HEROES
AMERICAN REAL ESTATE INVESTMENT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: REA)") else Response.Write("(AMEX: REA)") end if %> gained $2 1/4 to
$11 15/16 after the
real
estate investment trust (REIT) announced that it will transform itself
into an office and industrial REIT and combine its assets with privately
held Penn Square Properties and McBride Enterprises. McBride's CEO will take
over the reins at the combined company, basically making this a reverse merger,
whereby private companies obtain access to public equity markets and where
insiders gain liquidity for their own personal holdings. An affiliate of
CRESCENT REAL ESTATE EQUITIES CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEI)") else Response.Write("(NYSE: CEI)") end if %> will also buy 1.36 million
American shares at $11 apiece.
Biopharmaceutical company GUILFORD PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GLFD)") else Response.Write("(Nasdaq: GLFD)") end if %>
jumped $3 5/8 to $28 7/8 after the company announced a deal with AMGEN
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %> under which Amgen will be granted rights to Guilford's
FKBP-neuroimmunophilin ligands, an agent representing "a new approach in
the treatment of neurodegenerative disorders," such as Alzheimer's and
Parkinson's diseases. Guilford could earn up to $392 million in milestone
payments by developing target indications for orally active medicines intended
to promote nerve regeneration and repair. Amgen will invest up to $35 million
in Guilford, will pay for the research, and will pay Guilford royalties on
any drugs developed from the collaboration.
AMERICAN RADIO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFM)") else Response.Write("(NYSE: AFM)") end if %> picked up $3 1/8 to $48 3/4 after
the radio broadcaster said it is seeking strategic alternatives to build
shareholder value. The company has increased shareholder value just fine
over the last couple years, having returned over 40% per year since mid-1995.
Many broadcasters have done well over that period, having been pushed up
in 1995 in anticipation of the government increasing the limit on the number
of stations that these companies could own in any one market. Indeed, that's
what American Radio did after the Telecommunications Act of 1996 was passed.
However, with so much deal money chasing a finite number of choice radio
properties, many of these companies have become richly valued in the last
two years. Given the right assets and broadcast license, radio broadcasting
can be a wonderful business, but overleveraging for highly valued stations
can hurt operating results. Maybe that's why per-share pre-tax income dropped
36% last quarter at American Radio and hence its search for "strategic
alternatives."
QUICK TAKES: Orthodontic practice management company ORTHALLIANCE
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORAL)") else Response.Write("(Nasdaq: ORAL)") end if %> jumped $2 5/8 from its IPO price of $12 per share to close
at $14 5/8 today... Wireless products distributor INTELLICELL CORP.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FONE)") else Response.Write("(Nasdaq: FONE)") end if %> gained $1 1/2 to $9 1/4 on announcing that it will acquire,
through a 900,000 share stock swap, U.S. and Mexico wireless products distributor
Unplugged Communications... BRITISH
TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTY)") else Response.Write("(NYSE: BTY)") end if %> is reworking the terms of the stock and
cash price it will pay for MCI, which has shareholders placated and arbitrageurs
miffed as the stock closed up $4 3/8 to $66 3/8 (more on this story below)
... Environmental remediation company FLUOR DANIEL/GTI <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FDGT)") else Response.Write("(Nasdaq: FDGT)") end if %>
moved up $1 to $8 1/4 after reporting Q3 EPS of $0.14, beating estimates
of $0.11... BIOSITE DIAGNOSTIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BSTE)") else Response.Write("(Nasdaq: BSTE)") end if %> rose $1 to $9 after
announcing that it has filed with the FDA for marketing approval of the company's
device to diagnose a heart attack.
Wound closure device maker and April
Daily Double company CLOSURE
MEDICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLSR)") else Response.Write("(Nasdaq: CLSR)") end if %> gained another $3 1/8 to $28 5/8 after yesterday
announcing that it received approval to market its Dermabond cohesive in
European Union countries... CIDCO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDCO)") else Response.Write("(Nasdaq: CDCO)") end if %> added $1 5/8
to $15 5/8 on news that it will manufacture caller ID for the Japanese telecom
market and Nippon Telephone & Telegraph... Semiconductor fabrication
facility automation equipment company BROOKS AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRKS)") else Response.Write("(Nasdaq: BRKS)") end if %>
rose another $4 1/4 to $36 3/4 after yesterday's torrid day among the stocks
of its industry peers... DATAWORKS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DWRX)") else Response.Write("(Nasdaq: DWRX)") end if %> worked its
way $1 1/2 higher to $16 1/2 on announcing that it is well ahead of other
enterprise resource planning software companies with its products ported
for the Microsoft SQL Server with OLE database connectivity.
Gaming and hotel company BOYD GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BYD)") else Response.Write("(NYSE: BYD)") end if %> climbed $1 3/16 to
$7 1/4 after Deutsche Morgan Grenfell rated the company a "buy," up from
"hold" following yesterday's report of a 100% increase in quarterly EPS...
Financial services company CAPITAL ONE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %> continued
bouncing around, today gaining $3 3/4 to $40 1/8 on takeover speculation
involving NationsBank or possibly BankAmerica.... MORGAN KEEGAN INC.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOR)") else Response.Write("(NYSE: MOR)") end if %> moved up $2 3/8 to $25 3/4 after the brokerage and investment
bank yesterday reported a 46% jump in fourth quarter EPS of $0.51, smashing
the single estimate of $0.42... Geriatric products maker SUNRISE MEDICAL
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMD)") else Response.Write("(NYSE: SMD)") end if %> picked up $1 5/16 to $16 1/16 after reporting Q4 EPS of $0.20,
beating estimates of $0.11... Paperboard manufacturer CARAUSTAR INDUSTRIES
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSAR)") else Response.Write("(Nasdaq: CSAR)") end if %> gained $2 1/2 to $34 3/8 on initiation of coverage from
Goldman Sachs, which added the company to its "recommended list." Solid fiber
partition maker and paperboard products company ROCK-TENN CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RKT)") else Response.Write("(NYSE: RKT)") end if %> won the same rating and busted into the secondary for a $2 3/16 gain
to $20.
GOATS
After announcing in July
that it will lose almost $1 billion from its local operations alone in the
next six months, MCI COMMUNICATIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %> suddenly
didn't look as attractive to prospective merger partner BRITISH
TELECOMMUNICATIONS. A confirmation this afternoon that the two were in
talks to cut the price of the $22.5 billion deal by as much as 15% shook
up the market. The spread at the beginning of the day with British Telecom
at $62 a share put the takeout price of MCI at $39.48 based the original
deal that called for the exchange of 0.54 shares of British Telecom plus
$6 in cash for each MCI share. The price of MCI this morning was $36 11/16,
which put the premium a touch above 7%. The uncertainty thrown into the mix
today makes the merger a game of determining how much less British Telecom
will pay (if it pays at all), and what the resulting spread will be. MCI
shares were torched $6 1/8 to $30 9/16, along with the risk arbitrageurs
who were long MCI and short British Telecom.
Specialty retailer SUNGLASS HUT INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAYS)") else Response.Write("(Nasdaq: RAYS)") end if %> lost
$1 3/8 to $8 1/16 after reporting second quarter same-store sales growth
of 1.4% and Q2 EPS of $0.26, a penny below estimates. The bottom line for
"the Hut" is that there are too many sunglass stores and too few customers.
In other earnings related bashings, ZYGO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZIGO)") else Response.Write("(Nasdaq: ZIGO)") end if %> fell
$2 1/2 to $35 5/8 after the maker of optical measurement devices reported
Q2 EPS of $0.33, up 43% year-over-year and a penny above estimates. Up and
down client/server software vendor SYSTEM SOFTWARE ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SSAX)") else Response.Write("(Nasdaq: SSAX)") end if %> rose on earnings-related news
Tuesday, but crashed
$2 3/4 to $13 7/16 today after the company reported that due to anticipated
class action litigation settlements additional reserves may need to be set
up in its upcoming third and fourth quarters.
QUICK CUTS: Schroder & Co. downgraded PAMECO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PCN)") else Response.Write("(NYSE: PCN)") end if %> to "perform in line" from "outperform," dropping the temperature on the heating, ventilation, and air-conditioning company $3 5/8 to $17 3/8... Dutch bank and financial services company ABN AMRO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAN)") else Response.Write("(NYSE: AAN)") end if %> slid $1 5/8 to $21 5/8, even though the company reported an 18% rise in first half EPS... Telecom hardware and software company BOSTON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSN)") else Response.Write("(NYSE: BSN)") end if %> fell $2 to $29 5/8 after agreeing to merge with COMVERSE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMVT)") else Response.Write("(Nasdaq: CMVT)") end if %> in a stock swap that offered Boston Technology shareholders no premium (Boston Technology had run up, however, in advance of the deal)... Real estate developer and construction company ABRAMS INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABRI)") else Response.Write("(Nasdaq: ABRI)") end if %> fell $15/16 to $6 1/4 on posting 1Q EPS of $0.03, versus $0.04 in the year ago quarter... PHONETEL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: PHN)") else Response.Write("(AMEX: PHN)") end if %> said its agreement to acquire COMMUNICATIONS CENTRAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCIX)") else Response.Write("(Nasdaq: CCIX)") end if %> was terminated, hanging up on Central shareholders $1 to $8 1/4... KOMAG INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KMAG)") else Response.Write("(Nasdaq: KMAG)") end if %> recouped some of its loss recorded at lunchtime, but still closed down $1 15/32 to $17 1/4 on the announcement of the restructuring of its manufacturing operations... OPTICAL COATING LABORATORY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OCLI)") else Response.Write("(Nasdaq: OCLI)") end if %>, the world's largest independent manufacturer of optical thin film coated components, was smothered $1 to $12 1/4 after announcing 3Q EPS of $0.17, missing expectations of $0.18.
FOOL ON THE
HILL
An Investment Opinion by Randy
Befumo
Wells Fargo Buffett-ed by Filing
Rumors that Warren Buffett had liquidated his position in WELLS FARGO
CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFC)") else Response.Write("(NYSE: WFC)") end if %> sent the shares of the California-based regional bank
plunging $13 to $254 1/2. A 13-F filing for Buffett's BERKSHIRE HATHAWAY
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.A and BRK.B)") else Response.Write("(NYSE: BRK.A and BRK.B)") end if %> the quarter ended June 30 did not show previously
held positions in Wells Fargo, GENERAL DYNAMICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GD)") else Response.Write("(NYSE: GD)") end if %>, or
TORCHMARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TMK)") else Response.Write("(NYSE: TMK)") end if %>. A 13-F filing is a quarterly report required
by the SEC for institutional managers that updates their security holdings.
Although there is some question whether Buffett requested "confidential
treatment" from the SEC with regard to his Wells Fargo holdings, apparently
some desperados are shooting at the stagecoach first and asking questions
later. Investors now need to ask whether or not this filing is really the
last word on Buffett's holdings.
Buffett's relationship with Wells Fargo began on October 24, 1990, when his
holding company Berkshire Hathaway announced that it owned 5 million shares
of the company, almost 10% of the outstanding shares. Buffett's initial holdings
were purchased at an average price of $58 per share, or 3.7 times current
trailing earnings. Building from a tiny stake established in 1989, Buffett
eventually bought his way up to 6.8 million shares as of the company's last
quarterly 13-F filing before today's. Initially buying shares when concerns
over bad real estate loans in California amidst the backdrop of the savings
and loan crisis, Buffett added to his position in 1991 when Wells Fargo announced
a surprising $700 million in loan losses, causing its first unprofitable
year since it was founded in 1852.
At the time, Buffett was widely criticized for his purchase of the California
bank with high-profile short-sellers like the Feshback brothers taking the
other side of the trade. Prudential banking analyst George Salem continued
to issue "sell" ratings on the company from 1989 until 1993, when he dropped
coverage of the company out of sheer frustration. Betting on further loan
losses that never materialized, Wells Fargo bears eventually capitulated
in late 1993 when Wells Fargo noted that it might be over-reserved by as
much as $1 billion. This entire episode vindicated Buffett's analytical prowess
and made the purchase of Wells Fargo one of Buffett's most successful
investments. As of the first quarter, the company was Berkshire's fifth-largest
position after FEDERAL HOME LOAN MORTGAGE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %>.
With an average cost of around $60 per share after his second major purchase,
as of the June 30 date of the filing, Buffett had a 349.2% gain on the majority
of his stake over seven years, an average annual return of 23.9%.
In May, however, Buffett ended a long period of accumulation of the shares
when he sold 265,000 shares of the San Francisco-based bank owned by Berkshire.
When Wells Fargo was conspicuous in its absence from today's 13-F filing,
speculators became concerned that Buffett had liquidated his entire stake
and began indiscriminate selling. As Wells Fargo has labored under the dark
cloud of a painful integration of its acquisition of First Interstate, reporting
a slight revenue decrease of 4% last quarter, this was all the push that
a few other Wells Fargo shareholders required before they began selling shares
of the bank. Wells Fargo had announced its intention to buy First Interstate
on October 18, 1995, over First Interstate's objections. The deal was completed
on January 24, 1996, and Wells went to work integrating the two banks.
The integration of the two companies has not gone well. Although Wells has
maintained most First Interstate account holders in California, in many other
states there has been a lot of customer attrition. Interest and non-interest
income (revenue in the banking world) have dropped 4% in the last quarter
as net interest income has fallen off, consuming the 6.3% gain in non-interest
income. Backing out goodwill, the company's expense ratio (non-interest expense
divided by net interest income before provision for loan losses) increased
to 63.8% from 61.7% last year, meaning the company lost 2.1% more of every
dollar to expenses. Despite the drop in income, however, Wells Fargo still
managed to buy back 7% of its outstanding shares year-over-year and maintain
its $5.20 per share dividend.
Did Warren Buffett completely liquidate his holdings of Wells Fargo? The
13-F filing may not be the last word on Buffett's position in any of these
companies. Under SEC laws, Berkshire has the right to keep its holdings
confidential for 15 months by placing them "on a shelf." Due to the exacerbated
reaction that speculators can have when they hear of a Warren Buffett move,
Buffett strives to keep his sales secret. The 13-F is hardly definitive.
Additionally, Berkshire Hathaway Co-Chairman Charles Munger controls 169,340
shares in WESCO FINANCIAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WSC)") else Response.Write("(NYSE: WSC)") end if %>, a small but not insignificant
stake that has not been sold.
In fact, at the recent Wesco Financial shareholder meeting (as reported by
Outstanding Investor Digest) Munger stated, "...five years from now,
nobody will even remember the problems that [Wells Fargo] is having today.
And Wells Fargo will be a big presence [in California] -- as will Bank of
America. [One of the beauties] of a really good business is that it'll stand
some ruin, it'll stand some trouble and it'll stand some bad judgement."
At the recent Berkshire Hathaway annual meeting, Buffett made no negative
comments. Unfortunately, due to Berkshire's desire to play its cards close
to the vest, Vice President Marc Hamburg told reporters that the filing "speaks
for itself" and offered no further comment. However, Wells Fargo stated that
Buffett remains a significant shareholder in spite of the way people are
reading the 13-F -- a document that apparently speaks for nothing and whose
meaning remains much in doubt.
CONFERENCE CALLS
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
HOME DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %>
(402) 220-3005 -- replay through 8/22
WOOLWORTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %>
(800) 953-6481 -- replay
ROSS STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROST)") else Response.Write("(Nasdaq: ROST)") end if %>
(402) 222-9936 -- replay through 8/26
ACE CASH EXPRESS INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq:AACE)") else Response.Write("(Nasdaq:AACE)") end if %>
(800) 642-1687 (give last name and confirmation #566078) -- replay through
8/27
THIS WEEK'S CONFERENCE CALL SYNOPSES
HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>
Call
DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") 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
another Fool
Editing
Julia Wilson (TMF Delete), one more
Fool
Editing