HEROES

Paper and mining capital equipment manufacturer HARNISCHFEGER INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HPH)") else Response.Write("(NYSE: HPH)") end if %> added $3 5/16 to $42 13/16 on announcing a board authorization to buy back up to 10 million common shares -- the equivalent of raising each owner's proportional stake in the company by 25%. That's a huge bonus for the shareholders of what Fortune recently called the second fastest growing company in the country. That same story mentioned that analysts think Harnischfeger's growth may slow, but as Coca-Cola owners know, a company doing financial engineering and buying back stock at the same time doesn't need much operating earnings growth to keep shareholder return growing.

WATERS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAT)") else Response.Write("(NYSE: WAT)") end if %> spurted $6 7/16 to $40 7/16 after the liquid chromatography instruments maker said it will acquire Micromass Limited, a mass spectrometry equipment maker, for $178 million in cash. Waters said the acquisition will immediately add to earnings. The company also said that its market opportunity will now grow to $3 billion, implying that this highly acquisitive operator may feel there's more growth to be done. With excellent operating margins and annualized return on tangible capital of 22% through six months of the year, this company's management looks like it knows what it's doing.

Baby, I love your way, investors in ART'S-WAY MANUFACTURING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARTW)") else Response.Write("(Nasdaq: ARTW)") end if %> might have been thinking today. Though we don't know who Art is, his way seems to be working, as the manufacturer of agricultural equipment moved up $2 1/4 to $10 3/4 on reporting a 41% increase in Q1 revenues and EPS of $0.30. The company said that earnings were enhanced by a "meaningful" contribution from its recent acquisition of a grain wagon manufacturer. Year-over-year order levels increased 200%.

QUICK TAKES: BOSTON BIOMEDICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BBII)") else Response.Write("(Nasdaq: BBII)") end if %> jumped $2 1/2 to $8 3/4, or 40%, after the maker of medical quality control products and test kit components announced that "five of the company's Accurun quality control products have been cleared [by the FDA] for in vitro diagnostics," raising by a third the number of such products the company markets... AMERICAN MATERIALS & TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMTK)") else Response.Write("(Nasdaq: AMTK)") end if %> gained $1 1/16 to $5 5/8 after announcing that its Culver City Composites division received a contract from BOEING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> that is expected to increase its revenue levels by more than 100% over the next three years... ARIEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADSP)") else Response.Write("(Nasdaq: ADSP)") end if %> rose $1 1/2 to $9 after announcing a five year development pact with TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> under which the semiconductor giant will use Ariel's digital signal processing software... Machine vision systems company GENERAL SCANNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSCN)") else Response.Write("(Nasdaq: GSCN)") end if %> gained $3 1/4 to $28 1/2 after a U.S. District Court dismissed substantial parts of ROBOTIC VISION SYSTEMS' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROBV)") else Response.Write("(Nasdaq: ROBV)") end if %> claim of breach of contract and tortious interference against General Scanning.

BEST BUY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %> rode $1 5/16 higher to $24 3/16 as Goldman Sachs reiterated a "trading buy" on the consumer electronics retailer, according to Dow Jones... ADVANCED MAGNETICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AVM)") else Response.Write("(AMEX: AVM)") end if %> rose $1 1/4 to $11 1/4 on announcing that its Japanese partner has started to market the company's liver contrast agent... DURAMED PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DRMD)") else Response.Write("(Nasdaq: DRMD)") end if %> gained $3/4 to $5 7/8 after receiving an okay from the FDA to market "glipizide tablets, a treatment for diabetes, in the 5 mg and 10 mg strengths"... UTI ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: UTI)") else Response.Write("(AMEX: UTI)") end if %> picked up $3 3/34 to $36 1/4 after the onshore contract oil and gas driller announced an agreement to acquire J.S.M. & Associates, raising the number of UTI's rigs by seven... FREQUENCY ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: FEI)") else Response.Write("(AMEX: FEI)") end if %> rose $2 1/2 to $23 1/2 after the time and frequency control products manufacturer announced a 35% year-over-year increase in Q1 EPS of $0.27.

GOATS

MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> fell $5 9/16 from yesterday's closing price on the New York Stock Exchange to finish the day at $69 3/16. The company said Q3 EPS will fall "significantly below" the analysts' mean estimate of $0.60 due to sluggish pager sales in China and the U.S. and because it will take a charge to exit the Macintosh PC clone making business. Motorola quantified the miss by saying earnings will come in 25% or more below estimates. Taking the $95 million charge for exiting the Mac business and adding back the tax benefits associated with the charge works out to $0.10 per share after tax, or about two-thirds of the earnings shortfall. In effect, analysts and investors aren't taking a $0.05 per share miss all that hard and appreciate that Motorola is leaving the Mac business.

GIBRALTER STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROCK)") else Response.Write("(Nasdaq: ROCK)") end if %>, the steel service center based in Buffalo, New York, fell $4 7/8 to $21 3/8 after the company said that it will miss analysts' Q3 earnings estimates of $0.38 per share due to higher prices on raw materials. The company expects to generate record 1997 revenues of $440 to $450 million, up from $343 million last year. That's not all internal growth, as Gibralter is a consolidator that seeks out high value-added acquisition opportunities. What's bad for the goose may not be bad for the gander, though, as upward moves in steel industry suppliers, such as CARBIDE/GRAPHITE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CGGI)") else Response.Write("(Nasdaq: CGGI)") end if %>, indicate that steel prices have firmed in the last six months.

QUICK CUTS: Optometry products company KERAVISION INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KERA)") else Response.Write("(Nasdaq: KERA)") end if %> fell $1 1/16 to $8 5/8 after Cowen & Co. lowered its rating on the company to "neutral" from "buy"... WASTE INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WWIN)") else Response.Write("(Nasdaq: WWIN)") end if %> fell $2 1/8 to $23 7/8 after Deutsche Morgan Grenfell cut its rating on the solid waste handler and recycler to "hold" from "accumulate"... ROCKY SHOES & BOOTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RCKY)") else Response.Write("(Nasdaq: RCKY)") end if %> dropped $1 3/8 to $16 1/2 on announcing that it plans to sell more than one million newly issued shares... MILLER INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MLR)") else Response.Write("(NYSE: MLR)") end if %> stalled $4 9/16 to $10 3/8 after the towing equipment manufacturer reported a 57% increase in Q1 EPS and announced the acquisition of nine towing service businesses for 620,000 shares of Miller Industries stock and $2.9 million in cash... Employment services company MANPOWER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAN)") else Response.Write("(NYSE: MAN)") end if %> lost $3 13/16 to $37 1/2 after saying it expects flat earnings in the third quarter compared to last year... IMPERIAL HOLLY <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: IHK)") else Response.Write("(AMEX: IHK)") end if %> lost $1 1/16 to $13 1/2 after SAVANNAH FOODS & INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFI)") else Response.Write("(NYSE: SFI)") end if %> agreed to be acquired by the sugar producer for a cash and stock deal worth $20 1/4 per share.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

The Dollar Machine, Part 2

Yesterday we introduced the nuclear-powered dollar machine, a device so devious, so crafty, that it spits out one crisp new dollar bill each over a ten-year period. We confronted head on the problem of trying to value this dollar machine, taking the sum of the dollars it would spit out over ten years and discounting their value back to the present. Today we will relate this to investing by demonstrating that both bonds and stocks are really just specialized kinds of dollar machines.

One of the things that complicates the analysis of a true dollar machine is that instead of stuffing the dollar bills under your mattress as they came out, you would probably invest them at some rate of return as you received them. So the analysis of the actual net present value of the dollar machine is not as simple as just totaling up all the dollars it will spit out and taking them back to present dollars. You also have to assume that as you get each dollar, you will be able to earn the going rate of return on that as well.

If you think about it, a bond is really nothing more than a dollar machine. You pony up some money on the front end (the par value of the bond) and the bondholder pays you a certain amount of money every year (the coupon rate), normally in semiannual installments. Like a garden-variety bond, our dollar machine pays interest over time, not all at once at the end. Otherwise, it would be a zero coupon dollar machine, paying out all of the interest when the bond is "called" on the maturity date.

So, as you receive one dollar in Year One, another dollar in Year Two, and so on until you receive the tenth dollar in Year Ten, each of these dollars would be earning the rate of return you assumed your money would have made if you had not bought the dollar machine. Yesterday we used 6%, roughly the rate of return you can earn on a ten-year Treasury bond, as our rate of return for the purposes of discounting the future dollars. By looking at the separate returns for each dollar, we can do the same thing. Dollar one in Year One earns 6% for nine years, dollar two in Year Two earns 6% for eight years, and so on until dollar ten, which doesn't earn anything because it is paid on the last day.

Because each dollar earns additional money after you get it, the stream of $10 is actually worth slightly more because of all this extra interest income. Assuming a 6% rate of return, you would actually be willing to pay as much as $7.36 for the entire income stream, assuming that the payment comes at the end of the year and not the beginning. The reason for the higher value is that in year ten, assuming you earned 6% on all of the money you received from the dollar machine, you would have $13.18.

So if a bond is a dollar machine that spits out dollars at a fixed and pre-determined rate -- dollars that you can further invest after you receive them to increase the value of the income stream -- what would we have to do to the dollar machine to turn it into a stock? Tune in on Monday when we wrestle with this problem.

CONFERENCE CALLS

MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>
Regarding Pre-earnings announcements
(402) 220-4826 -- replay

AMERICAN GENERAL CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGC)") else Response.Write("(NYSE: AGC)") end if %>
Regarding acquisition of Western National Corporation
(800) 642-1687 (code: 615008) -- replay

LERNOUT & HAUSPIE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LHSPF)") else Response.Write("(Nasdaq: LHSPF)") end if %>
Regarding strategic alliance with Microsoft
(800) 839-1946 (passcode: 11853) -- replay through 9/15

WASHINGTON HOMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHI)") else Response.Write("(NYSE: WHI)") end if %>
(800) 696-1588 (code: 228931) -- replay through 9/16

THIS WEEK'S CONFERENCE CALL SYNOPSES

AOL/COMPUSERVE Call
MOTOROLA Call

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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