HEROES

DELTA AIR LINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> gained $3 1/4 to $75 1/4 this afternoon after the company announced second quarter unit operating expenses would be down slightly from last quarter when the carrier reported fully diluted earnings per share (EPS) of $2.98. In the past 90 days, Q2 estimates have come down from $1.41 per share to $1.17, while full-year estimates have declined 10% from $9.91 to $9.02. With a better handle on costs and the company signaling the health of the revenues line, analysts are probably revisiting their estimates this afternoon. At the moment, Delta is trading at 8.4 times 1997 estimates, while UAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> is at 7.3 times 1997 estimates; AMR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> at 8.5 times; and USAIR GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %> at 9.2 times. CONTINENTAL AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAI.A)") else Response.Write("(NYSE: CAI.A)") end if %> takes the prize at 7 times 1997 earnings estimates.

Digital printing server software company SPLASH TECHNOLOGY HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> jumped $4 1/8 to $29 3/8 today. The company's products turn color copiers into printing presses, similar to servers sold by ELECTRONICS FOR IMAGING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EFII)") else Response.Write("(Nasdaq: EFII)") end if %>. On a gross margin basis, the company crossed the 50% point, which is generally seen as a point where a company can start bringing serious profits to the bottom line. In driving the revenues past a certain point, the company not only wins price concessions on things like circuit boards, but the software going into the product represents almost no additional cost. The rest of the costs in the operating model are largely fixed in the short run, so much of the triple digit jump in revenue flows to the bottom line. Therefore, the company's $0.29 EPS handily slammed estimates of $0.16 per share.

YAHOO! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> sprang $4 1/2 higher to $25 3/8 after reporting a basically break-even performance in its fourth quarter, while analysts had been looking for a loss of a nickel per share. Since topline growth is the metric used to measure the health of a young company where profit measures really haven't been established, analysts were quite impressed by the 55% sequential growth in revenues. The bottom line isn't really the focus for investors right now, as long as Yahoo! is not hemorrhaging cash. With a ton of cash and investments left over from the company's IPO, pre-tax investment income somewhere near $1 million pads the bottom line. As long as it can demonstrate its utility to users and show advertisers that utility in the number of visits generated each day, Yahoo! will learn with experience how to generate operating earnings.

QUICK TAKES: TENCOR INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TNCR)") else Response.Write("(Nasdaq: TNCR)") end if %> rose $5 3/8 to $35 7/8 after the semiconductor capital equipment company agreed to merge with KLA INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> in a one-for-one stock swap... Aquaculture biotech firm CYANOTECH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYAN)") else Response.Write("(Nasdaq: CYAN)") end if %> gained $1 3/8 to $7 7/8 in anticipation of tomorrow's earnings... COR THERAPEUTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CORR)") else Response.Write("(Nasdaq: CORR)") end if %> rose $1 3/4 to $12 1/8 as one of the company's drugs has been slated for FDA review next month... Video game retailer FUNCO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FNCO)") else Response.Write("(Nasdaq: FNCO)") end if %> rose $2 3/16 to $13 9/16 on a tripling of its Q3 per-share earnings... ADE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADEX)") else Response.Write("(Nasdaq: ADEX)") end if %> processed a $1 5/8 gain to $18 after Alex. Brown & Sons raised its rating on the semiconductor capital equipment maker to "buy"... Healthcare information company HPR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HPRI)") else Response.Write("(Nasdaq: HPRI)") end if %> gained $2 to $16 1/8 after reporting a 40% increase in quarterly EPS... PILGRIM'S PRIDE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHX)") else Response.Write("(NYSE: CHX)") end if %> rose $1 1/4 to $10 5/8 after reporting EPS of $0.37, in part due to better Mexican results... Electronics distributor KENT ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KNT)") else Response.Write("(NYSE: KNT)") end if %> rose $1 3/4 to $29 on reporting Q3 EPS of $0.26 and receiving an upgrade from Alex. Brown... ZOLTEK COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZOLT)") else Response.Write("(Nasdaq: ZOLT)") end if %> rose $2 1/4 to $33 1/2 as Merrill Lynch upgraded the carbon fiber maker to "near-term accumulate"... Biopharm company EPITOPE INC. (EPTO) gained $4 5/8 to $16 1/4 after the Journal of the American Medical Association published a report on its blood testing alternative product.

GOATS

Help-desk software company CLARIFY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLFY)") else Response.Write("(Nasdaq: CLFY)") end if %> fell $11 1/2 to $34 1/2 after releasing earnings yesterday. Although the company showed great year-to-year growth, it also showed a sequential slowing of revenue growth to 13% from last quarter's 53% sequential growth. To be fair to the company, those sorts of comparisons are pretty hard to duplicate, especially when a company like this doesn't have an instantaneous sales cycle. To win accounts, the company has to demonstrate the benefits of the product and its cost of ownership. It's not like QUIGLEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QUIG)") else Response.Write("(Nasdaq: QUIG)") end if %> cough-drops, where word of the amazing qualities of the product spreads like wildfire. The products Clarify sells are capital goods, not consumption goods. Investors should probably look at the year/year growth and give less weight to the sequential numbers when assessing such a company.

TELTREND INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLTN)") else Response.Write("(Nasdaq: TLTN)") end if %> fell $5 7/8 to $17 1/8 after the telecommunications equipment company warned of a year-to-year decline in sales and earnings. Analysts blamed the problems on an order that didn't come in from U.S. WEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USW)") else Response.Write("(NYSE: USW)") end if %>, a dearth of orders from the rest of the Baby Bells, and the company's lack of technical advancement. According to Robinson-Humphrey analyst Greg Mesniaeff, Teltrend will have a better product line ready for delivery later in this fiscal year. The company is down from a high of $58 1/4 last year.

QUICK CUTS: Specialty semiconductor company MICROCHIP TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCHP)") else Response.Write("(Nasdaq: MCHP)") end if %> fell $4 7/8 to $33 1/2 after announcing a secondary offering of one million shares... KEY TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KTEC)") else Response.Write("(Nasdaq: KTEC)") end if %> fell $4 3/4 to $20 after the manufacturing process equipment maker forecast a loss for the quarter... Clarify's fall didn't help the rest of the help-desk industry -- VANTIVE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VNTV)") else Response.Write("(Nasdaq: VNTV)") end if %> fell $3 5/8 to $26, SCOPUS TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SCOP)") else Response.Write("(Nasdaq: SCOP)") end if %> lost $2 to $35, and REMEDY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMDY)") else Response.Write("(Nasdaq: RMDY)") end if %> fell $6 to $44 7/8... TRESCOM INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRES)") else Response.Write("(Nasdaq: TRES)") end if %> shed $2 to $6 3/4 after Donaldson, Lufkin & Jenrette lowered its rating and earnings estimate on the long-distance company... Database tools company OBJECT DESIGN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ODIS)") else Response.Write("(Nasdaq: ODIS)") end if %> lost $1 3/4 to $9 1/8 on acquiring an Italian software firm... WORLD ACCEPTANCE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WRLD)") else Response.Write("(Nasdaq: WRLD)") end if %> fell $1 to $6 3/8 after the consumer loan company reported a decrease on Q3 earnings... Energy company SEITEL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEI)") else Response.Write("(NYSE: SEI)") end if %> lost $5 1/2 to $38 3/4 even though the firm reported a 50% increase in Q4 revenues... MOSSIMO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGX)") else Response.Write("(NYSE: MGX)") end if %> lost $1 1/8 to $9 5/8 as the troubled fashion designer pre-announced continuing operating softness... WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> lost $4 3/4 to $70 1/4 on a bit of a post blow-out earnings hangover... Same thing for INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, which fell $4 7/8 to $142 1/4, though investors can judge the company's forward statements for themselves by dialing the conference call number below.

FOOL ON THE HILL
An Investment Opinion by MF Templar

WILL IT ALL END BADLY?

Many in the offline media have become preoccupied with the "market level" in light of the remarkable returns of the past two years. Looking back with the most specious of statistical evidence, pundits state the likelihood of a third fat year as low, citing the statistical paucity of similar runs over the past 90 years of U.S. market history. More than one set of eyes has turned toward Japan's market bubble in the late '80s that drove indigenous stocks up to ridiculous levels that have not been matched since. The question underlying all of these musings is of course rhetorical -- "Will it all end badly?" Could it happen any other way? The myopic majority cannot imagine another scenario.

With Americans pouring money into professionally-managed vehicles like mutual funds in an effort to build retirement savings, many fret that this has become some sort of mania akin to the soaring prices of tulip bulbs in 16th century Denmark. Certainly, if one looks closely, it is not difficult to find bits of data to confirm this thesis. Speculative penny stocks continue to achieve staggering valuations, driven by the superficial understanding of valuation among many beginning investors. High-octane traders more familiar with ticker symbols than company names can be dug up and propped on camera with the implication that they are irresponsibly gambling. These anecdotal bits are set against the background of dramatically increasing mutual fund inflows, suggesting that the mentality exposed there is the same that governs most mutual fund investing.

One of the more famous examples of mutual fund bashing occurs in Fred Schwed's Where Are the Customers' Yachts? Writing long before the mutual fund hey-day of the early '90s when more than two-thirds of all assets ever put in funds were invested, Schwed concluded that all of this mutual fund silliness must come to an ugly conclusion. First writing in the '40s, Schwed revisited his failed thesis in his second edition in the '50s, stressing that although he had been wrong about mutual funds to date, he was now absolutely sure that the ceiling was going to cave in. As useful as Schwed's critique of the brokerage industry was, it is obvious in retrospect that his analysis of what was driving the mutual fund boom of his time was incorrect. Schwed, like many today, concluded that a casino stock market mentality was behind it all.

You cannot understand the expansion of mutual fund assets without concomitantly tracing the radical decline of defined benefit pension plans and the relative economic value of social security income. Particularly given the explosion of 401(k), 403(b) and similar retirement packages, mutual funds have been the main beneficiaries of the end of traditional pension plans as we know them. Have any friends looking forward to a pension these days? Know anyone who believes that social security will provide them with enough income in their golden years? Both notions were quite prevalent until the early '80s initiated a radical transformation of the American economy.

Looking at the mutual fund inflow numbers and finding anecdotal evidence to support a hysterical market scenario is intellectual sloth, pure and simple. Although funds are notorious underperformers, overall they are hardly consumed by speculative silliness. There are a number of moving parts that need to be considered in any comprehensive analysis before concluding that the madness of crowds reigns king on Wall Street. Irrational exuberance aside, there are some big picture numbers that need to be considered to give context to this data. What percentage of money is in professionally-managed funds? What percentage of American households have assets in stocks? What percentage of their assets are in stocks or pension funds? How does this compare to prior historic levels? How does this compare with other countries? These questions only begin to scratch the surface of the issue. If these basic factors aren't considered, any conclusions drawn are little better than guesses.

CONFERENCE CALLS

INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
Replay available through Friday
(402) 220-1010

ADVANCED MICRO DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %>
(402) 220-5185 (passcode: 5838) -- replay

COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>
(re: Alliance with NCR)
(888) 243-0816 -- replay

MEDICIS PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDRX)") else Response.Write("(Nasdaq: MDRX)") end if %>
1-800-633-8284 (reservation # 2373978) -- replay avail 1/15 from 3:30 to 5:30 p.m. EST only

SALLIE MAE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLM)") else Response.Write("(NYSE: SLM)") end if %>
1-800-844-8666 (passcode: 2559) -- replays @ 5:00 p.m. EST on 1/14, 11:00 a.m. EST on 1/15, and 11:00 a.m. on 1/16

01/16/97 (Thursday)
INTUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> / MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(re: Online Financial Service partnership)
12:00 noon EST
(800) 857-4880 (access code: OFX) -- live call
(800) 846-5152 (access code: 1234) -- replay

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 in FoolMart. 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

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