HEROES

Shipbuilder AVONDALE INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVDL)") else Response.Write("(Nasdaq: AVDL)") end if %> rose $3 to $20 1/2 after winning a $641 million contract to build the first in a series of new amphibious ships for the U.S. Navy. The company bid for the contract with partners GM HUGHES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMH)") else Response.Write("(NYSE: GMH)") end if %>, which will be supplying the electronics, and the Bath Iron Works division of GENERAL DYNAMICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GD)") else Response.Write("(NYSE: GD)") end if %>, which will help design the craft and build the third ship in the series if the Navy exercises its purchase option. Avondale is now trading at 20% of its backlog, 50% of annualized revenues, 172% of book value, and 11 times annualized operating earnings. The company had incurred losses earlier in the decade as post-Cold War fiscal priorities were being rearranged. In the last year, Avondale has bounced back with a 48.5% increase in pre-tax earnings per share through nine months of 1996.

ADT LIMITED <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADT)") else Response.Write("(NYSE: ADT)") end if %> gained $3 to $23 1/8 after 27% owner WESTERN RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WR)") else Response.Write("(NYSE: WR)") end if %> launched a hostile bid for the home security systems company. Western is now the third-largest home security business in the country, but will unquestionably dominate the industry should its $22.50 per share stock and cash deal for ADT go through. The company is taking on the coming deregulation of public utilities differently than companies such as DUKE ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DUK)") else Response.Write("(NYSE: DUK)") end if %>, which recently proposed a merger with natural gas company PANENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEL)") else Response.Write("(NYSE: PEL)") end if %>. Rather than going into the energy complex where revenues and earnings can fluctuate to extremes, Western is looking for a "franchise" where there is a brand name to be sold and where a business can plan on stable revenue growth.

French luxury goods retailer LVMH MOET HENNESSY LOUIS VUITTON <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LVMHY)") else Response.Write("(Nasdaq: LVMHY)") end if %> rose $3 5/8 to $51 1/4 after an arbitrator ruled in favor of the company to go ahead with its planned acquisition of more than half of duty-free retailer DFS Group. Investment firm Kohlberg Kravis Roberts was also bidding for DFS, which sells in 180 airports and upscale hotels around the world, generating more than $3 billion in sales in 1995. Major shareholders who founded the company objected to the deal, pointing out that LVMH ownership, with its brand name products such as Givenchy and Christian Dior perfumes, spirits, and luggage, would put a strain on relations with other suppliers. From LVMH's point of view, it makes wonderful sense in that it could capture the retailer's large profits and expand its revenues in a deal valuing DFS at only 1.4 times last

QUICK TAKES: NATIONAL DATA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NDC)") else Response.Write("(NYSE: NDC)") end if %> moved up $2 5/8 to $42 1/8 on the strength of a 36% earning per share (EPS) increase in its second quarter... Disk drive components maker INNOVEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVX)") else Response.Write("(Nasdaq: INVX)") end if %> soared $7 to $53 1/2 after announcing that it will smear second quarter estimates by at least 20%, meaning year-over-year EPS growth will come in at 70%... CHIPS & TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHPS)") else Response.Write("(Nasdaq: CHPS)") end if %> gained $1 5/8 to $19 1/2 after announcing that it has designed a graphics controller for Fujitsu's 42 inch Color Plasma flat panel display... Medical device maker ECLIPSE SURGICAL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESTI)") else Response.Write("(Nasdaq: ESTI)") end if %> rose $1 1/8 to $9 1/8 after receiving European regulatory approval to market its TMR laser... JABIL CIRCUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBIL)") else Response.Write("(Nasdaq: JBIL)") end if %> gained $6 5/8 to $38 3/4 after the circuit board maker reported a gain in business from last quarter, which is normally a strong period for the company... Biotech company GENETICS INSTITUTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENIZ)") else Response.Write("(Nasdaq: GENIZ)") end if %> climbed $22 3/4 to $84 1/2 as AMERICAN HOME PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHP)") else Response.Write("(NYSE: AHP)") end if %> will exercise an option to purchase the 40% of the company it doesn't yet own for $85 a share... VERITY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VRTY)") else Response.Write("(Nasdaq: VRTY)") end if %> gained $1 1/8 to $17 7/8 after the Internet search engine company reported a 62% increase in quarterly revenues.

MORE TAKES: Ion beam equipment maker MICRION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MICN)") else Response.Write("(Nasdaq: MICN)") end if %> rose $2 1/8 to $22 1/8 after UBS Securities initiated coverage of the company with a "buy" rating... INTERNEURON PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPIC)") else Response.Write("(Nasdaq: IPIC)") end if %> posted a $2 1/2 gain to $22 1/4 as Lehman Brothers initiated coverage of the company with a "buy" rating... Medical device maker MEDTRONIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDT)") else Response.Write("(NYSE: MDT)") end if %> gained $4 1/2 to $65 7/8 on a Goldman Sachs upgrade... AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> rose $4 1/4 to $36 3/8 as the company announced direct marketing plans with solid-sounding business models... Shoes and apparel powerhouse NIKE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %> sprinted $6 3/8 higher to $59 after reporting a 76% increase in second quarter EPS... EMC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %> uploaded a $2 1/2 gain to close at $32 1/2 after the computer storage company said 1997 revenues will increase 25%... PC company COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> gained $6 3/8 to $78 5/8 after signing a strategic alliance with the Cheyenne unit of software giant COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>... MCAFEE ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCAF)") else Response.Write("(Nasdaq: MCAF)") end if %> powered $4 higher to $46 1/4 as the software company was added to the "Nasdaq 100" index... Biotech GENELABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNLB)") else Response.Write("(Nasdaq: GNLB)") end if %> surged $2 1/8 to $6 1/4 after announcing that is has signed a development pact with Dupont Merck... HONDO OIL & GAS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HOG)") else Response.Write("(AMEX: HOG)") end if %> gained $2 1/4 to $14 after affirming a sales agreement with the government of Colombia.

GOATS

METROMAIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ML)") else Response.Write("(NYSE: ML)") end if %> was crunched today for a $3 1/4 loss to $17 1/8 after Morgan Stanley cut its rating on the marketing information company to "neutral" from "outperform." Morgan Stanley had brought it public earlier this year after being spun off from commercial printing firm R.R. Donnelly & Sons. Back in October, the company's shares dropped more than 20% to their yearly low of $16.50, despite a 50% increase in third quarter operating earnings. In the coming quarter, earnings will come in near zero. There are two opposing themes with this company -- one is the outsourcing "megatrend" and the other is business taking more control over its marketing data with cheap computing power. Metromail has to beat the PC/Web trend, because just spitting out a mailing list and a bunch of zip code demographics doesn't cut it anymore.

ELTRON INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELTN)") else Response.Write("(Nasdaq: ELTN)") end if %> fell $4 5/8 to $19 3/8 as Robertson Stephens cut its 1996 earnings estimate to $1.36 per share from $1.37, which brings that estimate right in-line with the consensus estimate. The analyst involved also brought down revenue estimates by $1.8 million but left a "buy" rating on the stock, according to Dow Jones. The management of the bar-code printer company expressed befuddlement, which is understandable for anyone who watches the trading in publicly-owned companies and sees what happens when an analyst moves an estimate one penny or a company misses an estimate by one penny.

QUICK CUTS: HARCOURT GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: H)") else Response.Write("(NYSE: H)") end if %> lost $1 5/8 to $47 5/8 after the publishing and retailing company's Chief Executive Officer resigned... Trucking company M.S. CARRIERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSCA)") else Response.Write("(Nasdaq: MSCA)") end if %> lost $2 3/4 to $16 1/4, saying fourth quarter EPS will come far below estimates... QUALITY DINING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QDIN)") else Response.Write("(Nasdaq: QDIN)") end if %> lost $2 1/8 to $17 1/4 as the restaurant company reported earnings yesterday that were expectedly decreased by charges... Long-distance re-seller TELCO COMMUNICATIONS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCGX)") else Response.Write("(Nasdaq: TCGX)") end if %> lost $1 5/8 to $16 5/8 after AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> sued the company claiming that Telco's direct advertising is misleading.

FOOL ON THE HILL
An Investment Opinion by MF Templar

THE TAX EFFECT, PART I:
WHAT IS TAX-LOSSING SELLING?

Tax-loss selling routinely becomes a hot topic in December. Individual investors are forced by the calendar to make year-end decisions that will impact their total tax bill. Waiting until the end of the calendar year to make tax-related decisions regarding your investment portfolio can exacerbate the confusion that taxes inspire in almost anyone, certified public accountants (CPAs) included. Collecting together some basic investment-related tax information before the last hour of trading on December 30th makes all the sense in the world.

The tax consequences of investment decisions are important, although they should not be the overriding concern. Say you were prescient enough to purchase DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> at its split-adjusted lows of $11 a share in the first quarter, and you think here at $56 1/4 we are pushing the boundaries of fair value. Making that sale would cause you to book a substantial capital gain, meaning a pretty nasty tax consequence. What should someone in this situation do?

Whenever looking at a capital gain (or loss), you must first determine whether it is short-term or long-term. A short-term capital gain is a gain on something you hold for less than a year. A long-term capital gain is a gain on something you hold for at least a year. In the above example with Dell, as the stock was purchased in the first quarter of 1996, the stock has been held for less than a year and is a short-term capital gain. This means that you have to pay taxes on the gain at your normal income rate. However, if you had actually bought Dell two years ago at a similar level, the highest tax rate you would pay is the 28% capital gains tax. (If, like a few Fools here at HQ, you were still securely in the 15% tax bracket, you would not even worry about the 28% capital gains cap and would just pay taxes at your income level.)

When recognizing a capital gain, you can try to balance it against an equivalent capital loss. Tax-loss selling involves selling securities where you have lost money in order to balance out any capital gains you have taken during the year. The reason why you should figure out whether it is short-term or long-term is because there are certain rules that require you balance like gains with like losses, although this gets confusing quickly and you should always consult an expert.

How does this loss balancing work? Well, say you also bought CAI WIRELESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CAWS)") else Response.Write("(Nasdaq: CAWS)") end if %> at $12 because you though wireless Internet access was the wave of the future. Here at $1 3/32, you have pretty much lost all of your money on the investment. If you determine that after NYNEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NYN)") else Response.Write("(NYSE: NYN)") end if %> and BELL ATLANTIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> pulled their support from CAI Wireless that it really does not have much of a future, you can recognize that loss by selling the CAI Wireless shares and use that loss to balance off your huge gain in Dell, thus avoiding the tax consequences.

Now, keep in mind, if you never pay taxes, you never make money. However, intelligently using your losses to limit your tax liability makes a lot of sense. What amount of capital losses can you use to offset the capital gains you decide to take? You can use up all of the capital losses you recognized this year to offset your capital gains, no matter how much this amount is. You can also deduct up to $3,000 worth of tax-losses above and beyond the losses that offset your gains (or $1,500 if you are married and file a separate return) .

Now what happens if you are unfortunate enough to have capital losses left over? You can "store" them until next year using something called tax-loss carryovers. What happens is sometimes you recognize more losses in a given year than you have gains to match them against. If you lost more in CAI Wireless than you have gains to match it against, after taking the $3000 maximum capital loss deduction you can store the remaining losses and recognize them in future years. The losses do not disappear. At some point you will be able to use them if you plan accordingly. When a loss is carried over it retains its original character as long-term or short-term, meaning that you have that nasty issue of balancing short-term versus short-term and long-term versus long-term to work out with a qualified accountant.

Losing money in a stock is not always a totally negative event, as you can see by the example of tax-loss selling given here. Ideally, every stock is a winner and you never have to sell. However, given that we live in an imperfect world where sometimes we want to sell stocks because they become overvalued relative to any sensible measure, keeping careful track of your tax losses and using them every year to take the bite out of your tax bill can be that proverbial silver lining. Of course, you are probably wondering if there are other alternatives to postponing tax consequences and whether or not all this tax-loss selling affects the market? We will deal with these topics tomorrow.

CONFERENCE CALLS

ECHLIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
replay avail. 1:00 p.m. EST 12/17 thru 12/20
(800) 683-1535 (password: Auto Parts)

12/19/96 (Thursday)
COGNOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COGNF)") else Response.Write("(Nasdaq: COGNF)") end if %>
(800) 997-6911 -- replay avail. 12/19 @ 1:15 p.m. EST thru 12/24

ANOTHER FOOLISH THING

Special Holiday Gift Packs!

You can't give many better gifts to your loved ones than a nudge in the direction of financial independence. With only a few shopping days left until the Great Murksneeveling, if you haven't loaded up on gifts for your loved ones for Plankity-Plankity Day, you may be in trouble. That is, unless you hop over to FoolMart, where our holiday gnomes have assembled some special deals for you. They've put together carefully-bundled packages for college students, parents & grandparents, friends & neighbors, and Fool fanatics -- all offering you a special, limited-time discount over our regular prices.

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

Dale Wettlaufer (MF Raleigh), another Fool
Heroes & Goats

Brian Bauer (MF Hoops), one more Fool
Editing

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