HEROES

PACIFIC SUNWEAR OF CALIFORNIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSUN)") else Response.Write("(Nasdaq: PSUN)") end if %> rose $5 1/4 to $44 5/8 after the youth-oriented retailer reported a 51% year-over-year increase in August revenues and a whopping 19.5% increase in same-store sales, indicating that back-to-school lines are moving nicely. That's almost four times the increase in same-store sales for the 100-store BT Alex. Brown Index. GAP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> slipped $1 1/16 to $48 15/16 on turning in a strong 16% increase in August same-store sales, while athletic shoe and apparel retailer FINISH LINE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FINL)") else Response.Write("(Nasdaq: FINL)") end if %> leapt $1 3/4 to $16 1/8 on reporting a 10% increase. Finish Line's 5% increase in same-store sales for the second quarter was above trend.

Finally -- some action in networking, after a boring stretch of 56 kilobit modem standard-setting news. Canadian-based NEWBRIDGE NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NN)") else Response.Write("(NYSE: NN)") end if %> vaulted $5 3/8 to $54 1/2 after anonymous industry analysts told Reuters that the maker of local area network (LAN) hubs and switches, frame relay and asynchronous transfer mode switches, and wide area networking (WAN) products is setting up a deal with 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %>. Under the alleged agreement, Newbridge would supply 3Com with WAN equipment, which 3Com would re-sell under its name. 3Com is not a player in ATM and frame relay switches like CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> and ASCEND <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>, but this would round out its product line, allowing 3Com to offer end-to-end product solutions to telecom networks of all sizes. If this turns out to be true, it's not only good for Newbridge, but it would be a strategic coup for 3Com, especially in its match-up with Ascend.

HUDSON FOODS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HFI)") else Response.Write("(NYSE: HFI)") end if %> jumped $3 15/16 to $21 1/8 after the company, now famous for its connection with selling e. coli-contaminated beef to Burger King, announced today that it will be purchased by TYSON FOODS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TYSNA)") else Response.Write("(Nasdaq: TYSNA)") end if %> for $8.40 per share in cash and 0.6 shares of Tyson for each Hudson share. As of the closing today, that's a value of $22.50 per Hudson share. Since Hudson last week sold its Nebraska beef plant, the remaining 94% of the company is poultry operations, a tasty snack for Tyson to snap up at a discount to where its own shares are trading, relative to their earning potential.

COAST SAVINGS FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSA)") else Response.Write("(NYSE: CSA)") end if %> added $2 3/8 to $49 7/8 after a federal judge said that companies suing the federal government have a strong case for winning a decision involving goodwill. Ever wonder why the savings & loan industry crashed in the 1990s? It wasn't all swindlers and overbuilding -- it was partly the federal government reversing its decision to count goodwill (the difference between the purchase price of a business acquired and its net asset value) as regulatory capital (capital against which it could make loans). The orginal decision was made to encourage strong thrifts to take over ailing institutions in the early 1980s. When it was reversed, the thrifts had to sell off assets into an already glutted real estate market and take huge losses, and those are the damages for which the savings & loans are now suing the government. And now you know the rest of the S&L story.

QUICK TAKES: Diversified semiconductor company NATIONAL SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NSM)") else Response.Write("(NYSE: NSM)") end if %> rose $3 5/8 to $40 15/16 after reporting Q1 revenue growth of 39% and EPS of $0.45 today, beating estimates of $0.36... SOUTHERN PACIFIC FUNDING CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFC)") else Response.Write("(NYSE: SFC)") end if %> advanced $1 to $15 7/8 after the non-traditional home equity lending company announced a strategic alliance with Liberty Lending, a private specialty finance company... Business forms and supplies manufacturer WALLACE COMPUTER SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WCS)") else Response.Write("(NYSE: WCS)") end if %> added $1 11/16 to $34 15/16 on reporting Q4 EPS of $0.45, up from $0.44 last year and in line with estimates... ALYN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALYN)") else Response.Write("(Nasdaq: ALYN)") end if %>, a producer of advanced metal matrix composite materials, sparked $1 7/8 higher to $10 1/4 on announcing the signing of an exclusive customer agreement with True Temper Sports. The deal involves custom-drawn tubing for bicycle frame sets and other tube components.

MORE QUICK TAKES: MEDIALINK WORLDWIDE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDLK)") else Response.Write("(Nasdaq: MDLK)") end if %> leapt $2 3/8 to $13 1/2 after the video distribution company's Chair and CEO made bullish comments about the coming year at the company's first annual meeting yesterday... NATURAL WONDERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NATW)") else Response.Write("(Nasdaq: NATW)") end if %> was boosted $1 3/8 to $5 3/4 as the specialty gift merchandiser said its board had authorized the repurchase of up to $2 million worth of its common stock during the next 12 months... GEOWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GWRX)") else Response.Write("(Nasdaq: GWRX)") end if %> moved up $1 3/8 to $11 after UBS Securities upgraded its rating on the stock to "buy" from "hold." The company specializes in software for personal digital assistants (PDAs) and mobile telecommunications products... KOPIN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KOPN)") else Response.Write("(Nasdaq: KOPN)") end if %> rose $1 7/8 to $23 after the company announced a multi-year, multi-million-dollar business agreement with MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> under which the companies will develop, manufacture, and market low-cost, flat-panel display products based on Kopin's CyberDisplay(TM) active matrix LCD technology... EIDOS PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EIDSY)") else Response.Write("(Nasdaq: EIDSY)") end if %> jumped $1 3/8 to $10 1/8 as the worldwide developer and publisher of interactive entertainment products announced the appointment of Mike McGarvey as worldwide chief operations officer of Eidos Interactive, the largest division of the London-based company... Shares of fat-tube aluminum bike maker CANNONDALE CORP (Nasdaq BIKE) rose $1 11/16 to $20 on news that the company will repurchase up to $1 million worth of common shares "from time to time in the open market or in private transactions."

GOATS

The days of the exclusive retail power franchise are over, as evidenced by the shock that public utility GREEN MOUNTAIN POWER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMP)") else Response.Write("(NYSE: GMP)") end if %> is receiving from investors today, losing $5 1/16 to $21. The company announced a common stock dividend cut from $0.53 per share to $0.275 per share, making an annual rate of $1.10 per share (a yield of 5.2% with today's decline), compared to the previous rate of $2.12 per share. With 1997 earnings expected to be lower than those of 1996, the company cited its need to lower its payout ratio, which pumped out 94-96% of its retained earnings to investors (which is less cash than you would think, in light of depreciation). The Vermont-based company needs the funds as armor against coming utility deregulation, since the state is still actively looking at restructuring proposals. Tremendous uncertainty with regard to the outcome of this process, the status of a 16.7% retail rate increase request with the Vermont Public Service Board, as well as recovery of "stranded costs" through asset securitization, has depressed shares pending resolution of these matters.

BIOSPHERICS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BINC)") else Response.Write("(Nasdaq: BINC)") end if %> is a diversified company that provides information and environmental services, as well as a sugar substitute. Huh? Investors weren't scratching their heads yesterday, just buying up the stock, on 21 times normal volume. This boosted the share price by 203% on news that the company's Danish licensee for the non-fattening sweetener "tagatose" had provided sample quantities of the product to certain "unnamed" food product companies (which expressed interest in developing new products with it). Well, the rumor yesterday was that a large gum maker that makes "Juicy Fruit" and starts with the letter "W" was filing for patents involving the company's new version of sugar. Oops, today a real Wrigley official denied Biospheric's claims, chewing the stock $4 7/16 to $7 11/16. Biospherics countered, saying there was a full patent application pending and that "Wrigley officials said they were reluctant to go public with the application for competitive reasons, and because they don't want the Wrigley name used to promote the stock of a smaller company."

QUICK CUTS: Standard & Poor's today revised its ratings outlook on WESTBRIDGE CAPITAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WBC)") else Response.Write("(NYSE: WBC)") end if %> to "negative" from "stable," which destabilized shares of the health insurance underwriter $7/8 to $4 15/16... EXCEL INDUSTRIES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EXC)") else Response.Write("(NYSE: EXC)") end if %> reported today that its third quarter sales could be as much as 10% below analyst expectations, slamming the auto parts supplier $3 5/16 to $18 15/16... Same-store sales in the month of August plunged 22% for clothing retailer ANNTAYLOR STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>, and the stock fell $1 15/16 to $14 15/16 in tandem with the dive in comparative store sales... ADVANCED MICRO DEVICES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> dropped $3 5/8 to $35 1/4 following Deutsche Morgan's downgrade to "hold" from "accumulate" after today's guidance from the company... Smith Barney portfolio strategists said they viewed GENERAL MOTORS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> as having greater potential for an upside surprise in profits and valuation than CATERPILLAR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> over the next six to 12 months, slamming shares of the heavy equipment maker $3 7/16 to $56 3/8... Smith Barney initiated coverage of TREX MEDICAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXM)") else Response.Write("(NYSE: TXM)") end if %> with a "neutral," dropping shares $13/16 to $14 15/16... Recreational vehicle rental and sale company CRUISE AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: RVR)") else Response.Write("(AMEX: RVR)") end if %> had a damper put on its fun as shares fell $3/4 to $7 5/8, after reporting a loss of $1.07 a share for its most recent quarter... Piper Jaffray and Fahnestock double-teamed CARDIOTHORACIC SYSTEMS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CTSI)") else Response.Write("(Nasdaq: CTSI)") end if %>, downgrading the coronary bypass surgery equipment maker from two "buys" to a "neutral" and "hold" respectively, slamming the stock $3 1/16 to $7 11/16.

MORE QUICK CUTS: Information technology consulting company AMERICAN MANAGEMENT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMSY)") else Response.Write("(Nasdaq: AMSY)") end if %> lost $5 7/8 to $18 3/4 after releasing guidance that lowered 1997 EPS estimates to a range of $0.72 to $0.81 from a range of $0.95 to $1.03... After making a correction on its financials issued yesterday, FIRST AVIATION SERVICES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FAVS)") else Response.Write("(Nasdaq: FAVS)") end if %> fell $1 7/8 to $8 7/8 today as the aircraft engine services company made adjustments downward... Beer maker ADOLPH COORS CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACCOB)") else Response.Write("(Nasdaq: ACCOB)") end if %> went flat $4 31/32 to $32 7/16 thanks to a Merrill Lynch downgrade from "intermediate neutral" to "intermediate reduce"... Telecommunications cable supplier OPTICAL CABLE CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OCCF)") else Response.Write("(Nasdaq: OCCF)") end if %> fell $1 5/8 to $13 after reporting 3Q EPS of $0.05, versus estimates of $0.06... INTUIT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> declined $2 15/16 to $25 11/16 after the financial software and increasingly web-oriented company reported a Q4 operating loss of $0.17 per share, slightly ahead of estimates, however... ORTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORTL)") else Response.Write("(Nasdaq: ORTL)") end if %> dropped $2 3/8 to $21 3/4 after the telecom equipment manufacturer reported Q1 EPS of $0.12, beating estimates of $0.11... PERITUS SOFTWARE SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTUS)") else Response.Write("(Nasdaq: PTUS)") end if %> fell $2 5/8 to $26 3/8 on a Deutsche Morgan downgrade from "buy" to "accumulate"... Semiconductor mask generation systems maker ETEC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ETEC)") else Response.Write("(Nasdaq: ETEC)") end if %> slid $5 1/8 to $59 7/8 after reporting Q3 EPS of $0.54, beating estimates. The company said it expects revenues in the coming quarter to be flat to slightly down and earnings to fall because of capacity constraints and higher-expense system sales. .

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

Rats, back by popular demand

Do you have a favorite behavioral science experiment? I do. And no, it is not Stanley Milgram's pioneering work in 1937. You know, the experiments where volunteers were told by authoritative men in white lab coats to administer painful electric shocks to strangers -- and they did. Nope, that's number two. My favorite behavioral science experiment actually involves rats and explains a lot about why people use bizarre investment approaches.

The experiments center on how long it takes to extinguish a learned response. A rat was placed in a cage with a pellet dispenser. When the rat pressed down on a lever, a food pellet would shoot out. Scientists outside of the cage could control when the pellet could come out, however, adjusting it so that the pellet would come out when the rat hit the bar two times, three times, etc. They could even adjust it so that the pellet of food came out randomly, without any regard to how many times the rat pressed the lever.

Now, the first part of the experiment involved teaching the rat that pressing on the bar made food come out of the dispenser. The rat was left alone in the cage and would occasionally stumble into the lever, causing a pellet of food to come down. A few run-ins with the bar and the rat would figure out the connection. This was one criterion for the experiment, as the rat had to have the learned response taught to it before it could be extinguished, or unlearned. After the response was learned, the real fun part of the experiment began.

Now, the scientists had quite a few rats in these contraptions at their disposal. Once each learned the response, the lever-push and food delivery relationship was adjusted. Some rats got a pellet for every push, some got one for every three pushes, some got the pellet for many, many pushes and then some were just randomly rewarded. They left the rats to keep pushing the bar for food for a significant period of time, each with his or her own particular push-metric. Then one day, they stopped the pellets from coming altogether.

This was the crux of the experiment. How long would the rat keep pushing on the bar before it gave up and realized that no more food was coming? How long would it take for the response to be unlearned? Well, most of the experiment is pretty intuitive. The fewer times the rat had to push the bar to get food, the quicker it figured out no more food was coming. The rat who only had to push once gave up first, then the rat who had to push two times, then the rat who had to push three times, and so on.

The relevant part to the world of investing, however, comes in with the rat who was rewarded with the food pellet randomly. This rat just kept pressing and pressing and pressing. Because it never learned any set schedule for reward, it took the longest to figure out that no more food was coming. Consequently, the rat who was intermittently rewarded developed the learned response that took the most time to extinguish.

What does this have to do with investing? It's pretty straightforward. Behaviors that are intermittently rewarded are the most persistent -- thus the success of the myopic science of technical analysis. Completely ignorant of the actual business dynamics represented by the company behind the ticker, the technical analyst relies on charts of past price movement which he swears foretell future stock appreciation. It's much like driving a car by looking in the rearview mirror, nonetheless occasionally the technical analyst is right.

The problem is that they are right on an intermittent basis. Which means they develop a learned response that becomes darn near impossible to extinguish. All kinds of justifications, ranging from the sublime to the ridiculous, are given for why past price performance determines future stock appreciation -- in spite of the fact that Malkiel's tremendous book A Random Walk clearly proved that no chart pattern had any predictive value above and beyond what was possible through pure chance. Even technical analysts will admit that their "science" is really more art than system, saying that experience informs the reading of charts.

Others might say that what is really going on is that they are still getting those pellets on an intermittent basis.

CONFERENCE CALLS

ETEC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ETEC)") else Response.Write("(Nasdaq: ETEC)") end if %>
(800) 633-8284 (code: 3030112) -- replay through 9/4 @ 7:00 pm EDT

BECKMAN INSTRUMENTS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BEC)") else Response.Write("(NYSE:BEC)") end if %>
Re: acquisition of Coulter Corporation
(800) 633-8284 (password 3104980) -- replay through 9/4 @ 8:00 pm EDT

THIS WEEK'S CONFERENCE CALL SYNOPSES

APPLE/POWERCOMPUTING Call

WE DELIVER - Get The Evening News delivered
to your e-mailbox every evening!

SO YOU'VE READ THE EVENING NEWS
... WANNA HEAR IT?

Every day, News writers Dale Wettlaufer and Randy Befumo engage in an impromptu discussion about the stories they find most compelling from the day's news, adding color, fresh commentary and the occasional wisecrack for your listening enjoyment. Check it all out in the Motley Fool's Evening Report on RealAudio, produced by partner Westwind Studios and sponsored by Mapquest.

Randy Befumo (TMF Templr), a Fool
Alex Schay (TMF Nexus6), Fool two
Dale Wettlaufer (TMF Ralegh), Fool three

Contributing Writers

Selena Maranjian (TMF Selena), another Fool
Julia Wilson (TMF Delete), Fool, oh yes, Fool

Editors