DJIA: 7823.13 +28.35 (+0.36%) S&P 500: 955.40 +3.76 (+0.40%) Nasdaq: 1600.55 +6.05 (+0.38%) Korean Composite 411.91 -21.19 (-4.89%) 30-Year Bond 101 1/32 -2/32 6.05% Yield
Integrated telecommunications carrier GTE Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTE)") else Response.Write("(NYSE: GTE)") end if %> gained $11/16 to $50 9/16 on rumors that British Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTY)") else Response.Write("(NYSE: BTY)") end if %> will make a bid to acquire the company. GTE holds many of the same attractions that led to a merger agreement between British Telecom and MCI Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %>, as well as four million wireless customers, to which MCI only resold services. Though GTE has over $14 billion in long-term debt, it also runs one of the most profitable of all the local loop companies in the country, and could save what BT would have had to spend with MCI to integrate local and long-distance services. BT, however, would have to pay up for the right to acquire GTE. At the current quote, the price of GTE is more than $20 billion above what BT would have had to spend to acquire MCI, but the valuations on enterprise value-to-net income and price-to-cash flow are both lower for GTE. Should the rumors prove to be true, GTE's board would probably be able to wring a 10% premium from the current price out of BT's dealmakers, though some think various BT constituencies and management wouldn't go that high even if they receive equal value in return.
Telecommunications holding company ACC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACCC)") else Response.Write("(Nasdaq: ACCC)") end if %> gained $2 1/2 to $46 3/4 today after it was announced after market close on Wednesday that the nation's largest competitive local access provider, Teleport Communications Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCGI)") else Response.Write("(Nasdaq: TCGI)") end if %>, has agreed to purchase the company in a stock swap valued at approximately $1 billion. When the deal is expected to close in mid-1998, if Teleport stock is between $45 to $55, the exchange ratio will be fixed at 1.11111 shares of Teleport stock for each ACC share. If Teleport is over $55, that exchange ratio will be 0.90909 per share. The deal effectively spurns Tel-Save Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TALK)") else Response.Write("(Nasdaq: TALK)") end if %>, which had offered to buy ACC Corp. at the end of last month. Under the terms of the Teleport deal, ACC shareholders would receive $50 of Teleport stock for each ACC share, which is the same amount that Tel-Save arrived at in its unsolicited bid. Tel-Save's offer has been dropped, but it plans to make another bid for ACC if Teleport's share price trades outside the collar set for the deal.
QUICK TAKES: Entremed Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENMD)") else Response.Write("(Nasdaq: ENMD)") end if %> gained $3 3/8 to $15 1/4
after the biopharmaceuticals company said Nature, "a premier medical
journal," published a story highlighting the efficacy of an Entremed protein
in reducing very large tumors in mice... Medical equipment maker Conmed
Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNMD)") else Response.Write("(Nasdaq: CNMD)") end if %> rose $3 3/4 to $23 3/4 after announcing that it
has agreed to purchase from Bristol-Myers Squibb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BMY)") else Response.Write("(NYSE: BMY)") end if %> its Linvatec
medical device unit and certain other assets for $370 million in cash plus
warrants to purchase one million shares of Conmed... TMP Worldwide
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TMPW)") else Response.Write("(Nasdaq: TMPW)") end if %>, an online job search
company and web publisher, gained $1 1/8 to $18 1/4 after Morgan Stanley
Dean Witter raised its rating on the company to "strong buy" from
"outperform."
Automaker Honda Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMC)") else Response.Write("(NYSE: HMC)") end if %> rose $3 1/4 to $71 as arbitrageurs
adjusted the price of the company's American Depository Receipts to price
changes of the common stock on the Tokyo Stock Exchange. Honda yesterday
reported a 26% year-over-year increase in October exports... Rhone-Poulenc
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RP)") else Response.Write("(NYSE: RP)") end if %> added $2 to $44 7/8 after announcing yesterday that its nasal
spray for allergies, Nasacort AQ, has been approved for use in 13 European
countries... Skin replacement company Organogenisis <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ORG)") else Response.Write("(AMEX: ORG)") end if %> ran
$3 1/4 higher to $34 1/4 on announcing an agreement with Phymatrix Corp.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHMX)") else Response.Write("(Nasdaq: PHMX)") end if %> to "...assess [Organogenisis product] Apligraf(TM) (Graftskin)
in the treatment of decubitus ulcers (pressure sores)."
Jackson, Mississippi-based Deposit Guaranty Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEP)") else Response.Write("(NYSE: DEP)") end if %> gained $7 3/8 to $48 1/4 as bank merger fever heats up in the Deep South. Some investors believe the North Carolina superregionals will be shopping to their west, while others think the larger Tennessee banks will be filling out their franchises to the south.
Beijing Yanhua Petrochemical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BYH)") else Response.Write("(NYSE: BYH)") end if %> took a $1 1/6 spill to $11 3/16 today, while Jilin Chemical Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCC)") else Response.Write("(NYSE: JCC)") end if %> dropped $1 1/6 to $13 5/8 and Shanghai Petrochemical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHI)") else Response.Write("(NYSE: SHI)") end if %> slipped $1 1/4 to $19 9/16 amid concerns over declining petrochemical prices in China. Other Hong Kong and Chinese American Depository Receipts (ADRs) joined these chemical companies among the biggest losers today on the New York Stock Exchange, with China Southern Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZNH)") else Response.Write("(NYSE: ZNH)") end if %> descending $2 7/16 to $15 1/16 and Guangshen Railway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GSH)") else Response.Write("(NYSE: GSH)") end if %> derailed by $11/16 to $10 7/8. Traders commented that the issues were declining as a result of sentiment that the ADR prices were out of line with their fundamental performance in their home markets.
QUICK CUTS: Ergonomic products and technology company Ergobilt Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERGB)") else Response.Write("(Nasdaq: ERGB)") end if %> fell $7/8 to $11 5/8 after Neutral Posture Ergonomics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NTRL)") else Response.Write("(Nasdaq: NTRL)") end if %> filed counterclaims for "patent infringement, infringement and dilution of trademark rights and breach of contract" against Ergobilt... Mineral exploration and development company Sutton Resources <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STTZF)") else Response.Write("(Nasdaq: STTZF)") end if %> dropped $3/8 to $5 3/8 after reporting nine-month (ended Sept. 30) EPS of $0.05 versus 1996 nine-month EPS of $0.06... Paintball products and accessories company Brass Eagle <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XTRM)") else Response.Write("(Nasdaq: XTRM)") end if %> was splattered for a $3/4 loss $11 3/4 after the Wednesday IPO fell on its second day of trading... The same scenario occurred with integrated circuit maker Applied Micro Circuits Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMCC)") else Response.Write("(Nasdaq: AMCC)") end if %>, which debuted on Wednesday and fell $5/8 to $11 today... Franchisee of Papa John's Pizza units PJ America <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PJAM)") else Response.Write("(Nasdaq: PJAM)") end if %>, a franchisee of Papa John's Pizza units, fell $3/4 to $13 3/4 after reporting 3Q EPS of $0.17 on Thanksgiving morning versus prior year EPS of $0.14.
FOOL
ON THE HILL
An Investment Opinion by Randy
Befumo
Conventional Wisdom's Last Stand
No one can argue that wisdom is not an admirable attainment. Conventional
wisdom, on the other hand, can be a pernicious and poisonous construct, designed
to prolong lies and half-truths well beyond their normal lifespans. Consider
the following bits of conventional wisdom:
Conventional Wisdom: General George Armstrong Custer was an idiot
who got what he deserved at Little Big Horn.
Reality: Although you can fault Custer for underestimating his Sioux
and Cheyenne opponents, the guy was a brilliant general. In July 1863 at
the head of the 1st Michigan Cavalry, Custer drove back the canny J. E. B.
Stuart of the Confederate Army. This crucial calvary engagement to the east
of a town called Gettysburg sealed the Union victory and represented one
of the key turning points in the Civil War. Although criticized for his
unconventional methods and court-martialed in 1867 for deserting his post
and shooting deserters without proper trial, Custer was reinstated less than
a year later.
In 1876, Brevet Major General Custer led 212 soldiers of the 7th Calvary
to attack a village of Sioux and Cheyenne. Ignoring reports from his scouts
(as he routinely did) on the size of the village, Custer was surprised by
the size of the enemy force and every man in his command was slaughtered.
Although historians still debate whether Custer got himself in trouble or
was left
to hang by his compadres, Major Marcus Reno and Captain Frederick Benteen
of the 7th Calvary, it is hard to argue that even the combined might of the
7th Calvary should have attacked a hostile enemy force the size of that at
Little Bighorn.
Conventional Wisdom: Benedict Arnold was a do-nothing traitor to the
Revolutionary Army who got what he deserved.
Reality: Benedict Arnold was quite possibly the best general the
Revolutionary Army had at its disposal during the course of the war. During
the Battle of Saratoga, it was Arnold along with Horatio Gates and Daniel
Morgan that led the Revolutionary Army to a critical victory over the forces
of British General John Burgoyne. With his defeat in two separate battles
in the Saratoga Campaign, Burgoyne's attempt to divide the American colonies
at the Hudson was soundly defeated and he was forced to surrender.
Unfortunately for Arnold, who had financed his army with his own fortune,
his performance at Saratoga would not guide his treatment at the hands of
the Revolutionary Government. Denied any compensation for his expenses as
well as back pay, a very peeved Arnold defected to the British and was defeated
in Canada.
Conventional Wisdom: Hype on the Motley Fool's message boards often
explains dramatic price changes in small companies like Actrade
International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACRT)") else Response.Write("(Nasdaq: ACRT)") end if %>.
Reality: If only it were so, anyone who read the message boards on
the Motley Fool would be fabulously wealthy. Today's variation of this bit
of conventional wisdom that permeates the business media comes to us courtesy
of Bloomberg Business News. A story from Bloomberg today attributes the sharp
$3 1/2 to $28 11/16 rise in shares of Actrade to "on-line bulletin boards"
recommending the stock, specifically naming the Motley Fool and Silicon Investor.
Without even going into the point that the Motley Fool is quite a bit more
than a "bulletin board" (as this column and more than a dozen like it that
generate more than 50% of the service's total impressions do not debut on
message boards), a quick glance at message boards on both sites reveal a
decided lack of activity.
Rather than finding a horrible hype job when you check the message boards
on the America Online and Web versions of the Fool and the Silicon Investor,
there is actually a rather subdued conversation going on. The combined Fool
boards on Actrade have seen 29 messages in the last 30 days, a pace that
can be described as anemic at best. Silicon Investor does not even seem to
have a separate Actrade board as far as I can tell, and a full text search
reveals 11 messages in the past two weeks. Given that both of these services
combined generate millions of messages a month, attributing today's move
to either of these services seems a bit premature. For those who want to
check for themselves, the following links will give you the opportunity:
The
Fool's Web Actrade Board
Silicon
Investor's Comments on Actrade
In the interest of full disclosure, Actrade at one point was a very popular
message board on the Fool. Around April of this year after the stock had
doubled,
participants who had found the stock early were quite happy. The company
deals with trade acceptance drafts (TADs), a way for companies to finance
receivables without carrying them on their books. TADs allow companies without
significant working capital to finance large orders they otherwise would
have to turn down because Actrade buys the accounts receivable from them
for 75% of the face value, paying the balance over time as the TAD installments
come due. Although the company currently has no competitors in this innovative
line of financing, some worry that competition is a'coming.
As a hint to any aspiring wire service writers who want an explanation as
to why Actrade may be taking off recently, they need go no farther than the
December issue of Individual Investor. The one page profile on page
76 covers the company in loving detail, explaining how it has popularized
TADs and now has the industry basically to itself. The last paragraph questions
how long the business can continue and points out that Actrade charges annual
interest rates of 18%, leaving plenty of room for it to be undercut. However,
overall the coverage is positive and certainly could cause some novice investors
to decide to take the plunge on a low volume day, which would explain quite
a bit of the activity. Then again, there could be something else out there
as well.
Certainly the traders that the Bloomberg wire sources questioned would not
necessarily be prone to roll up their sleeves and do the investigative research
required to answer this one -- one of the reasons why traders as a source
are almost completely useless, in my read. The trader is usually a slave
to conventional wisdom, looking for a single factor explanation for any day's
price movement. The investor, on the other hand, eschews the conventional
wisdom, understanding that multiple factors cause daily movements, but over
long periods of time the single, overwhelming growth in earnings drives stock
prices. This is the unconventional wisdom that Fools emphasize, despite all
the labeling of the service as a "bulletin board" or "chat room" by the media
duped by the powerful force that is conventional wisdom.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
WE
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ANOTHER FOOLISH
THING
Fools on the Radio
Tom and David are coming to a radio near you. These founding Fools will be hosting this weekend's edition of MoneyTalk.
Randy Befumo (TMF Templr), a Fool
One
Dale Wettlaufer (TMF Ralegh), Fool
Two
Alex Schay (TMF Nexus6), Fool Three
Contributing Writers
Brian Bauer (TMF Hoops), Fool Four
Editor