The Motley Fool, 04/30/97: The Evening News

HEROES

L.M. ERICSSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERICY)") else Response.Write("(Nasdaq: ERICY)") end if %> gained $2 1/8 to $33 5/8 after Merrill Lynch named the Swedish wireless telecom equipment maker its "Focus One" stock of the week. Although the company missed earnings estimates of $0.22 per share when it reported first quarter earnings last week, those analysts moving up their ratings on the company are concentrating on order growth, where overall bookings grew 36% during the quarter. Sales growth was also quite strong at 36%, while pre-tax income grew by 30%. Contrasted with MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>, Ericsson is doing quite well in cellular products and infrastructure with double-digit revenue growth rates that put to shame Motorola's latest-quarter cellular products revenue growth of 4.4%.

DOUBLETREE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TREE)") else Response.Write("(Nasdaq: TREE)") end if %> gained $6 11/16 to $42 after the hotel franchisor and management company reported Q1 earnings per share (EPS) of $0.38, burying estimates of $0.21. Following a number of years of underbuilding in the wake of the real estate bust at the turn of this decade, those companies investing intelligently in the lodging industry, and particularly the business travel segment, have done quite well over the last three years. Most notable among those is HFS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HFS)") else Response.Write("(NYSE: HFS)") end if %>, which has built much of its business on franchising its stable of hotel brand names. Through today, Doubletree is sporting an annual shareholder return over the last 2.5 years of 38%, while HFS has returned 63% per year over the last three years.

Networking companies were major beneficiaries of the lifting of foxhole mentalities among fund managers today. ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> ran up $4 5/16 to $45 3/4, while merger partner CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> gained $2 7/8 to $31 1/2. Internetworking king CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> gained $1 3/4 to $51 3/4. The annual Hambrecht & Quist Technology Conference in San Francisco is also helping some companies. BAY NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> was up $1 3/8 to $17 3/4 after saying at the conference today that it expects good things out of its BayStack 350 IP switch and that it has a high-density remote access concentrator on the way for roll-out later this year. FORE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORE)") else Response.Write("(Nasdaq: FORE)") end if %> also made a strong move, gaining $3 1/2 to $15 1/4 on takeover rumors.

Teleservices outsourcing company UNION CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCO)") else Response.Write("(NYSE: UCO)") end if %> gained $1 1/8 to $20 after reporting third quarter EPS of $0.43, 19% ahead of last year's results. Like APAC TELESERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APAC)") else Response.Write("(Nasdaq: APAC)") end if %>, Union is a traditional teleservices company but focuses on financial services, namely bill collection operations. Rather than giving in to the temptation to grow its business at a rate that isn't needed by its customers, the company has done the responsible thing in buying back shares to deliver value to its owners. Having bought back a total of $37 million in shares over its corporate life, the company's board has authorized a further buyback of $15 million, or a little less than 13% of its market cap. With an enterprise value to sales ratio of 0.81, it is looking a little cheaper than APAC, which runs at an 18% operating margin and has put together blazing growth numbers, but refuses to return money to shareholders, even after its well-publicized share price fall from $59.

QUICK TAKES: Local loop telecom equipment company ADVANCED FIBRE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AFCI)") else Response.Write("(Nasdaq: AFCI)") end if %> surged $6 5/8 to $39 7//8 after presenting today at the Hambrecht & Quist Technology Conference... DIAMOND HOME SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DHMS)") else Response.Write("(Nasdaq: DHMS)") end if %> jumped $2 5/8 to $11 1/4, rebounding from a poor earnings report by announcing a 500,000 share buyback authorization... Graphics software company METATOOLS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTLS)") else Response.Write("(Nasdaq: MTLS)") end if %> gained $2 to $9 1/8, bringing along merger partner FRACTAL DESIGN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRAC)") else Response.Write("(Nasdaq: FRAC)") end if %> for a $1 3/8 gain to $6 1/2, after being the subject of a positive article in the Wall Street Journal... Unexplained advances in the shares of telecom equipment companies included PAIRGAIN TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAIR)") else Response.Write("(Nasdaq: PAIR)") end if %>, which rose $2 13/16 to $26; WESTELL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WSTL)") else Response.Write("(Nasdaq: WSTL)") end if %>, up $3 1/8 to $17 1/4; and optoelectronics company CIENA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %>, which leapt $6 1/4 to $31 1/4... SINTER METALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNM)") else Response.Write("(NYSE: SNM)") end if %> soared $9 17/32 to $36 17/32 after the maker of gears, bearings, and sprockets for the automotive industry agreed to be acquired by U.K.-based industrial company GKN plc for $37 per share in cash... Medical device maker BOSTON SCIENTIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSX)") else Response.Write("(NYSE: BSX)") end if %> regained some of what it lost on April 10 -- when it pre-announced Q1 revenues of $399 million -- in rising $5 3/4 to $48 1/4 on reporting EPS of $0.40... Auto and mortgage lender WFS FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WFSI)") else Response.Write("(Nasdaq: WFSI)") end if %> gained $2 1/4 to $11 3/4 on reporting Q1 EPS of $0.34, which beat estimates. Parent company WESTCORP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WES)") else Response.Write("(NYSE: WES)") end if %> also gained $1 1/2 to $15 after reporting Q1 EPS of $0.30, missing estimates of $0.37, but was not marred by any toxic loan loss charges... GREEN TREE FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNT)") else Response.Write("(NYSE: GNT)") end if %> gained $2 1/8 to $29 5/8 after Merrill Lynch upgraded the manufactured home lending company to "strong buy" from "outperform"... Semiconductor company MICREL INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCRL)") else Response.Write("(Nasdaq: MCRL)") end if %> gained $4 3/8 to $43 3/4 after reporting Q1 EPS of $0.32 on revenues of $22 million, up 59% over Q1 1996... DATA DIMENSIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDIM)") else Response.Write("(Nasdaq: DDIM)") end if %> moved up $3 1/2 to $23 3/4 after announcing that it has received $10 million worth of orders for its new Ardes 2K Year-2000 solution.

GOATS

Imaging products company IMATION CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IMN)") else Response.Write("(NYSE: IMN)") end if %> fell $1 1/4 to $23 5/8 after reporting a 4.9% decrease in Q1 revenues and EPS of $0.30. The company said the strong dollar hurt its ability to grow revenues. Once again, Imation has grown earnings on the back of cutting out R&D, unlike its former parent 3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>, which is renowned for achieving its financial growth through innovation. 3M's R&D expenses grew 7.2% in 1996 and 6.6% in 1995, while Imation cut its R&D 21% in its first quarter. Had Imation held R&D spending constant year-over-year, operating earnings would have fallen 16.6%. Perhaps a lack of compelling new products had more to do with the decline in revenues and negative unit volume growth worldwide than the strength of the dollar.

QUICK CUTS: ESPRIT TELECOM GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ESPRY)") else Response.Write("(Nasdaq: ESPRY)") end if %> lost $2 5/16 to $5 3/4 as telecommunications pricing pressure isn't just a U.S. phenomenon... Digital printing systems company XEIKON NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XEIKY)") else Response.Write("(Nasdaq: XEIKY)") end if %> lost $1 1/16 to $7 3/16 on reporting a 37% decrease in first quarter revenues and an operating loss of $0.08 per share, missing EPS estimates of $0.02... NEW DIMENSION SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDDDF)") else Response.Write("(Nasdaq: DDDDF)") end if %> fell $2 3/8 to $11 1/2 after the Israeli software company reported Q1 revenues of $12.8 million and EPS of $0.15... Specialty chemical company CATALYTICA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTAL)") else Response.Write("(Nasdaq: CTAL)") end if %> fell $1 1/8 to $7 on reporting a loss of $0.12 per share and quarterly revenue growth of 43%... SUNQUEST INFORMATION SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNQ)") else Response.Write("(Nasdaq: SUNQ)") end if %> slipped $1 5/8 to $10 1/4 after the healthcare information systems firm reported Q1 revenues of $12.8 million and EPS of $0.08, in-line with estimates... Printing company CONSOLIDATED GRAPHICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CGX)") else Response.Write("(NYSE: CGX)") end if %> fell $1 5/8 to $24 3/8 even though it reported Q1 revenue growth of 79% and EPS growth of 150%... Hotel owner RED LION INNS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: RED)") else Response.Write("(AMEX: RED)") end if %> lost $1 1/4 to $19 5/8 on reporting flat revenue growth and a slightly lower occupancy rate in its first quarter.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

Templar's Bookshelf
Part 4 of a Series

OF PERMANENT VALUE: THE STORY OF WARREN BUFFETT by Andrew Kilpatrick

Warren Buffett has endured for more than twenty years as the single most talked about investor in the world. The Chairman of reinsurance giant BERKSHIRE HATHAWAY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK)") else Response.Write("(NYSE: BRK)") end if %>, Buffett has grown the value of his company and its investment portfolio with the help of Vice-Chairman Charles Munger from a few hundred thousand dollars to a somewhere north of $77 billion. How did he manage this wonderful feat? Psychic powers? Ancient holy relics? Conversations with alien powers? None of the above. For the most part, Buffett has employed a buy and hold approach to investing in brand name companies that were undervalued relative to their future earnings potential.

In Of Permanent Value, author Andrew Kilpatrick offers a comprehensive tome of Buffett-ocrypha that takes us from Warren's humble origins in Omaha, Nebraska to his increasingly sizable investments in America's best-known companies here in the 1990s. Although not as focused as Roger Lowenstein's treasure, Buffet: The Making of an American Capitalist, Of Permanent Value is much more comprehensive. Much of the book details the story of each investment made by Warren Buffett throughout his career, isolating each particular company purchased in one comprehensive chapter.

"Chapter 34, Buffett Writes Some Coke Puts" is a lurid example. The five paragraph chapter analyzes Buffett's decision to write puts on his Coca-Cola stock after that notorious day, April 2, 1993 -- better known to many as "Marlboro Friday." The decision of Philip Morris to cut cigarette prices to regain lost market share wiped out the stocks of almost all the branded, packaged goods companies. At a time when the stocks of companies like generic cola maker Cott Corp. were flying up, this sign from Philip Morris implied that a secular shift in consumer buying preferences away from brands and into generic products might be occurring.

Buffett's reaction was straightforward. Kilpatrick writes: "Despite his distaste generally for options, in April 1993, he wrote (sold) out-of-the-money put options, for $1.50 apiece, to buy three million Coca-Cola shares." This means that Buffett sold other investors the right to sell Coca-Cola to him at $35 a share when Coca-Cola was trading above this amount, meaning he was willing to purchase more stock if it got that low. Although one can debate whether or not this move is in line with Buffett's character, the straightforward analysis of this and dozens of other interesting details distilled from Berkshire Hathaway annual reports and meetings makes for interesting reading. The book is a must for any Buffett-o-phile.

STOCKS FOR THE LONG RUN by Jeremy Siegel

Jeremy Siegel's 1994 book, Stocks for the Long Run, makes for dry but very interesting reading. A finance professor at the University of Pennsylvania, Siegel has compiled some of the most thorough information about stock market performance over time relative to other asset classes that can be found for such a low price. The book is frequently used as a reference by various Fool HQ writers who are looking for the authoritative numbers on how stocks have done over various time periods.

Siegel analyzes stock returns and large-scale economic factors deftly, pausing to focus on specific historical issues that demonstrate the idea of stocks being a superior investment vehicle over long periods of time. His analysis of the performance of the Nifty Fifty stocks bought at their high in 1973 through the early 1990s is one particularly interesting stopping point, and his work on gold, recessions and taxes all make for interesting sidebars as well. Although some of the peripheral stuff may not exactly be Foolish, the general conclusion that stocks make superior long-term investment vehicles certainly is.

[Note: These books and many others are available at keyword: FoolMart.]

CONFERENCE CALLS

PEPSICO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %>
(800) 577-6980 (code: 03160)

THE MONEY STORE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MONE)") else Response.Write("(Nasdaq: MONE)") end if %>
(800) 964-4236

RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>
(402) 222-9939

HEWLETT PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>
VERIFONE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VF)") else Response.Write("(NYSE: VF)") end if %>
Replay available from 4:15 PM EDT today through 8:00 PM EDT on 4/25, and from 10:00 AM EDT on 4/28 through 8:00 PM EDT on 4/30
(800) 633-8284 (reservation # 2699996)

MATTSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTSN)") else Response.Write("(Nasdaq: MTSN)") end if %>
(402) 220-6969 -- replay available through 5/6

CANANDAIGUA WINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WINEA)") else Response.Write("(Nasdaq: WINEA)") end if %>
After 2:30 PM ET for 48 hours
(800) 677-7940

04/29/97 (Tuesday)
MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %>
(402) 220-4250 -- replay through 5/6

COMPUSA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %>
(800) 642-1687 (ID # 381120) -- replay for 24 hours
(706) 645-9291 (ID # 381120) -- replay (International callers)

US WEST MEDIA GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UMG)") else Response.Write("(NYSE: UMG)") end if %>
Replay available through 8PM ET on 5/2
(800) 839-5620
(719) 448-2012 (International callers)

SEAGRAM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VO)") else Response.Write("(NYSE: VO)") end if %>
1:00 PM EDT
(800) 558-5253 (reservation # 529689) -- replay available through 9PM ET on 5/2

05/01/97 (Thursday)
PERFORMANCE TECHNOLOGIES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTIX)") else Response.Write("(Nasdaq: PTIX)") end if %>
10:00 AM EDT
1-800-360-6077 -- live call

05/01/97 (Thursday)
RED ROOF INNS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RRI)") else Response.Write("(NYSE: RRI)") end if %>
From 1:00 PM EDT through 5:00 PM on 5/2
(800) 633-8284 (reservation # 2614549) -- replay

THIS WEEK'S CONFERENCE CALL SYNOPSES

ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %> Q1 Conference Call
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> Q1 Conference Call
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> Q3 Conference Call
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> Q2 Conference Call
C-CUBE MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CUBE)") else Response.Write("(Nasdaq: CUBE)") end if %> Q1 Conference Call
INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> Q1 Conference Call
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> Conference Call

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Randy Befumo (TMF Templr), a Fool
Fool Plate Special

Dale Wettlaufer (TMF Ralegh), another Fool
Ups & Downs

Brian Bauer (TMF Hoops), yet another Fool
Editing