HEROES

Independent aviation services company UNC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNC)") else Response.Write("(NYSE: UNC)") end if %> gained $2 1/2 to $13 3/8 after agreeing to merge with GREENWICH AIR SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GASIA and GASIB)") else Response.Write("(Nasdaq: GASIA and GASIB)") end if %>. UNC shareholders will receive from $14 to $16.10 per share, and they may elect to receive up to half that price in cash. UNC's government work, interior retrofit, avionics, and airframe services will complement Greenwich's primary business line of engine repair work. The deal will more than double Greenwich's revenues and offers some possibilities for cost savings in facilities consolidation, volume purchasing, and reduction in overhead personnel. If the company can achieve cost savings, it is reasonable to assume that combined operating margin could approach 7%. The combined company now sells at an enterprise value to sales ratio of 0.81.

FREEPORT-MCMORAN COPPER & GOLD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FCX.A)") else Response.Write("(NYSE: FCX.A)") end if %> picked up close to $100 million in market value today in gaining $2 7/8 to close at $30 1/2. In the continuing saga of the BRE-X MINERALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BXMNF)") else Response.Write("(Nasdaq: BXMNF)") end if %> Busang gold deposit in Indonesia, rumors have it that Freeport-McMoran has won a 15% interest in a joint venture with Bre-X and the government of Indonesia. Guesstimates put the value of the 15% interest at $400 million, which values the whole property at $2.7 billion, or about 7.7 cents on the dollar for the market value of the 100 million ounces of gold in the ground. That pales in comparison to the $4.5 billion offer from PLACER DOME <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDG)") else Response.Write("(NYSE: PDG)") end if %>, but the rumor is that Bre-X will keep a 45% interest in the property with the Freeport-McMoran deal, which offers shareholders the upside potential of an independent concern with the expertise of a global mining partner. With gold prices in the dumps, this is the key merger & acquisition prize out there right now.

T. ROWE PRICE ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TROW)") else Response.Write("(Nasdaq: TROW)") end if %> gained $4 to $53 1/4 as 401(k), 403(b), and IRA funds continue to pour into the mutual fund industry at the rate of over $20 billion per month. In a $7 trillion+ economy with U.S. savings rates trending higher (on monthly statistics), investors are likely to buoy the valuations on companies that are good at collecting and managing all that money that is being saved. With a market cap of about $3.2 billion and assets under management (AUM) just under $100 billion, the company is trading at 3.2% of AUM. In contrast, one of the larger mutual fund families in the world, FRANKLIN RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEN)") else Response.Write("(NYSE: BEN)") end if %>, trades at 4.4% of AUM. Annualizing last quarter's numbers, Franklin earns pre-tax income of 32 basis points (100 basis points = 1%) on AUM, while T. Rowe earns pre-tax income around 20-25 basis points.

QUICK TAKES: BOSTON ACOUSTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOSA)") else Response.Write("(Nasdaq: BOSA)") end if %> leapt $5 1/4 to $25 1/4 after announcing that it has signed an agreement to supply speaker systems to a major PC manufacturer... Pharmaceutical development company ALKERMES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALKS)") else Response.Write("(Nasdaq: ALKS)") end if %> gained $4 1/4 to $27 after announcing that ALZA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AZA)") else Response.Write("(NYSE: AZA)") end if %> will invest $50 million in the company by purchasing two million newly-issued shares... Dental practice company COAST DENTAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDEN)") else Response.Write("(Nasdaq: CDEN)") end if %> moved up $1 7/8 to $12 1/2 following this week's initial public offering of 2.2 million shares at $8... BIOPSYS MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIOP)") else Response.Write("(Nasdaq: BIOP)") end if %> rose $4 1/4 to $31 1/2 despite FDA questions on the company's marketing of its breast cancer products... Utilities software company SYSTEMSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYSF)") else Response.Write("(Nasdaq: SYSF)") end if %> gained $2 3/8 to $16 1/4 after MICRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> announced that it will pre-install the company's SystemWizard package on certain PCs... MAIL BOXES ETC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAIL)") else Response.Write("(Nasdaq: MAIL)") end if %> rose $2 1/4 to $22 1/4 after the U.S. Postal Service decided to discontinue its "Pack & Send" service... Semiconductor capital equipment maker CREDENCE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMOS)") else Response.Write("(Nasdaq: CMOS)") end if %> tacked on $2 5/8 to $20 7/8 after Merrill Lynch raised its near-term rating on the shares to "buy" from "neutral"... VARCO INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VRC)") else Response.Write("(NYSE: VRC)") end if %> gained $1 1/4 to $25 1/4 after the energy drilling equipment and instrumentation company reported Q4 earnings per share (EPS) of $0.27, beating the First Call estimate of $0.23... Specialty insurance company EXECUTIVE RISK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ER)") else Response.Write("(NYSE: ER)") end if %> jumped $4 3/4 to $45 after reporting Q4 EPS of $0.74, beating estimates of $0.70 despite restructuring its formerly-exclusive relationship with AETNA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AET)") else Response.Write("(NYSE: AET)") end if %>... PROVIDENCE ENERGY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PVY)") else Response.Write("(NYSE: PVY)") end if %> rose $1 3/4 to $18 7/8 after a money manager appearing on CNBC speculated that Georgia-based utility SOUTHERN CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SO)") else Response.Write("(NYSE: SO)") end if %> is fixing to take over the natural gas utility... CONVERSE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVE)") else Response.Write("(NYSE: CVE)") end if %> continued upward $1 5/8 to $22 1/2 after a bankruptcy plan for its Apex One unit was affirmed by a federal court yesterday.

GOATS

SECURITY DYNAMICS TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SDTI)") else Response.Write("(Nasdaq: SDTI)") end if %> fell $3 1/4 to $28 1/2 after Wednesday's 14% gain on an upgrade from Laidlaw Securities and on general buzz generated at the Goldman Sachs Technology Conference. The slip comes on the same day that Internet commerce enabler OPEN MARKET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMKT)") else Response.Write("(Nasdaq: OMKT)") end if %> received approval from the Department of Commerce to export 128-bit key encryption software using the Secure Sockets Layer, a standard supported by NETSCAPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> and others. Security Dynamics leads the encryption field, having acquired RSA Data Security, whose algorithm is the standard in encryption systems across a number of different software applications. Today's government action bodes well for the approval of Security Dynamics' 128-bit product, which was submitted last month. With its ties to MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, Security Dynamics is probably celebrating Open Market's good news.

Nutritional supplements and personal healthcare products company NUTRITION FOR LIFE INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NFLI)") else Response.Write("(Nasdaq: NFLI)") end if %> fell $1 to $9 1/2 after reporting first quarter numbers that were marred by charges taken for the settlement of class action lawsuits brought by persons involved in the company's "Instant Executive" program. Investors didn't have a problem so much because of the settlement charges, but rather because sales fell year-over-year and on a sequential basis. With more and more catalog sellers and direct sales forces, such as Equinox, out chasing the consumer's dollar, alienating a sales force will not help build sales. Add the fact that even before the settlement charges, operating earnings had fallen into the red, and it's not hard to see why the shares are mired near the 52-week low.

QUICK CUTS: SIGMA DESIGNS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIGM)") else Response.Write("(Nasdaq: SIGM)") end if %> fell $3 1/8 to $5 7/8 after announcing that Q4 sales and earnings will come in lower than expected due to chip fabrication problems and lower-than-expected demand for its Explorer chipset... Closed-circuit video systems maker ULTRAK INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ULTK)") else Response.Write("(Nasdaq: ULTK)") end if %> was smashed for a $8 7/8 loss to $19 7/8 after reporting Q4 EPS of $0.19, beating estimates of $0.18... NUKO INFORMATION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NUKO)") else Response.Write("(Nasdaq: NUKO)") end if %> fell $1 5/8 to $6 3/8 after reporting a Q4 loss of $6.75 million and the resignation of its Chief Operating Officer... Laser systems company GENERAL SCANNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSCN)") else Response.Write("(Nasdaq: GSCN)") end if %> fell $2 3/8 to $10 5/8 on reporting Q4 pro-forma EPS of $0.18, in-line with estimates... DIANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> dropped $1 1/4 to $10 after an insider at the networking products company and former food distributor sold 78% of his shares... TOOLEX-ALPHA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLXAF)") else Response.Write("(Nasdaq: TLXAF)") end if %> fell $1 7/8 to $9 5/8 after the CD-ROM production equipment company pre-announced disappointing revenues and earnings for the year... After being ordered by State regulators to cut natural gas rates, PUBLIC SERVICE CO. OF NEW MEXICO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PNM)") else Response.Write("(NYSE: PNM)") end if %> lost $1 5/8 to $18 3/4... FIRST COMMONWEALTH INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FCWI)") else Response.Write("(Nasdaq: FCWI)") end if %> lost $1 3/4 to $15 1/2 after the dental benefits company reported Q4 EPS of $0.19, beating estimates of $0.18... Industrial gases company PRAXAIR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PX)") else Response.Write("(NYSE: PX)") end if %> fell $2 1/2 to $49 3/8 as Salomon Brothers started coverage of the company with a "buy" rating, but Schroder Wertheim lowered its rating slightly... IMAGYN MEDICAL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IGYN)") else Response.Write("(Nasdaq: IGYN)") end if %> lost $1 5/8 to $8 1/8 after the medical device maker reported a fourth quarter loss of $0.16 per share... Circuit board manufacturer CONTINENTAL CIRCUITS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCIR)") else Response.Write("(Nasdaq: CCIR)") end if %> fell $1 1/4 to $12 1/4 on reporting Q2 EPS of $0.24, 20% below estimates.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Can You Patent This?

If you were to try to find the best performing well-known, consumer-oriented company over the past three years, the usual suspects would probably come to mind very quickly. CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>, MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, GILLETTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: G)") else Response.Write("(NYSE: G)") end if %>, or COCA-COLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> might be the obvious guesses. However, if those were your choices, we'd have to send you off to jail -- no passing go and definitely no collecting $839. Or try 839%, the total return that DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> has managed to produce over the past three years, outperforming all the companies listed above and more.

With only 7.2% profit margins in a business that almost everyone agrees is an exercise in cutting prices year after year, one would hardly expect that Dell Computer would be the company that would outperform a handful of companies with proprietary brands and majority market share. The simple fact is that Dell Computer is operating with the power of the personal computer direct sales model behind it. Yesterday at the Goldman Sachs Technology Conference, Michael Dell was asked what the main drawback was of selling PCs direct to consumers through the mail. Dell quipped, "The fact that the direct PC model could not be patented." Number four in PC sales in the U.S., it is no surprise that Michael Dell is trumpeting the superiority of his sales model. Despite the intense price competition in the PC industry, Dell Computer generated an astounding 73% return on invested capital in 1996. This means that for every dollar the company invested, it got back $1.73. The company used a good portion of these gains to repurchase 9% of the outstanding shares.

When Dataquest forecast PC unit growth in the high single digits to low teens in the first quarter of 1996, analysts around the world gave sighs of relief. PCs had enjoyed record sales for three years running -- the trend had to end. However, the expected slowdown in PC growth was prematurely diagnosed. Unit volume at the end of calendar 1996 increased a solid 16%, well within the norm of 15% to 20% seen over the past three years. PC sales were aided by the dramatic slide in the price of computer memory that drove the dollar per MIPS (millions of instructions per second) through the floor. In retrospect, many are saying that demand was a function of the decreased cost of computing memory in conjunction with the promise of 32 bit operating systems like Windows '95 and Windows NT.

In fact, if memory prices stay stable and the Pentium MMX and Pentium Pro chips live up to their promise in the consumer and corporate markets respectively, Dell Computer argues that PC unit growth of 18% is easily achievable. With more than 120 million of the 210 million PC installed base still using 286, 386 or 486 chips, there are still plenty of people who could be attracted by price points between $1500 and $2000 to buy nice new machines with all kinds of horsepower. This is particularly true of those persnickety corporate buyers and second-time PC buyers that Dell targets -- the kind of people who know just what they want and want to order it factory direct. Could a fourth record year be on its way for sales of PCs? Unless you get hung up on the notion that a record could never occur four times running, the actual fundamental drivers to demand remain intact. The significant reduction in MIPS per dollar will drive the 57% of the installed base at 486 or below to consider an upgrade, a factor that could easily increase unit volume from 72 million last year to 85 million this year.

Whoa there Templar. Hold the phone. Analysts are already forecasting 20% profit growth for Dell. With $2.57 EPS estimated in the current fiscal year with only one quarter to go, estimates for the next fiscal year currently hang at a moderate $3.20 EPS. With the stock at $70 and change, this is a forward P/E multiple of 21 times -- certainly discounting sufficiently the estimated growth. Given that Dell drove revenues ahead 42% when the PC channel as a whole grew by only 16%, the company has grown at two to two-and-a-half times the rate of the channel. Earnings growth of 93% projected for this year will be accelerated by cost efficiencies and systematic stock repurchases that show no sign of abatement. All in all, simply forecasting 24.5% earnings growth next year seems pretty tame. Assuming share repurchases and topline growth at double the industry average, you work up to possible $3.70 to $4.00 EPS awfully fast.

Certainly 17.5 times forward earnings is a little rich for a company mired in a commodity business. However, the perception of Dell as merely a commodity player in the PC market is shifting. With the company 1500 units away from overtaking IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> as the number three manufacturer of servers in the U.S., Dell has significant velocity in high margin sidelines, while at the same time reducing margins for its key competition, COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %>. Add to this the fact that the company is converting orders into cash in about one day. Looking at accounts receivable plus inventories minus accounts payable, Dell is a cash machine that is more than self-financing.

If analysts are excited that PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> is buying back shares fast enough to go private within 12 years, at the rate Dell is going it will be a private company in less than a decade. Despite the stock's incredible run over the past year from the high teens to the current perch of $70, Dell could see a 20 P/E multiple on $4.00 EPS next year for a price of $80, a 14% return that would smash the market's historical average of 10%. Beyond that, things get even better as the company milks the direct model for all that it is worth, continuing to grow revenues and profits far ahead of the market.

With SEAGATE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> reporting that its biggest mistake in forecasting PC demand in 1996 was underestimating the power of direct-sellers like Dell Computer and GATEWAY 2000 <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GATE)") else Response.Write("(Nasdaq: GATE)") end if %>, it seems clear that these companies could continue to enjoy growth at two to two-and-a-half times the rate of the overall channel, literally stealing sales from indirect sellers who rely on retail stores to deliver their product.

CONFERENCE CALLS

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)

360 (DEGREES) COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay through 1/21

SEMICONDUCTOR PACKAGING MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEMX)") else Response.Write("(Nasdaq: SEMX)") end if %>
replay avail. through 2/18
(800) 642-1687 (ID# 64304)

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
New -- Daily Stock Ideas!

So you've read the Fool's 13 Steps. You've got them under your belt and you're ready to start researching stocks in which to possibly invest. Where do you go for ideas? Well, we're happy to unveil an exciting new offering -- The Daily Double -- in which we introduce you to a stock which has doubled in the past year. Penning these handy reports are our own MF Uptrend and RgeSeymour. Pretty exciting, eh? How much does this cost? We're glad you asked, because it's available online for free! So head on over to our Stock Research button on our main screen and check out the Daily Double each day! Remember -- there may be no such thing as a free lunch, but here at Fooldom, we're giving you a free hunch -- every day! (E-mail subscriptions are available at FoolMart.)

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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