HEROES

LONG ISLAND LIGHTING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LIL)") else Response.Write("(NYSE: LIL)") end if %> was lit up for a $2 5/8 gain to $22 as the company announced plans to merge with BROOKLYN UNION GAS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BU)") else Response.Write("(NYSE: BU)") end if %>. The proposal calls for a new holding company to be formed with LILCO owners taking two-thirds of its common stock and Brooklyn Union holders retaining one-third. LILCO has been a political football in New York State, with both Governors Cuomo and Pataki having made moves to deal with the company's high rates and its useless Shoreham nuclear plant. The addition of Brooklyn Union, with its greater financial strength, is being welcomed by almost all concerned, as the combined company is planning on increasing earnings while lowering utility rates in the region. Based on Brooklyn Union's 1998 estimates and projecting zero growth for LILCO for 1998, both groups of shareholders do well with a combined estimate of $2.56 a share for 1998.

Investors have come back to the airport security sector after these shares experienced run-ups this summer following the ValuJet and TWA tragedies. On Friday, INVISION SYTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVN)") else Response.Write("(Nasdaq: INVN)") end if %> advanced strongly after receiving an order from the FAA for 54 of its explosives detection systems. That stock was up $2 1/8 to $33 5/8 today. Other stocks in this sector also made strong moves today on the back of that order, as investors see the federal government backing up promises to beef up airport security. MAGAL SECURITY SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAGSF)") else Response.Write("(Nasdaq: MAGSF)") end if %>, which makes bomb-detection systems, gained $1 1/4 to $8 5/8; security systems company DETECTION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DETC)") else Response.Write("(Nasdaq: DETC)") end if %> was up $1 5/16 to $20 5/16; X-ray systems maker AMERICAN SCIENCE & ENGINEERING <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ASE)") else Response.Write("(AMEX: ASE)") end if %> added $3 3/8 to $14 3/4; and security camera company COHU <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COHU)") else Response.Write("(Nasdaq: COHU)") end if %> rose $1 7/16 to $22 5/16.

ASECO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASEC)") else Response.Write("(Nasdaq: ASEC)") end if %> gained $1 5/8 to $11 3/8 after Barron's turned up the shares in a screen from Market Guide, available on the World Wide Web. Many of the companies to show up in the value screen are semiconductor equipment concerns, including the above-mentioned COHU, which also competes with Aseco and AETRIUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATRM)") else Response.Write("(Nasdaq: ATRM)") end if %>. Some value investors looking at these companies are in nirvana right now, as it is difficult to find firms with such an excellent secular outlook trading at recession-like prices. Even after today's bounce, Aseco is only valued at 1.33 times book and has a market capitalization 2.8 times the value of the cash on its books. Even taking into account the lean earnings taking place right now, investing in a cash-rich, debt-free company at such low valuations can be rewarding later on.

QUICK TAKES: Dutch insurance group AEGON N.V. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AEG)") else Response.Write("(NYSE: AEG)") end if %> gained $5 7/8 to $62 7/8 after agreeing to merge its U.S. insurance operations with those of PROVIDIAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PVN)") else Response.Write("(NYSE: PVN)") end if %>... Medical device maker BIOFIELD CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BZET)") else Response.Write("(Nasdaq: BZET)") end if %> rose $5 1/4 to $14 1/8 on announcing that it has filed for pre-market approval with the FDA for its breast cancer screening device... Oklahoma's LIBERTY BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LBNA)") else Response.Write("(Nasdaq: LBNA)") end if %> jumped $8 1/2 to $50 1/4 after agreeing to merge with BANC ONE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %>... THOMAS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TGIS)") else Response.Write("(Nasdaq: TGIS)") end if %> gained $1 1/8 to $8 1/2 after the consulting company appeared in the Barron's article on value stocks.

GOATS

RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> fell $3 3/4 to $24 1/8 after one of the guests on the PBS series Wall $treet Week suggested that the concept restaurant company's shares are a good bet for shorting. Even the longs might have some self-doubts about the current value of the restaurant chain, as the stock has rocketed from around $3 per share (adjusted for splits) 20 months ago to a high of $36 1/2 this year. Rainforest Cafe has become the "highest-grossing unit concept in the restaurant industry," according to MF Edible, Rick Munarriz. That's almost 14% higher than PLANET HOLLYWOOD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHII)") else Response.Write("(Nasdaq: PHII)") end if %>, and virtually eclipses the per-store sales at restaurants such as OUTBACK STEAKHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OSSI)") else Response.Write("(Nasdaq: OSSI)") end if %> and APPLEBEE'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APPB)") else Response.Write("(Nasdaq: APPB)") end if %>. With mall developers subsidizing the buildout of stores and its Disney location set to ring up sales of $30 million this year, some Rainforest Cafe investors are saying, "Thanks for the dip today."

Shares of ZITEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZITL)") else Response.Write("(Nasdaq: ZITL)") end if %> closed down $20 1/4 to $41 after the stock had been up by as much as $12 during the day. A news release at the end of the trading day stating that billionaire investor George Soros was not taking a position in Zitel was blamed for the sharp turnaround. Recurrent rumors that Soros was amassing a stake was apparently one of the principle drivers behind the stock's recent ascent, although short-covering and general hysteria over the Year 2000 problem was also to blame. Other late-session losers included ACCELR8 TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACLY)") else Response.Write("(Nasdaq: ACLY)") end if %>, down $5 1/8 to $16 3/8; TSR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TSRI)") else Response.Write("(Nasdaq: TSRI)") end if %>, off $7 1/2 to $30; and VIASOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VIAS)") else Response.Write("(Nasdaq: VIAS)") end if %>, down $2 to $51. UNICOMP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UCMP)") else Response.Write("(Nasdaq: UCMP)") end if %> still managed to climb $4 5/8 to $9 7/16 after announcing a contract for Year 2000 services worth $100,000.

QUICK CUTS: Weakness at upscale retailer NORDSTROM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOBE)") else Response.Write("(Nasdaq: NOBE)") end if %> spread a cloud of doubt over the retail sector -- SAKS HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKS)") else Response.Write("(NYSE: SKS)") end if %> dropped $1 1/8 to $36 3/8, GUCCI GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GUC)") else Response.Write("(NYSE: GUC)") end if %> lost $3 3/4 to $64 1/4, and NEIMAN-MARCUS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NMG)") else Response.Write("(NYSE: NMG)") end if %> slipped $1 3/8 to $25... IOMEGA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> fell $1 3/8 to $16 as the company announced that it will move all manufacturing operations to its Malaysian facility... Blaming lower-than-expected Q4 results on lower order rates for silicon wafers, SEMICONDUCTOR PACKAGING MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEMX)") else Response.Write("(Nasdaq: SEMX)") end if %> plunged $6 3/4 to $10 3/4... Y2K grand-daddy DATA DIMENSIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDIM)") else Response.Write("(Nasdaq: DDIM)") end if %> participated in the reversal today, falling $4 1/8 to $33 5/8.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Handling the Pressure Drop

There are no sellers more ruthless than institutional investors who believe they have been misled. MARKS BROTHERS JEWELERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MBJI)") else Response.Write("(Nasdaq: MBJI)") end if %> learned this lesson this morning after an influential analyst broke the news that same-store sales at the jewelry store chain might come in a little light. Montgomery Securities analyst Tom Tashjian wrote in a published note that December same-store sales might come in below expectations, causing him to trim his fourth quarter earnings estimates by nine cents to $0.57 per share. Shares of Marks Brothers dropped in quick order on more than nine times normal volume, intensifying throughout the day. The stock closed the day down $8 1/4 at $13 1/4.

Why did Wall Street take Tashjian's comments about some fourth quarter weakness and crush the stock? Because Montgomery Securities was the lead underwriter for Marks Brothers initial public offering of 2.2 million shares at $22 1/4 a share in early November. As part of the team of investment bankers that worked with Marks Brothers to navigate the treacherous straits of bringing a company public, the Street views Tashjian as particularly close to management and takes his comments as equivalent to a press release from the company admitting fourth quarter weakness.

Exacerbating an already delicate situation, there are only about three million shares of Marks Brothers available for trading, which means that institutions that got shares on the initial offering that are looking to dump them are doing so in a market that is providing absolutely no liquidity. The issue of "trust" is key when institutional investors put money in a stock. If they believe that they were lied to during the "road show" that often accompanies a public offering, wherein management runs around the country telling their "story" to interested investors, they will sell without regrets regardless of the price -- as evidenced today.

Multi-point drops in names like Marks Brothers or even more established companies like COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> cause individual investors quite a bit of consternation. When is a drop justified and when does it signal an opportunity? Many investors are often too quickly moved by large price decreases, looking to get into a company because it suddenly seems cheap. However, as MEDAPHIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDA)") else Response.Write("(Nasdaq: MEDA)") end if %> at $14 or MARVEL ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRV)") else Response.Write("(NYSE: MRV)") end if %> at $4 both proved, buying after a large price drop can often land you a company that is still too expensive given deteriorating fundamentals, and not the bargain that was anticipated.

Despite the fact that the market constantly beckons quick, frenzied activity, the individual investor is best served by a cautious and curious stance when confronted with a huge multi-point drop. Oftentimes, this is probably the first or second time an investor has even seen the particular name in question. Rarely is there a strong grasp of the business environment or the competitors that a company faces. Whether or not the bargain appears short-lived, it is incumbent upon careful investors to do their due diligence -- homework, for the legal term-impaired.

Take for instance the case of Marks Brothers that presents itself today. What would the next step be? A quick look out at EDGAR's search page indicates that there is nothing on Marks Brothers there. The Morningstar AOL Stock Report online lists the phone number and a brief company description, where we discover the company has 160 stores in 24 states under the Marks Brothers, Whitehall Co. and Lundstrom Jewelers names. A quick call to Marks Brothers at (312) 782-6800 would elicit an investor's packet, which at this point would include the S-1 filing, one 10-Q and whatever press releases the company had on hand.

After getting the company's financial information, the next step would be to put it in context. To get a sense of where the company trades comparable to some peers, I would look at TIFFANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIF)") else Response.Write("(NYSE: TIF)") end if %>, ZALE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZLC)") else Response.Write("(NYSE: ZLC)") end if %>, REEDS JEWELERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: REED)") else Response.Write("(Nasdaq: REED)") end if %>, FRIEDMAN'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRDM)") else Response.Write("(Nasdaq: FRDM)") end if %> and BARRY'S JEWELERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BARY)") else Response.Write("(Nasdaq: BARY)") end if %> to see what comparable price/earnings ratios, enterprise value/sales and the like were. In talking to Marks Brothers on the phone, I would be sure to ask the investor relations person who Marks viewed as its publicly-traded "peers," and perhaps order their packets as well to get a sense of what this weak fourth quarter really means. All in all, after all the data is collected, spending a weekend's worth of work to determine whether or not the price was right would be warranted. Heck, people put more than that into comparative shopping for cars, right?

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, demonstrating 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 at keyword: FoolMart on America Online or at our website (). You might also be interested in his weekly Industry Decathlon report, delivered by e-mail or fax. In it, Bogey examines a different industry each week and runs its top players through his decathlon to discover which one company looks the most attractive.

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

Happy Holidays, Fools

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