HEROES
BENTHOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BTHS)") else Response.Write("(Nasdaq: BTHS)") end if %> might have to worry about getting the
bends today as a highly favorable write-up in Barron's this weekend
sent the stock of the underwater gear and leak detection equipment maker
$8 3/4 higher to $26 1/2. The company has begun to transform itself under
a new CEO and has discovered new markets in the brewing and pharmaceuticals
businesses. To top it off, this isn't some cruddy little small cap selling
at outrageous multiples. The company endorses 1998 EPS growth estimates of
up to 33% and long-term growth of 20%. Adjusting the figures published in
Barron's, the company now sells at about 1.5 times sales, 16 times
1997 EPS, 13 times 1998 EPS estimates, and 3.2 times book value (with 34
acres of Cape Cod land on the balance sheet at cost).
MONTEREY RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRC)") else Response.Write("(NYSE: MRC)") end if %> jumped $5 5/16 to $20 3/8 after agreeing
to be acquired by TEXACO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TX)") else Response.Write("(NYSE: TX)") end if %> in a stock swap valuing Monterey
at $21 per share. Texaco believes the deal will increase proved reserves
by 385 million barrels, valuing the deal at about $4.38 per barrel of oil
in the ground. With generally higher-viscosity low-gravity deposits, the
present value of the company's deposits is somewhere north of $1.75 billion,
putting a price (including net debt) on this deal of about $3.69 per barrel
of proved reserves. That's about a 23% discount from what an appraiser might
put on the reserves, not even counting Texaco's efficiency at extracting
that oil.
ADVANCED MICRO DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> jumped $4 1/16 to $41 9/16 after
announcing late in the day that IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> will use AMD's K-6
MMX-enhanced CPUs in selected units of its Aptiva line. With IBM holding
second place in worldwide market share for PCs, this is a nice feather in
the cap of Advanced Micro, but not necessarily the game breaker. It would
have been nicer to hear "exclusive" or "high-end" mentioned. Using the K-6
chip could be a lowball strategy for IBM in the low-end Aptiva products.
Using a lower-priced processor, IBM may be trying to grab more of the
lower-priced PC market (where it's far from being the leader) while maintaining
gross margins.
QUICK TAKES: Oil and gas trust GOLDEN TRIANGLE INDUSTRIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GTII)") else Response.Write("(Nasdaq: GTII)") end if %> gained $1 1/8 to $11 1/2 on reporting a 74% increase in net income for its second quarter... GELTEX PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GELX)") else Response.Write("(Nasdaq: GELX)") end if %> added $1 13/16 to $20 1/16 after Merrill Lynch started coverage of the gastroenterological drug developer with a "long-term buy" rating... Telecom integration equipment and software company GENESYS TELECOMMUNICATIONS LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTI)") else Response.Write("(Nasdaq: GCTI)") end if %> rose $2 7/8 to $31 after Deloitte & Touche consulting signed a Systems Integration Alliance Agreement with the company... Budget retailer GOODY'S FAMILY CLOTHING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GDYS)") else Response.Write("(Nasdaq: GDYS)") end if %> climbed $2 5/16 to $36 15/16 on reporting 16% second quarter sales growth and EPS of $0.32, beating estimates of $0.21. Second quarter same-store sales increased 7.3%... EXXON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XON)") else Response.Write("(NYSE: XON)") end if %> jumped $3 3/16 to $62 3/16 after Dow Jones reported that South Korean company Hyundai Natural Gas will buy into Yemen Liquefied Natural Gas, of which Exxon owns 14.5%... ROYAL DUTCH PETROLEUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RD)") else Response.Write("(NYSE: RD)") end if %> added $2 7/8 to $52 1/8 after the company said its Gulf of Mexico Auger and Mars platforms, operated by its Shell unit, have surpassed the 100,000 barrel per day production mark... CHICAGO RIVET & MACHINE CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CVR)") else Response.Write("(AMEX: CVR)") end if %> gained $3 to $56 on announcing a 2-for-1 stock split and a 20% dividend hike.
GOATS
ANDREA ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AND)") else Response.Write("(AMEX: AND)") end if %> short-circuited today, falling $6 to
$23 on reporting a clarification with regard to potential deal with NORTHROP
GRUMMAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOC)") else Response.Write("(NYSE: NOC)") end if %>. The company, which makes headphones that filter
out extraneous noise and protect the wearer's ears from damage, reported
that a supply agreement will only be reached with Northrop once qualification
testing for Andrea's headsets is completed (read: the deal is not yet in
the bag). Andrea shares have almost doubled this month and climbed 25% last
Thursday on news reported by Dow Jones that Chief Financial Officer Patrick
Pilch stated that Andrea will "soon" sign a contract with Northrop. Andrea
expected to get 30% to 70%, or $180 million to $420 million, of the $600
million Northrop had designated for audio headsets over a 15-year period.
Investors today seem to be factoring in the risk that this deal, which the
company has been planning for four years, might not materialize.
Internet search engine company EXCITE INC.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> dropped $1 7/8 to $15 1/4 as Jonathan Cohen of UBS Securities
initiated coverage of the company with a "hold." UBS stated that it expects
projected losses for the company to come in at $1.85 per share in 1997 with
positive numbers of $0.19 per share anticipated for 1998. The company has
trailing EPS of a loss of $3.19, and the stock price has
doubled since May. While still
in the shadow of industry rival YAHOO! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>, Excite may
yet be able to engage in some lucrative publishing deals due to the fact
that it is imitating Yahoo's strategy of creating a "destination site" filled
with content. As evidenced over the last year, the web-engine market can
still support at least three strong players. The 20% stake in Excite taken
by INTUIT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> in June gave the company much needed
cash, but Intuit's weak Internet presence may yet drag the association
down.
QUICK CUTS: Insurance underwriter ALLIED GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GRP)") else Response.Write("(NYSE: GRP)") end if %> fell $2 15/16 to $46 5/16 on a downgrade to "hold" from "buy" issued by Advest Inc., which cited price concerns but also stated that the company's long-term fundamentals were "still in place"... Dow component HEWLETT-PACKARD CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> was taken down $2 1/4 to $63 13/16 on the release of earnings today which fell $0.10 shy of EPS expectations... CITYSCAPE FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTYS)") else Response.Write("(Nasdaq: CTYS)") end if %> fell $1 1/16 to $9 1/4 as the consumer finance company's subsidiary in the United Kingdom filed libel proceedings against The Times of London for alleged "defamatory business articles"... Multimedia accelerator maker NEOMAGIC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NMGC)") else Response.Write("(Nasdaq: NMGC)") end if %> decelerated $1 11/16 to $18 1/16 after a downgrade on Friday from "strong buy" to "outperform" from Morgan Stanley... CHICAGO MINIATURE LAMP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHML)") else Response.Write("(Nasdaq: CHML)") end if %> shares were dimmed $2 3/8 to $28 1/8 on the announcement that it had reached an agreement to acquire Sylvania Lighting International for $165 million in cash.
FOOL ON THE
HILL
An Investment Opinion by Randy
Befumo
Amylin's Negative Side Effects
AMYLIN PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMLN)") else Response.Write("(Nasdaq: AMLN)") end if %> demonstrated today the risk
inherent in owning shares of a "development stage" pharmaceutical company.
Shares of the drug therapy concern were rocked for a $6 7/16 loss to $8 7/16
after Phase III trials for a diabetes drug called pramlintide disappointed
investors. More than a third of Amylin's shares available for trading (also
called the "float") traded hands during the volatile session that saw the
company's value drop more than 43%. Although Amylin stressed in a press release
that investors were overreacting, the questions that this sort of event raises
in the minds of shareholders reinforces the notion that biotechnology is
a realm for those who know the science or those who are willing to take on
incredible risk and simply speculate.
According to a press release issued Friday, Amylin's pramlintide compound
showed improved metabolic control for patients with type I diabetes.
Unfortunately, analysts characterized this effect as "minor" and went on
to point out that pramlintide had no such effect on type II diabetes. Everen
Securities analyst Albert Rauch cut his rating to "underperform" from
"outperform" on the news, stating that he did not believe the results justified
use of the drug for type II diabetics and that he anticipated that it would
probably not be prescribed for very many type I diabetics either. A drug
based on the human hormone amylin, Amylin Pharmaceuticals had hoped that
pramlintide would help diabetics control glucose levels and improve weight
if used with insulin.
Amylin Chairman Howard Greene told Reuters that the company still had four
other trials that would finish in late 1998 that he believed would vindicate
the drug. Partner JOHNSON & JOHNSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> has committed
$120 million to developing pramlintide. Although it is unclear how much of
this has already been paid to Amylin, the company had $49.5 million in cash
and short-term investments when it reported its last fiscal quarter and was
only burning about $4 million in cash per quarter, so it will easily make
it to its next set of Phase III trials without requiring additional funding
-- even if they are extended by six months to end in mid-1999, as analyst
Albert Rauch suggested today.
The rather extensive
press
release that accompanies Phase III results is a very dense document targeted
at clinicians, scientists and analysts -- not investors. The structure is
typical of both development stage pharmaceutical and medical products companies.
GERON
CORP.'S
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GERN)") else Response.Write("(Nasdaq: GERN)") end if %> recent rise from $6 1/2 to $16 1/8 over the past two days
is an example of the kind of lift one of these companies can get when it
talks about science that sets the imagination afire. The company stated on
Thursday that it had succeeded in cloning the human gene for telomerase catalytic
protein. Because some believe telomerase functions as a kind of biological
clock, eager investors who believe that Geron might have found the secret
to aging and cancer are buying up the shares.
In either case, investors must ascertain whether these stories lie within
their "circle of competency" before they can make informed investments in
the businesses. Even if a company does find a "holy grail," as Geron Corp.
claims in its press release, the additional question of whether the company
can actually bring a product to market in a reasonable amount of time is
just as important as the underlying science. What makes Amylin worth $222.9
million net cash after a disappointment in its only drug trial in the next
year (possibly the next two), or Geron worth $151.4 million net cash after
the company has claimed to find the secret for aging? In the end it comes
down to the net present value of the cash flows the companies can generate.
The further out the potential profit is, the less it becomes worth in today's
dollars. If Geron can invent an anti-aging drug in 3030, even though this
could net a trillion dollars at that time after 1043 years of 0% returns,
the investor must compare this to buying bonds over the same period with
dollars they have today.
How can you assess what the future earnings might be in order to compare
the return to that from other investments you could make with today's dollars?
At some point questions like time to market, ability of management to deliver,
established partners in the pharmaceutical world, and just plain credibility
of the science all creep in -- quantities that certainly individual investors
can evaluate if they have spent the necessary time to study the science and
the business. However, if you are working off of whispers from friends, a
phone call from a broker, or read a few messages on a message board, Geron
Corp. could just as easily be Amylin Pharmaceuticals or vice versa. Too often
when picking biotechnology companies investors confuse luck with skill without
recognizing the amount of knowledge required to truly reduce the high level
of risk that comes from owning this kind of development stage company.
[Relevant Message Boards:
GERON
CORP.]
CONFERENCE CALLS
WOOLWORTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %>
(800) 953-6481 -- replay
LARSON-DAVIS INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LDII)") else Response.Write("(Nasdaq: LDII)") end if %>
(800) 633-8284 (reservation #3058895) -- replay through 8/18
CARRAMERICA REALTY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRE)") else Response.Write("(NYSE: CRE)") end if %>
(800) 677-1575 (password 1234) -- replay through 8/19
(402) 998-0105 (password 1234) -- replay for international callers
HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>
(800) 633-8284 (code: 2857062) -- replay through 8/22
08/19/97 (Tuesday)
HOME DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %>
(402) 220-3005 -- replay through 8/22
08/19/97 (Tuesday)
DAYTON HUDSON CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %>
(800) 633-8284 (reservation # 2943671) -- replay through 8/20 @ noon EDT
08/19/97 (Tuesday)
WILLIAMS-SONOMA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WSGC)") else Response.Write("(Nasdaq: WSGC)") end if %>
(800) 633-8284 (reservation # 3051244) -- replay 8/19 from 3:00-6:00 pm EDT
08/19/97 (Tuesday)
ROSS STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROST)") else Response.Write("(Nasdaq: ROST)") end if %>
(402) 222-9936 -- replay through 8/26
THIS WEEK'S CONFERENCE CALL SYNOPSES
COMPUSA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %> Call
WE
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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), and yet
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Editing