HEROES

Non-standard used-car lender FIRST MERCHANTS ACCEPTANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FMAC)") else Response.Write("(Nasdaq: FMAC)") end if %> gained $1 7/32 to $5 19/32 after announcing this morning that Greenwich Capital Markets Inc. will inject $50 million into the beaten-down finance company via the purchase of a pool of loans. Greenwich has also committed to provide the company with an insured $200 million credit line and to underwrite and place up to $1 billion in debt. In addition, Greenwich obtained warrants to purchase up to 15% of First Merchants. First Merchants has dropped from a 1997 high of $20 1/8 as the fallout caused by MERCURY FINANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MFN)") else Response.Write("(NYSE: MFN)") end if %> choked out much of the life in the low-credit quality lending sector. That decline was accelerated after First Merchants revealed wrongdoing by company officers and said it would restate 1996 results. The company still says it will take a loss of $1.60 to $2.00 per share in Q1 to clean up the books.

TRANSITIONAL HOSPITALS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: THY)") else Response.Write("(NYSE: THY)") end if %>, formerly Community Psychiatric Centers, jumped $1 1/8 to $15 1/2 after VENCOR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VC)") else Response.Write("(NYSE: VC)") end if %> launched a $16 per share cash tender offer for Transitional, trumping the $14.55 per share takeover bid announced by Select Medical Corp. on Monday. Vencor, an operator of eldercare, acute care, and physical rehabilitation facilities, will also have to cough up another $0.48 per share to pay the termination fee Transitional agreed to pay Select at the time those two agreed to merge.

British industrial explosives and chemical company IMPERIAL CHEMICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICI)") else Response.Write("(NYSE: ICI)") end if %> rose $3 1/8 to $50 3/8 after announcing an agreement to purchase the specialty chemical unit of UNILEVER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UL)") else Response.Write("(NYSE: UL)") end if %> for $8 billion in cash. Investors in London reacted favorably to the purchase as Unilever holders were disappointed that their company may not have received as high a price as it might have found elsewhere, Dow Jones reported today. While shareholder return for Imperial holders has come almost entirely from holdings in ZENECA GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZEN)") else Response.Write("(NYSE: ZEN)") end if %>, the pharmaceutical company Imperial spun off in 1993, the company's Chairman today said he is "dead certain the next five years will be better" with this acquisition.

QUICK TAKES: DISCREET LOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DSLGF)") else Response.Write("(Nasdaq: DSLGF)") end if %> moved up $2 7/8 to $13 1/2 after the video editing systems maker announced Q3 revenues of $27 million and earnings per share (EPS) of $0.11, crushing estimates of $0.04... Dental laser maker PREMIER LASER SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PLSIA)") else Response.Write("(Nasdaq: PLSIA)") end if %> surged $1 5/8 to $8 3/8 after receiving FDA marketing approval for a system designed to replace the use of drills in certain procedures... BALLY TOTAL FITNESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BFIT)") else Response.Write("(Nasdaq: BFIT)") end if %> was pumped up $1 1/16 to $7 1/8 on reporting Q1 EPS of $0.19, beating estimates of $0.03... PC graphics chips company 3DLABS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDDDF)") else Response.Write("(Nasdaq: TDDDF)") end if %> gained $4 1/4 to $34 1/2 on introducing a new member of its MX 3D processor family, which the company said is being supported by a number of graphics cards producers... LEHMAN BROTHERS (NSYE: LEH) jumped $3 7/8 to $38 after takeover rumors started floating around trading rooms... GRAND CASINOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GND)") else Response.Write("(NYSE: GND)") end if %> gained $1 3/8 to $14 1/8 after appearing in the Wall Street Journal's "Inside Track" column, which highlighted insider buying... Broadcaster AMERICAN RADIO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFM)") else Response.Write("(NYSE: AFM)") end if %> moved $2 3/4 higher to $34 3/4 after reporting a 130% increase in Q1 revenues and a 144% increase in broadcast cash flow... JILIN CHEMICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCC)") else Response.Write("(NYSE: JCC)") end if %> gained $1 1/2 to $19 1/4 as the Chinese chemical company is making the rounds of New York and Boston brokerages telling its story, according to Dow Jones... Data storage products company IOMEGA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> jumped $1 1/2 to $19 after Hewlett-Packard announced the inclusion of Zip drives as an option on some of its PCs. Needham & Co. also initiated coverage of Iomega, which has been somewhat starved of analyst attention... ACNIELSEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ART)") else Response.Write("(NYSE: ART)") end if %> gained $1 1/4 to $17 1/4 after a federal judge dismissed antitrust allegations brought against it by Information Resources Inc... ADAMS RESOURCES & ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AE)") else Response.Write("(AMEX: AE)") end if %> rose $1 5/8 to $14 1/8 after the oil and gas explorer reported Q1 EPS of $0.45, up 80% from last year... Movie theater company AMC ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AEN)") else Response.Write("(AMEX: AEN)") end if %> added $1 7/8 to $22 1/2 after Furman Selz initiated coverage of the company with a "buy" rating.

GOATS

PREMIER RESEARCH WORLDWIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRWW)") else Response.Write("(Nasdaq: PRWW)") end if %>, which handles outsourced research for pharmaceutical and biotech companies, lost $1 5/8 to $7 after announcing that it expects its June quarter revenues to decline substantially year-over-year and that it expects to miss earnings estimates for the quarter and the year. In Premier's first quarter as a public company it earned $0.07 per share (operating income of $481,000 and net income of $424,000) on revenues of $4.1 million. Analysts had been expecting EPS of $0.12 this quarter and $0.52 for the fiscal year ending in December. The company said the falloff is normal for the industry, which one would imagine after looking at the lumpiness of the company's past income statements. The stock is down from its February IPO price of $17 and its first day close at $22.

Sub-prime auto lender RELIANCE ACCEPTANCE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RACC)") else Response.Write("(Nasdaq: RACC)") end if %> declined $2 3/8 to $6 5/8 after reporting a net loss from continuing operations of $0.76 per share, severely undershooting EPS estimates of $0.20. Much of the loss came from raising its credit loss reserves to 7.5% of its finance receivables portfolio from 4.1% at year-end. The company's CEO resigned, as its strategy of seeking out the higher-risk, higher-return borrowers obviously didn't work out, something observers of the financial services sector know by now. The company's new CEO, its Chairman Howard Silverman, said Reliance's highest priority right now is credit quality and that its balance sheet is strong. The former Cole Taylor Financial has seen its shareholder equity erode by about 42% in the last 60 days and its debt-to-equity ratio decline from 1.26 to about 3.55 today. As they say, the liabilities are rock solid.

QUICK CUTS: Digital subscriber line standard-holder AMATI COMMUNICATIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMTX)") else Response.Write("(Nasdaq: AMTX)") end if %> plunged $1 15/16 to $11 5/16 as long-anticipated contracts with major phone companies have not yet materialized, apparently to the chagrin of those selling today... MEDAREX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDX)") else Response.Write("(Nasdaq: MEDX)") end if %> fell $1 1/8 to $6 5/8 after the biopharmaceutical company yesterday announced its acquisition of GenPharm International for up to $65 million in Medarex stock... Homebuilder D. R. HORTON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DHI)") else Response.Write("(NYSE: DHI)") end if %> was bulldozed for a $1 3/4 loss to $9 3/4 after Merrill Lynch cut its near-term rating on the company to "accumulate" from "buy"... EXCEL INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EXC)") else Response.Write("(NYSE: EXC)") end if %> rolled down $1 5/8 to $17 1/4 after completing the sale of its automotive parking brake business to DURA AUTOMOTIVE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DRRA)") else Response.Write("(Nasdaq: DRRA)") end if %>... Conglomerate OGDEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OG)") else Response.Write("(NYSE: OG)") end if %> slipped $1 1/2 to $20 1/2 after reporting Q1 EPS of $0.22, ahead of estimates of $0.19, and 16% above year-ago results... PHP HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PPH)") else Response.Write("(NYSE: PPH)") end if %> lost $1 to $17 3/8 despite legendary investor John Kluge taking a 7.3% stake in the company.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

Chip Equipment Enjoying the Ride

After suffering through a disastrous 1996, shares of semiconductor capital equipment manufacturers have been enjoying a prosperous year. Semiconductor capital equipment, known to many simply as semiconductor equipment, are the giant machines that are used to manufacture semiconductor chips. The 19.6% rise that the group has enjoyed since January 1st has come in spite of the fact that revenues and earnings for many of these companies still remain well below year ago levels.

When semiconductor prices began to tumble in early 1996, semiconductor manufacturers halted aggressive capital expansion plans, putting the kaboosh on profit growth for the entire industry. Although only a few of these companies have managed to post profit growth over the last three quarters, there is now a growing consensus expecting a turnaround in late 1997 or early 1998 that could lead into the next wave of multi-year expansion for the semiconductor industry. Semiconductor capital equipment revenues increased an unprecedented three years in a row from 1993 to 1996 in the last wave, and many investors are looking for a repeat this time around.

The complete collapse of semiconductor-related companies in mid-1996 caught many investors by surprise. Although the presence of silicon seems to increase every day, the profits of semiconductor manufacturers have much more to do with the current pricing environment rather than units shipped. In the classical economic model for a capital good, current supply and demand work to set pricing and determine profitability for the companies involved. When customers bought too many chips for their inventories in late 1995 and early 1996 and decided to halt new purchases in order to work down their inventory levels, pricing for semiconductors toppled.

Moore's Law holds that the amount of information storable in one square inch of silicon has roughly doubled every year since the technology was invented while prices have decreased. Because of this relentless price deflation inherent in the semiconductor industry, short-term bouts of rapid price-cutting occur regularly. When pricing falls faster than costs, semiconductor manufacturers can make less money even if the number of units they ship increases. The aberrant environment from 1993 to 1996 led to a temporary suspension of the pricing part of Moore's Law, as demand was so high that it held prices in check or even moved them higher. When the lull came in early 1996, three years worth of price decreases occurred in about three months, leaving the industry in shock.

For many semiconductor equipment manufacturers, it is beginning to appear that the low was hit sometime in the last six months. Manufacturers of back-end and test equipment have seen sequential revenue increases over the last two quarters. These machines are ordered on an as needed basis to expand existing fabrication facilities, unlike front-end equipment, which is ordered en masse when a new foundry is built. The 20% to 35% sequential revenue increases seen at KULICKE & SOFFA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLIC)") else Response.Write("(Nasdaq: KLIC)") end if %> and COHU <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COHU)") else Response.Write("(Nasdaq: COHU)") end if %> would tend to indicate a square bounce off of the bottom, one that has been reflected in the stock prices of both of these companies over the past few months. Even test-equipment giant TERADYNE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TER)") else Response.Write("(NYSE: TER)") end if %> saw a slight uptick quarter-over-quarter, suggesting some stability.

With only two to three quarters of flat performance left in the companies, investors who did not purchase these securities at distressed prices last summer might want to reconsider over the next few weeks as the turnaround becomes more visible. Although many trade at high price/earnings and price/sales multiples, the semi-cyclical nature of the industry puts high valuations on the stocks at the low part of the cycle and more reasonable valuations at the high-end of the cycle. For instance, although Kulicke & Soffa currently has negative trailing earnings, it trades at 13.6 times consensus earnings estimates six quarters out. Assuming the upturn in the cycle lasts through 1999 and peak earnings for Kulicke could be around $3.00 to $3.50 per share suggests that the stock could trade in the $45 to $55 range in the next two years, a 25% annualized gain.

Investors at this point would do well to stay away from the larger, more liquid names like APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %>, Kulicke, Teradyne, and KLA INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> and concentrate on tier-two names with dominant market share, significant cash reserves, and reasonable prices based on prospects for the next 12 to 18 months. As many of these stocks are not widely followed by brokerage analysts, it would appear the prospects for finding undervalued securities are best here. ULTRATECH STEPPER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UTEK)") else Response.Write("(Nasdaq: UTEK)") end if %>, SILICON VALLEY GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SVGI)") else Response.Write("(Nasdaq: SVGI)") end if %>, ELECTROGLAS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGLS)") else Response.Write("(Nasdaq: EGLS)") end if %> and Cohu are the names that come immediately to mind. Should the turnaround prove to be a two-year story, even from here the price appreciation in these shares should be 1.5 to 2.0 times the S&P Index 500, a very solid return.

CONFERENCE CALLS

CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
Replay available through 5/16
(800) 633-8284 (code: 2624093)

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

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

INFORMIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFMX)") else Response.Write("(Nasdaq: IFMX)") end if %>
Available until 5/16
(800) 839-8790 -- replay

GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %>
(regarding purchase of Seprafilm from Cleveland Clinic)
(402) 220-9054 -- replay through 5/9 at 5:00 PM EDT

AMERICAN RADIO SYSTEMS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFM)") else Response.Write("(NYSE: AFM)") end if %>
(800) 475-6701 (code: 340629) -- replay from 1:00 PM ET through 5/10

COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>
(800) 759-8892 -- replay from 4:00 PM EDT through 8:00 PM EDT on 5/9
(402) 222-8538 -- replay (International callers)

05/08/97 (Thursday)
PIER ONE IMPORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PIR)") else Response.Write("(NYSE: PIR)") end if %>
(April sales results)
(888) 243-0810 -- replay available after 2:00 p.m. EDT

05/08/97 (Thursday)
FEDERAL REALTY INVESTMENT TRUST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRT)") else Response.Write("(NYSE: FRT)") end if %>
11:00 a.m. EDT
(913) 661-0487 -- live
(402) 222-9905 -- replay

THIS WEEKS CONFERENCE CALL SYNOPSES

TIDEWATER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %> Q4 Conference Call
ATC COMMUNICATIONS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %> Q3 Conference Call
JAMES RIVER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JR)") else Response.Write("(NYSE: JR)") end if %>, FORT HOWARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORT)") else Response.Write("(Nasdaq: FORT)") end if %> Merger 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), Fool Three
Julia Wilson (TMF Delete), Fool Quatro
Editing