HEROES

AWARE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AWRE)") else Response.Write("(Nasdaq: AWRE)") end if %> gained $1 7/8 to $10 1/2 after signing a supply agreement with PAIRGAIN TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAIR)") else Response.Write("(Nasdaq: PAIR)") end if %>. Pairgain will buy circuit board modules that use DMT ADSL chips. For the uninitiated, that's the Discrete Multi Tone variation of Asynchronous Digital Subscriber Line technology, which is supposed to endow a normal telephone line with the download capacity of fractional T-3 line. This is an important agreement for Aware because it will give its engineering and production personnel experience with turning out higher volumes. Whereas most people think of ADSL as a link directly into phone lines and the Internet, this also means that Pairgain may use the DMT linecoding scheme in its Campus products, which are used in office buildings and organizations where a remote workstation is out of reach for a LAN but doesn't need an expensive WAN connection.

Computer Aided Production Engineering (CAPE) company TECNOMATIX TECHNOLOGIES LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCNOF)") else Response.Write("(Nasdaq: TCNOF)") end if %> gained $3 1/2 to $25 after receiving a $10 million order from Mazda, a major FORD MOTORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> investment. The order is a sizable piece of business for the Israel-based Tecnomatix, which has done about $10 million in sales each quarter this year. This is a follow-on order from Mazda, which placed a $2 million order in October. Using Tecnomatix's products, a company can build a digital assembly line or plan a re-tooling of an existing assembly line. This can improve ergonomics for the people running the line and can revel potential production bottlenecks or incompatibilities in components before a line is built. Such tools help car companies compete in a world of shorter product cycles and prevent expensive re-toolings to correct engineering mistakes.

GTS DURATEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DRTK)") else Response.Write("(Nasdaq: DRTK)") end if %> moved up $2 1/2 to $14 5/8 after the nuclear waste cleanup company announced that a it had won an 18-year contract with the Department of Energy as part of a consortium led by BNFL Inc. and including MORRISON KNUDSEN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MK)") else Response.Write("(NYSE: MK)") end if %>. The total value of the consortium contract is near $2 billion. GTS Duratek turns nuclear waste into glass beads and counts DUKE POWER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DUK)") else Response.Write("(NYSE: DUK)") end if %>, one of the nation's largest nuclear power operators, among its customers.

QUICK TAKES: OXFORD INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OXM)") else Response.Write("(NYSE: OXM)") end if %> gained $3 1/2 to $22 1/2 after registering a 150% increase in second quarter sales... Architectural design/engineering company SOFTDESK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SDSK)") else Response.Write("(Nasdaq: SDSK)") end if %> jumped $3 3/4 to $14 1/4 after AUTODESK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADSK)") else Response.Write("(Nasdaq: ADSK)") end if %> raised its buyout offer to $15 per share... FINANCIAL TRUST CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITC)") else Response.Write("(Nasdaq: FITC)") end if %> surged $10 13/16 to $40 1/16 after agreeing to be acquired by KEYSTONE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KSTN)") else Response.Write("(Nasdaq: KSTN)") end if %> in a deal that values Financial Trust at $43.73 per share... Office equipment distributor MILLER HERMAN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MLHR)") else Response.Write("(Nasdaq: MLHR)") end if %> rose $5 7/8 to $51 3/4 after announcing a 43% increase in second quarter earnings per share (before charges this year and last)... AUTOZONE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AZO)") else Response.Write("(NYSE: AZO)") end if %> dropped $1 7/8 to $24 3/4 as the company will be added to the S&P 500 Index after the close of trading today... Industrial equipment company THERMO ELECTRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TMO)") else Response.Write("(NYSE: TMO)") end if %> gained $2 7/8 to $34 3/8 for the same reason... NEW YORK BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NYB)") else Response.Write("(NYSE: NYB)") end if %> moved up $2 3/4 to $36 7/8 after announcing that it will increase its dividend more than 12%... Utility and wastewater treatment firm IWC RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IWCR)") else Response.Write("(Nasdaq: IWCR)") end if %> gained $5 1/8 to $31 1/8 after energy company NIPSCO INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NI)") else Response.Write("(NYSE: NI)") end if %> proposed a $32 per share merger... Pharmaceutical firm FOREST LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: FRX)") else Response.Write("(AMEX: FRX)") end if %> gained $2 1/4 to $32 1/8 after receiving FDA marketing approval for its Monurol antibiotic drug for treatment of urinary tract infections.

GOATS

BROOKS AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRKS)") else Response.Write("(Nasdaq: BRKS)") end if %> lost $1 5/8 to $16 3/8 today after the semiconductor fabrication facility (fab) automation company announced that first quarter revenues will come in light. As of the last conference call, the company said first quarter revenues would be "down 20% or more" and that revenues for the year would be "back-loaded into the last three-quarters of the year." The announcement today that revenues will fall 29-38% stung investors who had girded themselves and factored the previously-expected revenue softness into their valuations.

Circuit board manufacturer MERIX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MERX)") else Response.Write("(Nasdaq: MERX)") end if %> declined $1 1/2 to $16 after reporting disappointing second quarter results after the bell yesterday. While sales increased 7% year-over-year, gross margin dropped 10.5 percentage points, which led to a precipitous decline in operating earnings. A sales drop of 12.8% from last quarter was the most worrisome development, as sales to MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>, one of the company's largest customers, dropped sharply. Though sales in the computer segment were down significantly, the largest drop came in the communications segment, with a 31% drop sequentially.

REDHOOK ALE BREWERY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HOOK)") else Response.Write("(Nasdaq: HOOK)") end if %> was flattened for a $4 1/4 loss to $9 3/4 today after the Northwestern craft brewer said earnings will fall below expectations and fourth quarter unit growth will slow to 15-20% from last year's Q4. Investors weren't concerned that Redhook is incurring start-up costs for its brewery in New Hampshire, but rather that the company's growth has been hampered in its home markets on the West Coast. Craft brew bellwether BOSTON BEER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SAM)") else Response.Write("(NYSE: SAM)") end if %> has also taken some lumps this year. That company recently announced that it will buy one of its brewing partners and take on some of its own production, which will change its cost structure. Both of these companies face competition from other craft brewers, but Redhook doesn't share in the advertising campaign torments from ANHEUSER BUSCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BUD)") else Response.Write("(NYSE: BUD)") end if %>, which owns 30% of Redhook.

QUICK CUTS: Sales force software company DENDRITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DRTE)") else Response.Write("(Nasdaq: DRTE)") end if %> crumbled $11 5/8 to $8 after saying that fourth quarter sales will fall sequentially and that the company will take a loss for the quarter... ARTERIAL VASCULAR ENGINEERING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %> fell $6 21/32 to $9 31/32 after the medical device maker said quarterly sales and earnings will be sequentially lower... Software developer PROGRESS SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRGS)") else Response.Write("(Nasdaq: PRGS)") end if %> lost $1 3/4 to $19 1/4 on reporting fourth quarter results which include a 15% reduction in revenues... VIMPEL-COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VIP)") else Response.Write("(NYSE: VIP)") end if %> lost $1 1/2 to $23 7/8 even though the Russian cellular telephone company reported a hefty jump in operating numbers... Orthopedic products company ORTHOLOGIC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OLGC)") else Response.Write("(Nasdaq: OLGC)") end if %> fell $1 3/8 to $5 7/8 after announcing that it expects a large jump in sales to be accompanied by earnings close to nil in its fourth quarter... GRC INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GRH)") else Response.Write("(NYSE: GRH)") end if %> slid $2 1/4 to $6 3/4 as the networking company said its OSU interface will initially face small market demand... Cellular telephone company PALMER WIRELESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PWIR)") else Response.Write("(Nasdaq: PWIR)") end if %> fizzled $4 1/2 to $12 after announcing that cellular competitors are cutting prices in advance of PCS system rollouts... PARK ELECTROCHEMICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PKE)") else Response.Write("(NYSE: PKE)") end if %> fell $1 3/8 to $22 after yesterday reporting a 5% increase in Q3 earnings per share... Automotive electronics supplier SHELDAHL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHEL)") else Response.Write("(Nasdaq: SHEL)") end if %> lost $1 1/4 to $19 7/8 on lower first quarter revenues and a $0.19 per share loss... Broadcaster and specialty market HERITAGE MEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HTG)") else Response.Write("(NYSE: HTG)") end if %> fell $2 7/8 to $10 1/2 after brokerage Donaldson, Lufkin & Jenrette cut its rating to "hold" from "buy"... NATIONAL MEDIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NM)") else Response.Write("(NYSE: NM)") end if %> lost $1 5/8 to $5 3/4 after the infomercial company pre-announced a loss for its third quarter and said its Chair has stepped down... Circuit board and flexible circuit maker SIGMA CIRCUITS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIGA)") else Response.Write("(Nasdaq: SIGA)") end if %> lost $1 11/16 to $5 1/4 after breaking off merger talks with CONTINENTAL CIRCUITS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCIR)") else Response.Write("(Nasdaq: CCIR)") end if %>... NAL FINANCIAL GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NALF)") else Response.Write("(Nasdaq: NALF)") end if %> lost $1 5/8 to $9 3/4 after the used-car financing company said it was unable to complete a stock offering because of poor market conditions in its industry... Call-center company BOSTON COMMUNICATIONS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BCGI)") else Response.Write("(Nasdaq: BCGI)") end if %> fell $2 7/8 to $5 1/8 after releasing an earnings warning.

FOOL ON THE HILL
An Investment Opinion by MF Templar

The Tax Effect, Part 3 

SHORTING & SWAPPING

Some more comments on shorting against the box. The beauty of the online medium is that astute and learned readers can dash off lightning fast corrections in e-mail and send them to wayward columnists before their next deadline. It appears some of my comments about shorting against the box yesterday were... well... less than correct. Ironically enough, if I had but chanced to look at the Foolishly Answered Question (FAQ) on the same subject in our FAQ area I would not have been so darned wrong.

In light of the enthusiastic response of readers to Foolishly correct inaccuracies and misinformation in the News, I wanted to take this opportunity to formally introduce the Motley Fool "No-Prize." Readers are eligible to receive the No-Prize when they correct any inaccuracy in any Foolish feature or publication. All readers who win the valuable and priceless No-Prize will have their erudite musings pointed out in the Evening News as a formal recognition of their status as a No-Prize winner.

When discussing shorting against the box yesterday, I said that this could be used to turn short-term gains into long-term gains by extending your holding period. Rod Potter ([email protected]) wrote, "My belief is that the IRS adjusts the purchase date of the underlying shares for the days spent short against the box, thus removing one of the attractions of the maneuver." Fool Robra even cited from IRS Publication 550: "Special rules for treatment of gains. If you held property substantially identical to the property sold short for 1 year or less on the date of the short sale, or if you acquire property substantially identical to the property sold short after the short sale and by the date of closing the short sale, then:

Rule 1. Your gain, if any, when you close the short sale is a short-term capital gain, and

Rule 2. The holding period of the substantially identical property begins on the date of the closing of the short sale or on the date of the sale of this property, whichever comes first."

Basically, what all this means, as Crmirror plainly stated, is "when you short against the box then you freeze the holding period. Effectively, the IRS would not let you lock in a profit and let time elapse to create a long term gain." Any information I gave to the contrary was just plain wrong. ASJ111 pointed out, "[A] shareholder may get away with this because it is hard for the IRS to detect, but if discovered, the time the stock is shorted will be deducted from the total time held to determine whether the stock is taxed as a long term capital gain vs. a short term regular gain." Probably best not to try. Finally, SSachs1221 tells us that it is not necessary to cover your short and sell your long position to cover a short against the box. Instead, you can simply "...have the broker journal the long shares to the short account which effectively closes the position." Nice.

So, official Foolish No-Prizes are on their way to [email protected], Robra, Crmirror, ASJ111, SSachs1221, [email protected], MF Taxes, WPatch and Huibs pht -- the first official crop of no-prize winners. Give 'em a hand, folks.

Strategic recognition of tax losses. Because you can store up tax losses indefinitely, many investors will often recognize a large capital loss by selling a security and simply buy it back 31 days later. Why 31 days? Because of an IRS concept called a wash sale. Essentially, if you sell a security for a loss and buy it back within 30 days, the sale is considered a wash by the IRS and you do not get the benefit of claiming the tax loss. However, if you are well past the quarterly earnings report and do not see much substantial news ahead in the next 30 days, it might make sense to sell the security to lock in the loss for tax purposes and then buy it back 31 days later, keeping your net position the same. The main danger here is that the stock rockets right after you sell it, as they have a nasty habit of doing.

Swapping. Swapping was an idea that was originally promulgated by mutual fund buyers, but has since been adopted by those who purchase individual stocks, with mixed degrees of success. Swapping involves purchasing a security similar to one you have substantial losses in and selling the loser to lock in tax benefits, thus keeping your net position the same. For instance, if you have a capital loss in your Ginnie Mae bond fund and want to recognize that loss but stay in bonds, you can "swap" that fund for a different fund with longer or short maturities. Why different maturities? The swap is only valid according to the IRS if it is "substantially" different.

How does this apply to stocks? Well, if you have incurred a loss in a networker like BAY NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> but remain positive on the prospects for routers and local-area network (LAN) switches, you can sell Bay and buy CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>. This locks in the loss in Bay, but keeps your position in the networking industry intact. How can you get into trouble here? Well, companies are different and sell for different prices at different times. Because the securities are not "substantially" similar, they also could have divergent performance. However, it is definitely something to consider.

CONFERENCE CALLS

12/20/96 (Friday)
3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %>
replay of quarterly conference call
(800) 633-8284 (reservation # 2217914) -- replay

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

12/23/96 (Monday)
CABLETRON SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CS)") else Response.Write("(NYSE: CS)") end if %>
(402) 220-6028 -- replay

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

THE DAILY NEWS CAN BE DELIVERED DIRECTLY TO ANY INTERNET E-MAIL BOX.