HEROES

TECNOMATIX TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCNOF)") else Response.Write("(Nasdaq: TCNOF)") end if %> jumped $2 1/2 to $23 1/4 after the Israeli engineering software company won a contract to supply FORD MOTOR CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> with computer-aided production engineering (CAPE) services and software. These products allow a company to build virtual machine tools and systems and then put them together into a digital assembly line, improving the product design and engineering process. The contract is worth up to $30 million over three years, a significant revenue boost off a base of $44.5 million in 1996. In comparing earnings for this company with similar U.S. companies, many analysts adjust for the miniscule tax rate Israeli "high tech" companies pay. Tecnomatix booked an effective tax rate of 5% last year. An analyst might assign a 35% tax rate to Tecnomatix's pre-tax earnings and then compare net earnings from there.

Brokerage, money manager, and investment bank ALEX. BROWN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AB)") else Response.Write("(NYSE: AB)") end if %> gained $3 1/4 to $44 5/8 on talk that the total repeal of the Glass-Steagall Act will bring about the quick gobbling up of brokerages and investment banks by commercial banks, which are still Lilliputians in the securities underwriting and brokerage process. On a stock-for-stock basis, mergers would look quite attractive from the viewpoint of banks, which trade at much higher valuations than companies such as Alex. Brown. Of the major publicly traded underwriters, Alex. Brown & Sons is one of the cheapest. Adjusting for dividend yield (subtracting dividend yield from the price-to-earnings ratio), Alex. Brown is trading at 7.8 times 1997 estimated earnings of $4.68 per share. MORGAN STANLEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MS)") else Response.Write("(NYSE: MS)") end if %> trades at 9.6 times 1997 estimates; SALOMON BROTHERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SB)") else Response.Write("(NYSE: SB)") end if %> trades at 8.1 times 1997 estimates; and MERRILL LYNCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> trades at 10.7 times 1997 estimates.

QUICK TAKES: APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> rose $7/8 to $18 7/8 on rumors that the company's management is shopping around for possible acquirers... Biotech company HYBRIDON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HYBN)") else Response.Write("(Nasdaq: HYBN)") end if %> moved $1 higher to $6 3/4 on announcing positive results in a Phase II trial of an HIV antisense drug... WESTELL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WSTL)") else Response.Write("(Nasdaq: WSTL)") end if %> jumped $2 3/8 to $14 1/8 after Cowen & Co. raised its rating on the digital subscriber line networker to "neutral" from "buy" in hopes that the company will snag some Baby Bell contracts that are up for grabs right now... Audio products company HARMAN INTERNATIONAL INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HAR)") else Response.Write("(NYSE: HAR)") end if %> gained $2 1/2 to $35 3/4 after it reaffirmed guidance given by the company in mid-March, and the company's Chair said he will raise his stake in the company by 10%... COLUMBIA/HCA HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> gained $1 5/8 to $33 1/4 after Moody's reaffirmed the company's debt rating in the face of a federal investigation... Healthcare products distributor MOORE MEDICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMD)") else Response.Write("(NYSE: MMD)") end if %> rose $1 3/8 to $10 3/8 after an investment group revealed that it has raised its position in the company to 11.7%... K-V PHARMACEUTICAL CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: KV.A)") else Response.Write("(AMEX: KV.A)") end if %> added $1 1/4 to $16 after it unveiled a list of products its generic drugs unit will market with multinational drug company Roche Holding Ltd.

GOATS

Major oil companies took a hit today as Merrill Lynch hit the squawk box with a recommendation to its army of brokers not to "build positions" in these normally defensive companies. Apparently, analysts at the firm believe the companies are trading at rich historical multiples to cash flow. Compared to small cap oil stocks and the hot exploration and production companies, like CHESAPEAKE ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHK)") else Response.Write("(NYSE: CHK)") end if %>, that may be true. However, these biggies also hedge for maximum smoothing of earnings year-over-year with their huge reserves, while companies like Chesapeake hedge for maximum cash flow when the market is hot. CHEVRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHV)") else Response.Write("(NYSE: CHV)") end if %> fell $2 5/8 to $64 3/8, and MOBIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOB)") else Response.Write("(NYSE: MOB)") end if %> dropped $4 1/8 to $124 3/4.

Meanwhile, oil service companies also took a slide. BJ SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %> dropped $2 to $43 7/8; READING & BATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RB)") else Response.Write("(NYSE: RB)") end if %> fell $7/8 to $20 3/4; and FALCON DRILLING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLC)") else Response.Write("(NYSE: FLC)") end if %> was reduced $2 1/2 to $32. CLIFFS DRILLING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDG)") else Response.Write("(NYSE: CDG)") end if %>, which operates jackup rigs and other mobile production units in the Gulf of Mexico, the Middle East, and off the coast of West Africa, lost $3 3/4 to $54. Part of the reason these shares are so volatile is that institutional managers, from the value people to the momentum people, are all in these stocks -- many are even "overweighted" in these issues. With some analysts estimating five year annualized growth rates of up to 60% and higher, according to First Call, many investors find these companies and their stories too tasty to pass up. While insiders have been buying in the industry lately, other industry veterans find some of the valuations awfully rich.

PC graphics board company DIAMOND MULTIMEDIA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIMD)") else Response.Write("(Nasdaq: DIMD)") end if %> was beaten down $1 7/8 to $6 5/8 after pre-announcing Q1 revenues of $112 million, down sharply from last quarter's revenues of $166.5 million. The company also said gross margin will suffer and that it expects an operating loss for the quarter. Meanwhile, PC multimedia board maker CREATIVE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREAF)") else Response.Write("(Nasdaq: CREAF)") end if %> gained $1 5/8 to $10 3/4 after it said it will beat the mean Q3 earnings estimate of $0.30 per share, as its demand is healthy and margins are rising.

QUICK CUTS: Software company ILOG SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ILOGY)") else Response.Write("(Nasdaq: ILOGY)") end if %> slipped $3 1/2 to $3 1/2 after pre-announcing disappointing Q3 results... SCIOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SCIO)") else Response.Write("(Nasdaq: SCIO)") end if %> lost $2 to $4 11/16 after suspending development of its AURICULIN anaritide treatment for kidney failure because of poor Phase III trial results... Spanish language U.S. television broadcaster TELEMUNDO GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLMD)") else Response.Write("(Nasdaq: TLMD)") end if %>, second in reach to Univision, was powered down $6 to $20 on an Alex. Brown rating downgrade to "buy" from "strong buy"... PATTERSON DENTAL CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PDCO)") else Response.Write("(Nasdaq: PDCO)") end if %> fell $2 3/4 to $31 1/4 on a Smith Barney downgrade.... COLLAGENEX PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CGPI)") else Response.Write("(Nasdaq: CGPI)") end if %> slid $2 to $11 1/2 after announcing the sale of one million shares at $12.50, a dollar below last night's closing price... Georgia bank FIDELITY NATIONAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LION)") else Response.Write("(Nasdaq: LION)") end if %> lost $1 1/4 to $7 3/4 after being the subject of a none-too-flattering article in yesterday's Southeast edition of the Wall Street Journal that detailed its credit losses and its current lack of reserves... Transaction systems company PAR TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTC)") else Response.Write("(NYSE: PTC)") end if %> shed $1 5/8 to $8 3/8 after saying first quarter revenues will fall up to 35% due to product transitions... TRITON ENERGY LTD. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OIL)") else Response.Write("(NYSE: OIL)") end if %> fell $2 5/8 to $35 5/8 with the rest of its exploration and production cohorts... OCEANEERING INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OII)") else Response.Write("(NYSE: OII)") end if %>, which makes deep-sea vessels, also lost $1 to $14 3/4 because of weakness in oil stocks, as did ENSCO INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESV)") else Response.Write("(NYSE: ESV)") end if %>, which lost $3 1/8 to $46 1/8... IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> ticked down $2 5/8 to $131 1/8 on worries that dollar strength will hurt Big Blue.

FOOL ON THE HILL
An Investment Opinion by MF Templar

Selling Stocks, Part 1

The recent slump in stock prices has begun to cause consternation for many individual investors, giving rise to the question of when to sell. For investors unsure of why they may have bought in the first place, selling becomes even more difficult. Selling stock remains possibly the only investment decision that creates more stress than actually purchasing a stock, particularly when an investor may be taking a loss on the investment. As profits that have already been celebrated begin to erode, the psychological pressure to sell in order to lock in some perceived gain becomes more acute. However, just because the public market is sending the price of a stock lower, should that trigger a sell decision?

The logic of when and why to sell a security is intimately tied up in the logic of why you purchased that particular stock in the first place. These buy and sell decisions all must operate within the larger context of why you are investing in the first place and how you conceive of the entire investment process. Although there are dozens of so-called selling strategies, in the end an investor must know what she believes in order to buy and sell effectively. Buying and selling a stock go hand in glove, two sides of the same investment coin. Successful investors, regardless of their approach, are the ones who allow the same logic to drive both their purchase decisions and their selling decisions, enforcing a rigorous intellectual discipline on the entire process.

"You convince the public that the odds are against them so they behave like they're in a casino," Peter Lynch is quoted as saying in the recently released Investment Gurus, by Peter Tanous. "They go in there and buy options -- which is like betting on number twenty-six. It's like playing poker without looking at your cards." Lynch highlights the core perceptual (or epistemological) problem that many individual investors face: What is a stock? Why are they investing in a stock? What kinds of expectations are rational? Lynch implies that if an investor behaves as if the market is a casino-like device, the market will be a casino-like device that rewards and punishes investors at random. His argument is that if investors learn to view purchasing stock as the opportunity to purchase a stake in a known business with defined and measurable attributes, the process itself becomes more transparent.

Although it may appear biased, the only position that I can effectively outline with regards to selling stock is my own. When an investor purchases common stock, she is buying a stake in a real business. This business generates cash at a certain rate, giving the investor a way to gauge the rate of return on the investment by comparing the current price of the asset to its current and future ability to generate cash. Investing our savings in businesses that we learn about in great detail is a powerful way of creating wealth, helping to free individuals from the unkind state of having to sell their most precious commodity -- time -- for money in order to live. The process of investing is one of attaining human freedom through the intelligent purchase of publicly traded businesses.

What makes a business attractive enough to purchase? Although the inherent quality of the business divorced from any tangible or numeric signposts is relevant, in the end an investor is buying something that she believes trades below its intrinsic value. However you choose to measure that value, you must have a sense of what that value might be before you purchase the security. Simply relying on the fact that a company is a "quality" business without regard to the valuation is dangerous, although over long periods of time the power of compounding tends to erase any error in the initial purchase price. Establishing some idea of the inherent value of the asset remains the first step in establishing any successful sell discipline.

Constant evaluation and reevaluation of the intrinsic value of the company whose stock you own is the most important part of maintaining an effective sell discipline. What elements of the company drive your valuation? Did a particular product or a particular corporate executive influence the decision? Does a major trend in the economy affect the logic of your purchase? Although I hate the phrase "story stocks," I think it is incredibly important that investors create a story for their potential investments, something that I call the "chain of events." This tale includes not only what the company is and why it is undervalued, but what events could serve as catalysts in order for that value to be recognized. Similar to Mario Gabelli's oft-stated admonition that a value investor should only purchase a stock when there is a clear set of events to change the valuation dynamic, I would maintain that investors must not only buy a stock that appears undervalued, they must also posit the possible forces that could unlock that value.

When you have a sense of the intrinsic value of the business and what attracted you to that business in the first place, you have logical reasons to make buy and sell decisions. Ken Fisher's notion, expressed in his book Super Stocks, of writing up why you purchased a stock when you purchased it and what your perceived value of that stock was at that time is a good one, as it serves to enforce this discipline. However, investors also must have a context against which to make these decisions that is divorced from any particular company and instead deals strictly with the inherent goal of the process of investing -- to create wealth at a rate possible only with stocks. I will discuss this context in more depth tomorrow.

CONFERENCE CALLS

CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %>
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
To discuss merger announcement
(800) 475-6701 (code: 336788)

US DIAGNOSTIC INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USDL)") else Response.Write("(Nasdaq: USDL)") end if %>
Replay available after 3:00 PM EST through 4/8
(303) 267-1074

THIS WEEK'S CONFERENCE CALL SYNOPSES

SHIVA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHVA)") else Response.Write("(Nasdaq: SHVA)") end if %> Q1 Pre-Announcement
PAYCHEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAYX)") else Response.Write("(Nasdaq: PAYX)") end if %> Q3 Conference Call
COLUMBIA/HCA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> Conference Call To Discuss Investigation

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Good Fool, Bad Villains, and You!

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MORE FOOLISHNESS
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Randy Befumo (MF Templar), a Fool
Fool Plate Special

Dale Wettlaufer (MF Raleigh), another Fool
Ups & Downs

Brian Bauer (MF Hoops), and yet another Fool
Editing