HEROES

USLIFE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USH)") else Response.Write("(NYSE: USH)") end if %> surged $5 1/4 to $47 after agreeing to merge with diversified financial services company AMERICAN GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGC)") else Response.Write("(NYSE: AGC)") end if %>. USLIFE is primarily a life insurer selling individual, group, and credit life insurance, although the company also writes health insurance. While the company is well regarded and has a good track record of building its business, its return to shareholders over the last three years has lagged both the S&P 500 and its acquirer. Counting dividends, its return has amounted to around 11.25% per year, while American General's three-year return has surmounted 17% per year. The $49 per share in stock American General will swap for each USLIFE share values the company at less than 1.5 times book value, while investors give American General a 13% premium to that value.

SABRATEK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBTK)") else Response.Write("(Nasdaq: SBTK)") end if %> gained $3 1/4 to $23 1/8 after the medical products company received a five-year contract from staffing/home healthcare services company OLSTEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OLS)") else Response.Write("(NYSE: OLS)") end if %>. Sabratek makes hardware and software for patient monitoring sytems, infusion pumps, and consumables. Considering Sabratek's impressive gross margin near 50% derived from its unique, valued-added products combined with a contract that adds a dependable revenue stream over the long term, the stock's move up from its June 1996 IPO of $10 doesn't look like vaporware.

QUICK TAKES: EXOGEN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EXGN)") else Response.Write("(Nasdaq: EXGN)") end if %> gained $1 3/8 to $7 as the ultrasound company is expected to make a presentation at the annual meeting of the American Academy of Orthopedic Surgeons this week, according to Dow Jones... DEPUY INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DPU)") else Response.Write("(NYSE: DPU)") end if %> added $1 1/4 to $20 3/8 on reporting Q4 EPS of $0.28... Retail franchisor GROW BIZ INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GBIZ)") else Response.Write("(Nasdaq: GBIZ)") end if %> ran $1 1/2 higher to $11 3/4 in anticipation of earnings that came out after the closing bell -- Q4 EPS of $0.14 missed estimates by $0.02... OAK TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OAKT)") else Response.Write("(Nasdaq: OAKT)") end if %> gained $2 1/16 to $14 1/8 after Hambrecht & Quist raised its rating on the CD-ROM controller company to "strong buy" from "buy"... Gynecological products company CYTYC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYTC)") else Response.Write("(Nasdaq: CYTC)") end if %> added $3 5/8 to $29 1/8 after Blue Cross of Massachusetts included the company's ThinPrep test in its coverage... CIENA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> jumped $4 5/8 to $39 1/4, indicating strong investor interest in the newly-public fiberoptic electronics company... MERRILL LYNCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> gained $8 1/2 to $96 1/2 as Goldman Sachs initiated coverage of the huge brokerage with a "buy" rating, setting a price target of $110... Asset management companies followed suit, with T. ROWE PRICE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TROW)") else Response.Write("(Nasdaq: TROW)") end if %> up $3 3/8 to $49 1/4 and FRANKLIN RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEN)") else Response.Write("(NYSE: BEN)") end if %> up $3 7/8 to $62 1/2... WORLD COLOR PRESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WRC)") else Response.Write("(NYSE: WRC)") end if %> rose $2 1/2 to $20 3/4 after the printing and publishing services company recorded Q4 EPS of $0.46, meeting estimates... Moving up on analysts' upgrades were ABERCROMBIE & FITCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANF)") else Response.Write("(NYSE: ANF)") end if %>, up $1 1/8 to $14 5/8; PHYSICIANS RESOURCES GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PRG)") else Response.Write("(NYSE: PRG)") end if %>, up $1 to $13 1/2; and BARRETT RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRR)") else Response.Write("(NYSE: BRR)") end if %>, up $2 3/4 to $38... Retail control systems maker CHECKPOINT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKP)") else Response.Write("(NYSE: CKP)") end if %> rose $1 1/2 to $19 5/8 on signing a long-term sales contract with Japan's Mitsubishi Materials... K-V PHARMACEUTICAL CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: KV.A)") else Response.Write("(AMEX: KV.A)") end if %> rose $1 5/8 to $18 5/8 after receiving approval to market Femstat One.

GOATS

DISCOUNT AUTO PARTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAP)") else Response.Write("(NYSE: DAP)") end if %> deflated $5 1/8 to $13 3/8 after industrial gases firm AIRGAS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARG)") else Response.Write("(NYSE: ARG)") end if %> filed a lawsuit against the company alleging that it knowingly sold Airgas corrupted R-12 refrigerant, a freon substitute. Discount Auto countered by saying that Airgas is trying to shift the blame for damages to the company from its former supplier of refrigerant, which is now bankrupt and which Airgas has also sued. Discount Auto imploded last month when it said it didn't expect to make any sales of R-12 during the quarter due to a disruption in its distribution channel. At that time, analysts moved swiftly to downgrade the stock as federal investigators were looking into allegations that one of Discount's customers was mislabeling cheap freon as the non-ozone depleting R-12. Analysts' fears that those complaints would eventually lead up the supply chain have manifested themselves in the lawsuit Airgas filed last night.

Information technology outsourcing firm DONNELLEY ENTERPRISE SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DEZI)") else Response.Write("(Nasdaq: DEZI)") end if %> was slammed for a $11 3/4 loss to finish at $12 after saying it will miss analysts' estimates for the year and especially for the quarter. The culprit in the matter is the company's LANSystems division, which encountered staffing problems and had to scrounge up outside talent to serve customer accounts. Essentially the company is a systems integrator, putting together LANs, word processing systems, and fax groups -- not exactly highly proprietary, high-margin stuff. This year's estimate called for EPS of $0.39, which would translate to a net profit margin around 2%. Such small margins can produce nice EPS growth if you also have robust earnings growth. When things go bad, however, margins can collapse, as J.P. Morgan's analyst -- who put out a "buy" rating on the shares yesterday -- found out today.

NOKIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOK.A)") else Response.Write("(NYSE: NOK.A)") end if %> fell $3 1/8 to $64 after reporting Q4 EPS of $1.08, beating expectations of $0.96. For the full year, the Finnish cellular telephone handset and telecom infrastructure company reported EPS of $2.30. The company says it is comfortable with expectations of 10% margins on handsets in the coming year. The U.S. still represents a growth market for the company, although this market only represents a small part of its revenues. Nonetheless, a weaker markka will help Nokia keep ahead of, or surpass, the price competition from its competitor, MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>. The weaker currency also helps when it's bidding against the American giant in the fast-growing developing markets of Asia and South America. Given the run since its low around $30 last year, today's weakness is to be understood. If Nokia can achieve EPS estimates of $3.38 in 1997, that run would be more than justified.

QUICK CUTS: GALILEO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GAEO)") else Response.Write("(Nasdaq: GAEO)") end if %> was beaned for a $11 3/4 loss to $6 7/8 after XEROX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XRX)") else Response.Write("(NYSE: XRX)") end if %> excommunicated the company as a supplier... Data network security software company V-ONE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VONE)") else Response.Write("(Nasdaq: VONE)") end if %> fell $1 1/8 to $5 7/8 before earnings were released following the closing bell -- EPS of negative $0.11 missed estimates by six cents... Research laboratory company COLLABORATIVE CLINICAL RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCLR)") else Response.Write("(Nasdaq: CCLR)") end if %> fell $3 3/8 to $9 after reporting Q4 EPS of $0.09, missing estimates of $0.10, and announcing an acquisition... PC parts distributor PC SERVICE SOURCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCSS)") else Response.Write("(Nasdaq: PCSS)") end if %> lost $1 1/4 to $7 3/4 on reporting Q4 EPS of $0.05, falling short of estimates... PICTURETEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCTL)") else Response.Write("(Nasdaq: PCTL)") end if %> dropped $2 11/16 to $15 7/8 after the videoconferencing software and hardware provider said first quarter 1997 results will be down sequentially... RELIANCE ACCEPTANCE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RACC)") else Response.Write("(Nasdaq: RACC)") end if %> shed $2 1/2 to $14 3/4 on its first day of trading in its new corporate incarnation following the divestiture of its Cole Taylor Bank and CT Mortgage subsidiaries... Information processing company PAR TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTC)") else Response.Write("(NYSE: PTC)") end if %> lost $1 1/8 to $12 on reporting Q4 EPS of $0.28, besting estimates of $0.27... DAL-TILE INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DTL)") else Response.Write("(NYSE: DTL)") end if %> fell $1 1/2 to $16 5/8 after the ceramic tile firm told investors that it is behind schedule in integrating an acquired company into operations, which will depress Q4 results... Despite a gaining a "buy" rating from Hambrecht & Quist yesterday, ANALOG DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADI)") else Response.Write("(NYSE: ADI)") end if %> lost $1 3/4 to $25 1/4.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Valuation for the Long-Run

How can you tell if management is worth a darn? The fact that there is no readily available formula that gives one faux mathematical precision should not dissuade an investor from trying to evaluate the people running the show. A company's ability to attract and retain qualified management is a critical determinant of its ability to sustain growth over prolonged periods of time. Even more importantly, episodes like MERCURY FINANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MFN)") else Response.Write("(NYSE: MFN)") end if %> and CENTENNIAL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTN)") else Response.Write("(NYSE: CTN)") end if %> highlight the damage that incompetent or unethical management can do to an investor's portfolio.

Although past performance is a lukewarm indicator of future performance for mutual funds, sustained corporate growth over prolonged periods of time is an excellent indication of management's ability to do the job. Creating sustained growth over periods of five years or longer requires more than dumb luck. Although even the most stellar of managements can only minimize the effects of industry-wide downturns, ability shines through when one considers sustained earnings and revenue growth.

Quality management can also reveal itself in the balance sheet. Many liquidity measurements like inventory turns and days sales outstanding (DSOs) are actually attempts by investors to take snapshots of how the company is managing the business. Relative to industry peers, does a particularly company always have way too much inventory? You will be able to tell this by simply looking at its inventory turns over the past five or ten quarters. Does a company show a systematic slowness when it comes to collecting on debts? Days sales outstanding will seem bloated when you compare the company to similar companies. (Investors can learn about inventory turns and DSOs in an article called "Liquid" in the How to Value Stocks area.)

When investors freak out because days sales outstanding have jumped, as Fools witnessed in late-January when CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> reported earnings, they are really worrying about whether or not management is manipulating sales in order to make earnings targets. A bulge in DSOs means that a company has shipped a lot of product without collecting. As accounting rules allow companies to count as revenue product that have been delivered but not paid for, management might be motivated to push product out into the channel in order to make sales targets. Short-term twitches are to be expected given the snapshot nature of quarterly accounting, freezing an entire balance sheet at one moment in time, but what investors get concerned about is a SYBASE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYBS)") else Response.Write("(Nasdaq: SYBS)") end if %> situation where management has sold product years into the future, essentially making the channel barren.

Philip Fisher stressed the importance of management throughout the organization in his book Common Stocks and Uncommon Profits. Fisher does not rely on any calculations, but instead stresses the importance of something called "scuttlebutt." By talking to employees, customers and suppliers, Fisher argues that one can get an excellent picture of how management thinks. After assessing this scuttlebutt, an investor can gain a deeper sense of management's strategy and ability to deal with change. The kind of fellow who would make every cocktail party or airline flight an opportunity to do research on yet another company, Fisher formed lasting commitments to companies with quality management, holding many core positions in his portfolio until his death. His son, Ken Fisher, has actually institutionalized scuttlebutt into what he calls the 12-Step Process, where he has associates of his money management firm call four customers, four suppliers and four competitors to assess the reputation of the company.

All this said, it is important not to allow yourself to be snowed by management. Many investors, such as Ben Graham, eschewed any contact with management for fear that they would bias the interpretation of the financials. Although Graham certainly took the situation to an extreme, it seems clear that some opportunistic managements tend to oversell themselves or their ability to grow. Investors should beware of claims from companies that seem too good to be true. Contrary to popular opinion, for instance, only a handful of penny stocks have managed to grow into significant companies, despite the tendency of the management of these firms to claim that they could be the next MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. To paraphrase Peter Lynch, investors who are told that a company will be "the next" anything should run in the other direction.

A recent book called Built to Last by James C. Collins and Jerry I. Porras took eighteen world-class companies and compared them to peer companies that started at roughly the same time in order to determine what made the difference. By comparing a company like MERCK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %> to PFIZER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %>, Collins and Porras believe that they identified not just the reason for overall success but also the reason for extreme success. Their findings indicate that a company requires an overall purpose for being beyond simply making money in order to become exceptional. This purpose is often built upon a foundation of core values that the company holds dear. Whether this purpose takes the form of a social mission or just a Big, Hairy, Audacious Goal (BHAG), there needs to be something to shoot for beyond profits and some ground rules for how to get there. If you can easily find a company's purpose and core values in its public documents or by talking to employees, the odds of sustained outperformance due to solid management are much greater.

Although this is hardly a comprehensive rendering of how to determine whether or not management is first class or coach, hopefully this at least nudges you in the right direction. There really is no magic formula, and many times mathematical equations give a false sense of precision. When one looks at the long-term track record of a Phil Fisher or a Warren Buffett -- men who primarily invest in management, not P/E to growth ratios -- it seems clear that there is something about the actual people running the business that is important for long-term outperformance.

CONFERENCE CALLS

APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %>
(800) 642-1687 (access code: 221082) -- replay after 5:30

DOLLAR GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DG)") else Response.Write("(NYSE: DG)") end if %>
(strategic plans for FY98)
(402) 220-1032 (code: 971032) -- replay

UNITED HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %>
replay available until 2/18
(800) 475-6701 (code: 323513)

ANN TAYLOR STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>
(re: January sales)
(402) 351-9977 -- replay through 5:30 PM EST on 2/14

ALLIED SIGNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %>
(800) 633-8284 (reservation # 2216671)
replay avail. thru 2/13

TITAN HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TH)") else Response.Write("(NYSE: TH)") end if %>
(800) 633-8284 (reservation # 2471439)
replay on 2/13 from 4:30-5:30 only

FOOL FEATURES

The Fool introduces a new feature today -- the Daily Double. It provides a description and valuation of a company whose stock has more than doubled over the last six months. Each day, the Fool will review the business, talk about the cause of its doubling in value, and broadly consider valuation.

Our aim is two-pronged. We hope that by concentrating attention on spectacular recent performance, together we'll come to a more thoroughgoing understanding of how and why certain businesses rapidly double in value. But just finding and focusing on the doubles isn't fulfilling. Additional to that task, we'll venture out in search of a fair value for the business.

ANOTHER FOOLISH THING
A New Fool Tool!

Valuations! Ratios! Factors! Rates! There are so many numbers tossed around Fooldom that it's easy to get lost, swimming in a sea of calculations, adrift on the waves of fractional roots, desperately searching for the shores of mathmatical reason. Okay, that might be a bit dramatic, but there are a lot of numbers to crunch. Enter Fooldom's brand-new and exciting ValuTool! This Foolish software package is a simple and powerful way to work with the vast amount of data necessary to determine the value of a stock. Give ValuTool the raw numbers and it'll compute many of the ratios and valuations that you read about as you wander through Fooldom and beyond -- The Foolish eight, the PEG strategies, and lots more! Spend more of your time researching and less of it doing calculations. Check out ValuTool in FoolMart today!

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.