HEROES

Disk drive component company HUTCHINSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HTCH)") else Response.Write("(Nasdaq: HTCH)") end if %> surged $14 1/2 to $103 1/2 after reporting Q1 earnings per share (EPS) of $1.97, up 64% from last year's first quarter (discounting a one-time charge for purchase of technology rights). Earnings came in higher than the range pre-announced on December 3 and stomped estimates of $1.75 per share. With gross margin well beyond the traditional 25% sweet-spot, the company showed just how much leverage is in the business model when it hits on all cylinders. Whenever demand is this strong in the industry, the company rarely fails to execute. The next step for Hutchinson is its new TSA suspension -- the company says it will be ready to ship 2 million of the higher-priced parts each week by the fall of 1997.

PICTURETEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCTL)") else Response.Write("(Nasdaq: PCTL)") end if %> leapt $2 3/4 to $23 1/4 after the world's largest videoconferencing company said it will report record revenues of $140 million in its fourth quarter. Compared to a year ago, Q4 sales will rise about 37%. With Q4 EPS of $0.27 in the bag, the full year's EPS of of $0.96 represents growth of 71% over last year. Even without any analyst upgrades on 1997 earnings projections, the company is still selling at a 25% discount to next year's growth rate. While small and mid-cap companies didn't really have the best ride in 1996, and while videoconferencing investors continue to worry about initiatives such as ProShare from INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, PictureTel's liquid balance sheet and impressive growth numbers are bound to catch the eye of some of the larger institutions.

Starting off 1997 on a better foot, TRUMP HOTELS & CASINO RESORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DJT)") else Response.Write("(NYSE: DJT)") end if %> rose $1 1/8 to $11 1/4 as the company will be getting a cash infusion and a deconsolidation of debt from its balance sheet. Colony Capital will take a 51% interest in Trump's Castle in Atlantic City in consideration for $125 million cash. The deal provides cash to fund the re-theming of the hotel (about which investors fretted last month when the Hard Rock Cafe people pulled out of talks) and removes $314 million from the debt side of the company's enterprise value. Trump will continue to manage the Castle, which can be a pretty lucrative endeavor as recent acquisitions in the hotel industry demonstrate. The deal also allows it the cash flow freedom to complete marina renovations and room additions. Should a bond rating upgrade result, the company, bondholders, and shareholders would all come out happy.

QUICK TAKES: AMATI COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMTX)") else Response.Write("(Nasdaq: AMTX)") end if %> shot up $2 1/4 to $14 1/2 after introducing its ADSL access concentrator for telco central offices... Dutch networker MADGE NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MADGF)") else Response.Write("(Nasdaq: MADGF)") end if %> rose $2 7/8 to $15 1/2 on introducing a new network switch... TARGET THERAPEUTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TGET)") else Response.Write("(Nasdaq: TGET)") end if %> exploded $10 1/4 higher to $57 on takeover rumors involving BOSTON SCIENTIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSX)") else Response.Write("(NYSE: BSX)") end if %> and U.S. SURGICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USS)") else Response.Write("(NYSE: USS)") end if %>... Aerospace and printing concern ASTRONICS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATRO)") else Response.Write("(Nasdaq: ATRO)") end if %> rose $1 1/4 to $6 3/4 on offline scuttlebutt in the Washington Post this weekend... TRIDENT MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRID)") else Response.Write("(Nasdaq: TRID)") end if %> gained $3 1/2 to $20 1/2 as Hambrecht & Quist gave the graphics chip company a "strong buy" nod... Specialty finance company HEALTHCARE FINANCIAL PARTNERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HCFP)") else Response.Write("(Nasdaq: HCFP)") end if %> rose $2 1/4 to $15 7/8 on announcing a strategic investment in a medical credit card company... AWARE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AWRE)") else Response.Write("(Nasdaq: AWRE)") end if %> added $1 to $13 5/8 as Hambrecht & Quist initiated coverage of the DSL company with a "buy" rating... Semiconductor equipment company GASONICS INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSNX)") else Response.Write("(Nasdaq: GSNX)") end if %> gained $2 5/8 to $19 1/2 on a Morgan Stanley "strong buy" recommendation... ALEX. BROWN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AB)") else Response.Write("(NYSE: AB)") end if %> rose $2 to $49 7/8 on a 9% increase in Q4 EPS... Polymer company RAYTECH CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RAY)") else Response.Write("(NYSE: RAY)") end if %> soared $1 7/8 to $6 7/8 on a mention in Barron's "Roundtable"... MACNEAL-SCHWENDLER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MNS)") else Response.Write("(NYSE: MNS)") end if %> gained $1 to $10 after the engineering software company elected a new Chair on Friday... A mention in Investor's Business Daily sent cryogenics company CHART INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTI)") else Response.Write("(NYSE: CTI)") end if %> $1 7/8 higher to $20 7/8 today... Closed-end mutual fund TEMPLETON RUSSIA FUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRF)") else Response.Write("(NYSE: TRF)") end if %> gained $2 1/8 to $29, and MORGAN STANLEY RUSSIA & NEW EUROPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RNE)") else Response.Write("(NYSE: RNE)") end if %> gained $1 1/2 to $22 1/4 as Russian President Boris Yeltsin left the hospital after being treated for pneumonia.

GOATS

DOW JONES & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DJ)") else Response.Write("(NYSE: DJ)") end if %> was shredded for a $4 1/8 loss to $36 3/4 after the publisher of The Wall Street Journal reported Q4 earnings of $59.6 million, or $0.62 per share. For the full year, EPS dropped 4.6% after backing out a one-time gain on a sale of assets. While the company recorded a 16.2% increase in advertising revenues for the year, has strong cash flow, grew the core business, and has a franchise in its WSJ property, investors were more focused on its restructuring plan announced today. The company will spend up to $650 million over the next 3-4 years to revitalize its Telerate electronic financial information services business. Rather than spinning off assets or kicking cash back to recent buyers -- who thought some dissatisfied family holders were laying down the law -- those plans and projected 1997 EPS of $1.20-1.40 were a pretty cold shot.

Generic pharmaceutical company BARR LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: BRL)") else Response.Write("(AMEX: BRL)") end if %> rose $3 3/4 to $30 1/4 today after Gruntal & Co. raised its rating on the company to "outperform" from "neutral," upped its 1997 EPS estimate to $1.70, and set its price target at $40, up from $37. Although the generic drug group has been one of the best performing industries in terms of stock price during the decade of the 1990s, 1996 was a tough year marked by price competition and a cyclical drop-off in the dollar value of drugs coming off-patent. 1997 will be an entirely different ball game, according to Gruntal's numbers published in a mid-1996 edition of the Wall Street Transcript. While the value of drugs which came off-patent in 1996 was just above $1 billion, the 1997 value may total $2.8 billion. This 159% increase in the value of drugs coming off-patent is the catalyst to focus on this year.

QUICK CUTS: PHARMACIA & UPJOHN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PNU)") else Response.Write("(NYSE: PNU)") end if %> fell $2 3/4 to $38 1/8 after the company's chief executive officer resigned to "pursue other interests"... Printing software publisher BITSTREAM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BITS)") else Response.Write("(Nasdaq: BITS)") end if %> fell $1 7/8 to $4 after the graphics software company pre-announced Q4 results below expectations... VERTEX COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTEX)") else Response.Write("(Nasdaq: VTEX)") end if %> lost $3 7/8 to $19 1/4 even though the satellite antenna subsystems company beat Q1 EPS estimates... Investment management software company ADVENT SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADVS)") else Response.Write("(Nasdaq: ADVS)") end if %> fell $3 1/4 to $26 3/4 after being panned in Barron's a day after the company announced a deal with Fidelity Management and Research... CERIDIAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEN)") else Response.Write("(NYSE: CEN)") end if %>, formerly Control Data, fell $3 1/4 to $35 3/4 after Lehman Brothers cuts its rating on the company to "neutral" from "buy"... Healthcare REIT CAPSTONE CAPITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCT)") else Response.Write("(NYSE: CCT)") end if %> slid $1 3/8 to $22 3/4 after reporting a slight increase in Q4 funds from operations... ENRON OIL & GAS CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EOG)") else Response.Write("(NYSE: EOG)") end if %> lost $1 3/8 to $24 7/8 after reporting Q4 EPS of $0.22, below estimates of $0.25 per share... Lumber and paper company BOISE CASCADE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCC)") else Response.Write("(NYSE: BCC)") end if %> fell $1 7/8 to $36 1/8 after reporting a loss for the quarter... HALTER MARINE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HLX)") else Response.Write("(AMEX: HLX)") end if %> lost $1 to $16 7/8 after Dean Witter cut its rating on the boat maker to "accumulate" from "buy."

FOOL ON THE HILL
An Investment Opinion by MF Templar

Credit Where Credit Is Due

FIRST USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FUS)") else Response.Write("(NYSE: FUS)") end if %> investors went to bed happy and woke up this morning ecstatic. When credit card specialist reported earnings of $0.58 EPS yesterday, the Dallas-based concern was two cents above expectations with year-over-year profit growth of 31.8%. The only blemishes on this otherwise strong report were the substantial year-over-year increase in the net credit loss rate to 4.76% from 3.10% last year, an increase in the delinquency rate to 5.19% from 3.57% last year, and flat growth in new accounts over the same period a year ago. Last night investors probably mentally prepared themselves for a potential negative reaction to the increasing evidence that consumer credit quality is decaying, something that tends to worry Wall Street when it becomes acute.

Flash-forward to Monday morning. The Wall Street Journal broke the story early this morning that BANC ONE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %> intended to bid close to $7 billion for First USA in a merger that would meld it to Banc One's credit card division. Early this morning the deal was confirmed, with First USA shareholders offered 1.1659 shares of Banc One for each share of First USA they currently hold. The deal values First USA at $48.53 per share and gives the combined entity $35 billion in credit card assets, making it number three in the credit card business behind CITICORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> and MNBA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KRB)") else Response.Write("(NYSE: KRB)") end if %>. Banc One's purchase was for the most part unexpected, although credit card-centric financial services companies have enjoyed a strong rise since late November when interest rates began to pull back due to economic news.

Investors had mixed reactions to the deal. First USA rose $8 7/8 to $45 5/8 on news of the deal, while Banc One was hammered for $3 1/2 to $41 5/8 due to concerns over dilution and credit risk. Many believe that the valuation on the deal at 32% of First USA's credit card receivables is significantly higher than the average price that banks pay for credit card receivables, roughly 11% according to industry sources. However, First USA is more than just some credit card receivables swapped between one bank and another -- it is a full fledged company that has marketing savvy, an impressive risk management infrastructure, and 70.97% earnings per share growth over the past three years. The deal is being done at 22.5 times trailing earnings and 16.2 times forward earnings estimates -- not necessarily the most expensive deal mankind has ever seen.

Formerly acquisitive Banc One has been pretty silent over the last two years of financial services and banking consolidation, often rumored to be an acquirer but never quite making it to the altar. In the end, it appears slowing growth in the consumer credit market may have been behind this merger -- a plan that has significant potential to backfire if Banc One is getting deeper into consumer debt at a time when credit quality is deteriorating. With all the teasers, special offers and benefits for swapping debt that have been rife in the past few years, just about anyone who wants too much credit has just that -- too much credit. To grow its credit card portfolio, Banc One needed to become an acquirer and that is has, choosing First USA as its preferred partner. Many see this move as a prelude to Banc One extending its banking franchise on a national scale, taking the credit card division national first.

The news of this business combination was enough to cause any company that has even thought about offering credit cards to rise today. The pure-plays in VISA and MasterCard credit cards jumped the most, with ADVANTA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADVNA)") else Response.Write("(Nasdaq: ADVNA)") end if %> rising $5 9/16 to $48 11/16, CAPITAL ONE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %> up $4 7/8 to $38 3/8, and MBNA Corp. climbing $2 3/8 to $33 1/2. Advanta and Capital One benefited the most because as relatively smaller pure-plays they would be the most likely potential beneficiaries of any further acquisition and merger activity. Citicorp was up marginally, plodding ahead $1 3/8 to $109 1/4 on lower than normal volume -- clearly not invigorating investor enthusiasm in the face of this news. DEAN WITTER DISCOVER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DWD)") else Response.Write("(NYSE: DWD)") end if %> climbed $1 to $36 1/2, and a number of other names with credit card operations also moved, like AAMES FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAM)") else Response.Write("(NYSE: AAM)") end if %>, rising $3 1/2 to $43, and GREENTREE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNT)") else Response.Write("(NYSE: GNT)") end if %>, jumping $2 1/8 to $39. Even some of the payment processing companies were up, with SPS TRANSACTION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAY)") else Response.Write("(NYSE: PAY)") end if %> scaling $1 7/8 to $17 1/2, and FIRST USA PAYMENTECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTI)") else Response.Write("(NYSE: PTI)") end if %> clambering ahead $2 to $34 7/8.

CONFERENCE CALLS

ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
replay available until 1/24
1-800-475-6701 (access code: 326346)

SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>
1-800-633-8284 (reservation # 2274153) -- replay

HOME DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %>
(Re: Maintenance Warehouse acquisition)
replay through 1/20
(402) 220-5199

01/21/97 (Tuesday)
AVALON PROPERTIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVN)") else Response.Write("(NYSE: AVN)") end if %>
(402) 220-6017 -- replay avail through 1/28

01/21/97 (Tuesday)
COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>
1-888-243-0816 (code: 8642) -- replay avail for 48 hrs. (note: # is toll free)

FOOL FEATURES

Earnings season is back in full swing, and the Fool has conference call coverage on all the big announcements. Earnings Central has conference call summaries from Freddie Mac, Medicis Pharmaceutical, Sun Microsystems, Apple Computer, and more.

Is the sky falling? Some would certainly have you believe that it will be any day now. This naysaying is examined in Rogue's latest missive, "History and the Market."

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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