moved up $1 5/8 to $9 1/4 as the company nears a shareholder vote on selling the company... The Equitable upgraded restaurant chain SHONEY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHN)") else Response.Write("(NYSE: SHN)") end if %> to a "buy," sending shares up $1 1/4 to $8 1/2, even though the company reported flat same-store sales growth in 1996 and is trying to distance itself from a Hepatitis A scare linked to a Shoney's restaurant... INTERNATIONAL SPECIALTY PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ISP)") else Response.Write("(NYSE: ISP)") end if %> moved up $1 1/4 to $12 1/8 as Bear Stearns hooked up the specialty chemicals company with a "buy" rating, possibly due in part to speculation that ROYAL DUTCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RD)") else Response.Write("(NYSE: RD)") end if %> and SHELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SC)") else Response.Write("(NYSE: SC)") end if %> will exit ISP's market... Synthetic skin company ORGANOGENESIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ORG)") else Response.Write("(AMEX: ORG)") end if %> added $1 1/2 to $19 5/8 as competitor ADVANCED TISSUE SCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATIS)") else Response.Write("(NASDAQ: ATIS)") end if %> went the other way... K-SWISS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KSWS)") else Response.Write("(NASDAQ: KSWS)") end if %> shot up $2 1/8 to $12 7/8 after the footwear company's board of directors authorized a doubling in its share buyback program.

MORE QUICK TAKES: Dutch consumer products giant UNILEVER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UN)") else Response.Write("(NYSE: UN)") end if %> moved up $9 5/8 to $162 7/8 after reporting strong operating results in the US and in markets other than the punk European arena in the third quarter... HOLLYWOOD PARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HPRK)") else Response.Write("(NASDAQ: HPRK)") end if %> finished in the winner's circle today by rising $1 7/8 to $11 7/8 due to developments favorable to its Boomtown Casino in Louisiana...Specialty filter company AMERICAN FILTRONA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AFIL)") else Response.Write("(NASDAQ: AFIL)") end if %> levitated $10 3/8 to $43 7/8 after revealing that it is in talks to be sold for $43 per share... VCR Plus+ maker GEMSTAR INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GMSTF)") else Response.Write("(NASDAQ: GMSTF)") end if %> rebounded $2 1/2 to $18 3/4 on a 44% increase in per-share earnings... ThinPrep cervical cancer detection firm CYTYC CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYTC)") else Response.Write("(NASDAQ: CYTC)") end if %> added another $3 1/4 to $20 1/2 after the major networks covered the story of the efficacy of the company's product vis-a-vis the 50-year-old pap smear testing method... MAIL BOXES ETC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MAIL)") else Response.Write("(NASDAQ: MAIL)") end if %> was sent upwards by $2 to trade at $23 1/4 after the company announced the settlement of franchisee lawsuits and expressed confidence in being able to achieve 20% earnings growth in its second quarter... xDSL networking company AMATI COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMTX)") else Response.Write("(NASDAQ: AMTX)") end if %> jumped $2 7/8 to $20 3/8 as a haze of rumors, ranging from a buyout to a development deal, descended over the stock in the final hours of trading.

GOATS

For every winner, there's a loser, and CASINO AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSNO)") else Response.Write("(NASDAQ: CSNO)") end if %> rolled snakeyes on the gaming industry table today. It was shepherded into the goat pasture as the stock fell $1 to $3 on the company's warning that it will lose up to $0.67 per share in its second quarter. The company operates in the crowed world of Mississippi Riverboat casinos, which looks more like the Sargasso Sea, judging by the stock prices of companies doing business in this segment. Casino America's stock has been down since the peak of the riverboat gambling bubble of 1993-94, when other companies such as LADY LUCK GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LUCK)") else Response.Write("(NASDAQ: LUCK)") end if %>, CASINO MAGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CMAG)") else Response.Write("(NASDAQ: CMAG)") end if %>, PRESIDENT CASINOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PREZ)") else Response.Write("(NASDAQ: PREZ)") end if %>, and the forgettable EUROPA CRUISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KRUZ)") else Response.Write("(NASDAQ: KRUZ)") end if %>, which struck out on a deal with Donald Trump, all hit their peaks. It's amazing that companies can't build share value in a three-year span when the odds are overwhelmingly favorable to the "house" in the casino business.

INTEGRATED SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTS)") else Response.Write("(NASDAQ: INTS)") end if %> was pounded for $7 1/4 to $19 this afternoon after Hambrecht & Quist trimmed earnings estimates. The developer of embedded operating software, simulation and control design tools faces higher-than-expected dilution and expenses from its acquisition of Diab Data in December of 1995. The company only announced that the deal had been done in September in order to give Diab a chance to establish a track record as an independent firm. In spite of the reduction in estimates, Sheila Ennis of H&Q maintained her "buy" rating. The deal gives Integrated the necessary compiler technology to provide a fully integrated tool suite for enterprise development and makes strategic sense.

PRI AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRIA)") else Response.Write("(NASDAQ: PRIA)") end if %> dropped $2 1/2 to $36 today after the semiconductor fabrication automation company missed earnings estimates by a wafer-thin penny, coming in with $0.49 EPS in its fourth quarter. In an industry hit by slowing orders because of the well-known semiconductor slowdown, PRI is showing an impressive 40% increase in earnings per share, year-over-year. Semiconductor/equipment research group Infrastructure reported today that PRI experienced a push-out, or delayed order, from ROCKWELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROK)") else Response.Write("(NYSE: ROK)") end if %>, but that the company will be purchasing PRI equipment for another of its facilities. For further details, the Motley Fool will have the full PRI conference call report in Earnings Central this weekend.

QUICK CUTS: Bone densitometry systems maker NORLAND MEDICAL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NRLD)") else Response.Write("(NASDAQ: NRLD)") end if %> dove $4 1/8 to $9 1/8 after a 25% increase in earnings (before a charge for selling stock) failed to satisfy investors... ODWALLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ODWA)") else Response.Write("(NASDAQ: ODWA)") end if %> was taken down another $2 11/16 to close at $10 3/8 as investors learned of the death of a toddler thought to have drunk the company's tainted juice... ADVANCED TISSUE SCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATIS)") else Response.Write("(NASDAQ: ATIS)") end if %> was cut for $3 3/4 to trade at $10 7/8 after Morgan Stanley's analyst exercised a monthly prerogative to change his investment opinions on the stock... Fashion company MOSSIMO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGX)") else Response.Write("(NYSE: MGX)") end if %> plunged $5 3/8 to $16 1/2 as the company re-stated past income. Today's Lunchtime News detailed the company's winter valuation look.

MORE QUICK CUTS: METRO ONE TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MTON)") else Response.Write("(NASDAQ: MTON)") end if %>, which earlier this week signed a large contract with SPRINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %>, declined $1 7/8 to $10 3/8 after reporting earnings of $0.03 per share vs. a loss in last year's third quarter... Medical products maker QUEST MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QMED)") else Response.Write("(NASDAQ: QMED)") end if %> was quashed for $1 to finish at $6 1/2 on flat year-over-year sales and the resignation of the company's chairman.... DIGI INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DGII)") else Response.Write("(NASDAQ: DGII)") end if %> lost $1 3/4 to $12 3/4 after brokerage Volpe Welty & Co. cut its investment rating on the stock to "neutral," saying the company is not controlling expenses well... Pre-paid phone card company SMARTALK TELESERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SMTK)") else Response.Write("(NASDAQ: SMTK)") end if %> slid $1 1/2 to $13, reporting a large loss on greatly increased revenues in its quarter just-ended.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Brokerage Companies Low-Hanging Fruit?

For Wall Street, 1996 has been a banner year of reform. For the first time since the post-Crash reforms initiated in 1933 and 1934, securities law was changed by Congress. The 1996 Securities Reform Act now allows public companies to make forward-looking statements under the protection of the Safe Harbor clause, enabling them to give shareholders reasonable expectations for the future. This decision ended the prodigal cycle of frivolous shareholder litigation that has beset growth companies over the past two decades. It also withstood a short-lived attempt in California to overthrow the thrust of the new law with Proposition 211, voted down on Tuesday by more than 75% of those casting ballots.

Less prominent, but just as important, has been reform of 1933's Glass-Steagall Act, a law that barred commercial banks from undertaking investment banking activities such as bringing companies public in initial public offerings (IPOs). At the time, it was important to keep banks from getting into non-financial businesses that were viewed as risky and the legislation addressed the massive failure of the banking system that catapulted the United States into the Great Depression. On July 31st, the Federal Reserve announced that they were amending something called Section 20, a rule that allows them to bypass the Glass-Steagall Act. Section 20 previously stated that up to 10% of a bank's revenues could come from equity underwriting and trading and is what freed names like J.P. MORGAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> to enter into the securities business.

The Fed now wants to up the limit to 25%, allowing many banks the latitude to delve much deeper into the securities business. As the comment period for this change expired September 30th without any significant opposition, it appears that this move is a slam dunk for commercial banks. Now these banks will be able to build their securities businesses and potentially acquire any number of "available" regional and boutique brokerages, the driving force behind the strong performance in the group over the last two months. Many of these stocks now appear to be values after the pounding they received in July and August when market bears were fretting about a possible "correction." The turnaround has been dramatic and if the same pattern holds for these companies as held for the savings and loans after they won a settlement from the government over goodwill amortization, there will be significant gains ahead.

BEAR STEARNS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSC)") else Response.Write("(NYSE: BSC)") end if %>, PAINE WEBBER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %>, LEHMAN BROTHERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %> and SALOMON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SB)") else Response.Write("(NYSE: SB)") end if %> are the large Wall Street houses that are suddenly "in play." Among the regional and specialty names that have the potential to be acquired by a commercial bank are ALEX. BROWN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AB)") else Response.Write("(NYSE: AB)") end if %>, MCDONALD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDD)") else Response.Write("(NYSE: MDD)") end if %>, MORGAN KEEGAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOR)") else Response.Write("(NYSE: MOR)") end if %>, A.G. EDWARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGE)") else Response.Write("(NYSE: AGE)") end if %>, INTER-REGIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IFG)") else Response.Write("(NYSE: IFG)") end if %>, LEGG MASON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LM)") else Response.Write("(NYSE: LM)") end if %>, RAYMOND JAMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RJF)") else Response.Write("(NYSE: RJF)") end if %> and even troubled PIPER JAFFRAY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PJC)") else Response.Write("(NYSE: PJC)") end if %>, which has been buffeted by outstanding litigation over bad bond funds.

The investment opportunity here was driven by the coincidence of a short, sharp market correction and the Federal Reserve's proposal to change Section 20. Bear Stearns traded down to $21 in mid-July and has recently bounced back up to the $26 level in the space of four months. Alex. Brown & Sons saw the low $40s in mid-July and is now around $60, a snappy 33% four-month gain, driven by the July 31st news. Legg Mason, which arguably has one of the most robust no-load mutual fund and asset management operations among the regionals, has seen the high $20s turn into $37-plus in the past few months as the Baltimore-based company has continued to make savvy acquisitions. Practically the only stock that has not moved in the group is Piper Jaffray, buried under the 25% loss in its "safe" bond fund that it is now fighting a nasty lawsuit over. Although the litigation might be making the company abnormally cheap, investors would have to psych out the situation to be certain there is value there.

In summary, the lessons an investor can draw from the strong performance of the brokerage stocks is two-fold. The first is that these stocks get stupidly cheap during even small market pull-backs, meaning that investors may want to wait to accumulate these shares when others are selling them en masse in a giant market call. Because brokerage business deteriorates in bad markets, a lot of institutions are quick to pull the trigger. The second point is that these big-picture government changes are not overnight momentum plays -- they work themselves out over a number of months, meaning that even individual investors who follow current events can catch them fairly early on, evaluate the relative bargains, and enter into a focused purchase of a solid business that has had a fundamental change in how it will be valued going into the future. Now that the brokerage stocks are having potential acquisition by commercial banks priced in, their relative value has increased. Over the next few months, this could easily continue, although one must be careful not to pay an outrageous price that an acquirer would consider unthinkable.

FOOLISH FEATURES

Fool's Gold kicks off the weekend with a Sector Snapshot that's very appropriate for a Friday night -- Specialty Brewing. Other features on tap for Fool's gold Fool's Gold are the Weekend Research Center, a Roguish look at shareholder rights, and the lowdown on the latest in technology from the EETimes.

Oh, yeah, some online company in America announced Q1 '97 Results.

CONFERENCE CALLS

WHOLE FOODS MARKET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WFMI)") else Response.Write("(NASDAQ: WFMI)") end if %>
replay avail. until 11/14
(800) 633-8284 (reservation # 2147984)

AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
Replay
(800) 475-6701 password: ONLINE.

ANOTHER FOOLISH THING

Painless Stock Valuations

Learn to value stocks painlessly! In the Industry Decathlon primer, MF Bogey takes readers by the hand and walks them through five stock valuation methods and ten financial ratios. While demystifying the Balance Sheet, Statement of Cash Flows, and Income Statement, Bogey demonstrates how to compare a bunch of companies in your industry of choice and find the most promising one. This is very useful stuff, folks! Check it out in FoolMart.

Randy Befumo (MF Templar), a Fool
Fool On the Hill

Dale Wettlaufer (MF Raleigh), Punk, As in Down, Not as In The Clash
Heroes & Goats

Selena Maranjian (MF Selena), one more Fool
Editing

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