<% ' AvantGo:MarketClose %>DJIA 8432.21 -20.08 (-0.24%) S&P 500 1072.32 +1.65 (+0.15%) Nasdaq 1724.98 +31.12 (+1.84%) Value Line Index 829.53 +6.55 (+0.80%) 30-Year Bond 105 30/32 +1 2/32 5.11 Yield<% ' AvantGo:End %>
<% ' AvantGo:Heroes %>Online auction retailer eBay Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EBAY)") else Response.Write("(Nasdaq: EBAY)") end if %> was bid up $23 1/4 to $73 3/8 after Donaldson, Lufkin & Jenrette started coverage of the company with a "buy" rating and a price target of $100 per share. DLJ, which was a co-manager of the company's initial public offering last month, believes the company's prospects look bright, considering that its economic model as an intermediary linking buyers with sellers allows it to collect fee income from its users without actually holding any inventory. Analysts expect to see strong Q3 revenue gains in eBay's first quarterly earnings report as a public company, which is scheduled to be released tomorrow. Elsewhere in the online auction world, Onsale Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> climbed $3 1/4 to $18 1/2 after saying it has recorded its 8 millionth bid on its website, which comes less than two months after the company hit the 7 million bid plateau.
There's a hurricane a-coming, so the share prices of many companies operating in the oil patch were acting a little stranger than normal today. Several oil and gas services and offshore drilling firms rose as Hurricane Mitch took center stage in the Caribbean. While Mitch does not yet pose the same threat to the U.S. Gulf Coast as last month's Hurricane Georges, oil traders are wondering whether it will disrupt shipments of imported oil from Venezuela and Mexico into the U.S. The possibility that storm-induced disruptions will help ease the ongoing oil supply glut in the U.S. -- however remote the chance -- was enough to spark a rally today. Among the big gainers, R&B Falcon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLC)") else Response.Write("(NYSE: FLC)") end if %> rose $1 5/8 to $14 1/4, Rowan Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RDC)") else Response.Write("(NYSE: RDC)") end if %> added $1 1/4 to $14 1/2, Varco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VRC)") else Response.Write("(NYSE: VRC)") end if %> moved up $1 7/8 to $12, Transocean Offshore <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIG)") else Response.Write("(NYSE: RIG)") end if %> advanced $3 7/8 to $39 3/8, and Global Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLBL)") else Response.Write("(NYSE: GLBL)") end if %> climbed $1 11/16 to $9 15/16.
QUICK TAKES: Baby Bell SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> rang up $2 1/4 to $44 11/16 as the company completed its merger with Southern New England Telecommunications today... Food and beverage containers maker and aerospace technologies firm Ball Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BLL)") else Response.Write("(NYSE: BLL)") end if %> rose $1 15/16 to $41 15/16 after reporting Q3 EPS of $0.84 (before charges), beating the Street's mean estimate of $0.73... Newspaper publisher Knight-Ridder <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KRI)") else Response.Write("(NYSE: KRI)") end if %>, which should not be confused with the similarly named David Hasselhoff TV series from yesteryear, advanced $2 to $46 after Bear Stearns raised its rating to "buy" from "neutral"... Pharmaceutical developer ICN Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICN)") else Response.Write("(NYSE: ICN)") end if %> moved up $2 to $24 1/8 after announcing a plan to buy back up to 3 million of its outstanding shares, which is in addition to the $10 million repurchase plan announced last month.
Online services conglomerate America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> picked up $6 1/16 to $121 on anticipation of its fiscal Q1 earnings report, which is expected after the close of trading tomorrow... Communications systems equipment supplier Andrew Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANDW)") else Response.Write("(Nasdaq: ANDW)") end if %> added $1 1/16 to $15 13/16 after reporting fiscal Q4 EPS of $0.31, which was a penny ahead of the Street's mean estimate... Drug delivery technologies developer TheraTech <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THRT)") else Response.Write("(Nasdaq: THRT)") end if %> jumped $3 1/8 to $12 7/8 after agreeing to be acquired by so-called off-patent pharmaceutical company Watson Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WPI)") else Response.Write("(NYSE: WPI)") end if %> in a stock swap valued at about $300 million. Watson fell $1 1/2 to $50 3/4 on the news.
Trash removal and recycling firm Waste Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WWIN)") else Response.Write("(Nasdaq: WWIN)") end if %> gained $1 15/16 to $22 7/8 after CEO Lonnie Poole, Jr., told Barron's that he is considering acquisitions that would boost the company's annual revenues by about $100 million, which would almost double the $116.3 million in revenues the firm posted in fiscal 1997... TV station owner Sinclair Broadcast Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBGI)") else Response.Write("(Nasdaq: SBGI)") end if %> rose $7/8 to $13 9/16 after Donaldson, Lufkin & Jenrette raised its rating to "buy" from "market perform"... Home builder Centex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTX)") else Response.Write("(NYSE: CTX)") end if %> hammered out a $2 3/16 gain to $34 7/16 after reporting fiscal Q2 EPS of $0.91, beating the Street's mean estimate by $0.11.
Network data storage products and file server developer Network Appliance <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NTAP)") else Response.Write("(Nasdaq: NTAP)") end if %> tacked on $3 1/2 to $54 after Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> said it will use the company's NetCache accelerator products for the network infrastructure of its Tripod.com site... Predictive software firm HNC Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HNCS)") else Response.Write("(Nasdaq: HNCS)") end if %> gained $3 3/8 to $28 3/4 after five companies agreed to implement its CRLink software for reviewing workers' compensation medical bills... Commercial metalworking heat treating firm Lindberg Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LIND)") else Response.Write("(Nasdaq: LIND)") end if %> moved up $3 to $13 1/2 after reporting Q3 EPS of $0.41, beating the Street's mean estimate by a penny... Telecommunications services provider ADC Telecommunications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADCT)") else Response.Write("(Nasdaq: ADCT)") end if %> rose $2 to $23 1/16 after shareholders of Teledata Communications Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLDCF)") else Response.Write("(Nasdaq: TLDCF)") end if %> approved ADC's $200 million cash acquisition of the firm...<% ' AvantGo:End %>
<% ' AvantGo:Goats %>Longer-term optimism about the health of the semiconductor industry was bittersweet for ASM Lithography Holding <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASMLF)") else Response.Write("(Nasdaq: ASMLF)") end if %> investors today. The Dutch wafer stepper (cameras that chipmakers use to print images on silicon wafers) maker's American depositary receipts fell $1 9/16 to $21 9/16 after the company issued its third profit warning this year, saying second-half net income will be "substantially below" last year's levels because of lagging orders from semiconductor companies. ASM expects to break even in the second half of 1998, turning in a full-year profit of $75 million. Last week, reassuring words about the semiconductor industry's 1999 outlook from capital equipment power supplies manufacturer Advanced Energy Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEIS)") else Response.Write("(Nasdaq: AEIS)") end if %> CEO Douglas Schatz helped boost the sector, as did an industry-spanning (ASM included) ratings upgrade from BancBoston Robertson Stephens. That didn't help ASM today, as ABN Amro kept its "hold" rating on the company's shares.
Pharmaceutical promotions consultant Boron, LePore & Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLPG)") else Response.Write("(Nasdaq: BLPG)") end if %> tanked again today despite management's efforts to minimize the expected loss of some business from the firm's biggest customer, drug giant Glaxo Wellcome <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLX)") else Response.Write("(NYSE: GLX)") end if %>. Continuing a sharp drop that began Friday, Boron fell another $4 3/4 to $26 3/4 on the news that Glaxo will discontinue using Boron's services for large speaker training meetings, what it calls "Symposia," and advisory panels in 1999. Working disaster control, Boron CEO Patrick LePore called Symposia its "least profitable type of business," adding that "while Glaxo remains a valued client, our dependence upon them has been decreasing." Last year, revenue from Glaxo -- a "substantial" portion of which were for Symposia and advisory panels services -- accounted for 49% of the company's total revenue, compared to about 38% through the first six months of fiscal 1998. Boron, which dropped $8 5/16, or 20.9%, to $31 1/2 Friday, was downgraded to "outperform" from "buy" by Salomon Smith Barney and to "buy" from "strong buy" by Piper Jaffray.
QUICK CUTS: Federal Express parent FDX Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %> dropped $3 3/16 to $48 5/16 today on Friday's reports that its pilots' union, unhappy with the progress of contract talks with the company, gave its leaders approval to order a slowdown during the peak holiday shipping season... The takeover speculation that pushed Bankers Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BT)") else Response.Write("(NYSE: BT)") end if %> up $5 1/2 on Friday eased today, as shares of the investment banking firm fell $4 to $62 7/8 on reports that the CEO of Deutsche Bank AG <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DTBKY)") else Response.Write("(Nasdaq: DTBKY)") end if %> said the two haven't held merger talks... Chubb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CB)") else Response.Write("(NYSE: CB)") end if %> lost $4 to $60 after Merrill Lynch lowered its near-term rating on the property/casualty insurer to "neutral" from "buy" and its 1999 EPS estimate to $4.95 from $5.10.
Solutia Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOI)") else Response.Write("(NYSE: SOI)") end if %> dripped down $2 1/16 to $22 1/16 after Goldman Sachs cut the specialty chemicals company to "market outperform" from its "recommended list." On Friday, the company reported Q3 EPS of $0.47, a penny higher than both a year ago and the analysts' mean estimate... Managed care organization Oxford Health Plans <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OXHP)") else Response.Write("(NYSE: OXHP)") end if %> dropped $5/8 to $9 9/16 after two New York physicians' groups and their medical management company filed a $1.16 billion lawsuit alleging that Oxford didn't provide data and payments as contractually required... Synthetic blood-plasma extender BioTime Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BTIM)") else Response.Write("(Nasdaq: BTIM)") end if %> slumped $1 1/2 to $9 1/8 after noted short-seller Manuel Asensio, co-star of a recent Daily Trouble, issued yet another attack on the company, this time saying it failed to meet FDA priority review standards, contrary to claims made by the company's management.
Mine Safety Appliances <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MNES)") else Response.Write("(Nasdaq: MNES)") end if %>, which develops products that protect mine workers, tumbled $7 3/4 to $67 after calling profitability at its European operations a "major concern" and reporting difficulties at its rubber molding start-up operation. Q3 EPS was $0.69, a far cry from last year's $1.29 figure... DAOU Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DAOU)") else Response.Write("(Nasdaq: DAOU)") end if %>, which designs and manages computer networks for the healthcare industry, finished down $1 11/16 to $4 5/16 after Adams, Harkness & Hill downgraded the company to "market perform" from "buy"... SFS Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFED)") else Response.Write("(Nasdaq: SFED)") end if %>, parent of Schenectady Federal Savings Bank in New York, slid $1 3/4 to $22 1/2 after saying that it has called off its planned merger with privately held Cohoes Savings Bank because of recent declines in the value of publicly held thrifts. Cohoes will pay SFS a $2 million termination fee.
Pumps, dispensing closures, and aerosol valves maker AptarGroup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATR)") else Response.Write("(NYSE: ATR)") end if %> fell $1 15/16 to $28 1/16 after it said Q3 U.S. sales saw a "slight decline." Q3 EPS was $0.39, $0.02 better than the market's consensus projection... Building products company Louisiana-Pacific Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LPX)") else Response.Write("(NYSE: LPX)") end if %> fell $1 11/16 to $19 5/8 after announcing changes to a class action lawsuit settlement plan that resulted in a $241 million, or $2.21 per share, Q3 charge. Q3 EPS (before the charge) was $0.44, a penny lower than the First Call mean estimate... Catastrophe reinsurer IPC Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPCRF)") else Response.Write("(Nasdaq: IPCRF)") end if %> was blown away $1 1/2 to $23 3/4 after saying high claims caused by Hurricane Georges pulled Q3 EPS down to $0.42, less than half last year's figure of $0.96 and short of analysts' mean estimate of $0.51.
Federal savings bank Pulaski Bank <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PULB)") else Response.Write("(Nasdaq: PULB)") end if %>, which is in the process of converting from a mutual holding company to a stock holding company, lost $2 1/8 to $16 7/8 after filing to resubmit its stock offering. Pulaski couldn't get purchase orders for the minimum required number of Pulaski Financial Corp. shares during its original offering, which expired September 18... Freight transportation equipment leasing firm XTRA Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XTR)") else Response.Write("(NYSE: XTR)") end if %> skidded $3 3/16 to $40 3/16 after it said a planned merger with Wheels MergerCo might be off because MergerCo believes it won't be able to obtain the necessary financing... Enterprise storage management software firm Legato Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGTO)") else Response.Write("(Nasdaq: LGTO)") end if %> lost $5 3/16 to $35 1/8 after announcing plans to buy FullTime Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FTSW)") else Response.Write("(Nasdaq: FTSW)") end if %> for $69.4 million in stock. FullTime jumped ahead $2 9/16 to $4 9/16.
Investors pushed fasteners, lithium batteries, and customized battery packs distributor Questron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QUST)") else Response.Write("(Nasdaq: QUST)") end if %> down $13/32 to $5 1/4 after late Friday's announcement of a shareholder rights plan, a common takeover defense. Questron's board said the plan was not adopted in response to a specific proposal... Financial services firm Amresco Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMMB)") else Response.Write("(Nasdaq: AMMB)") end if %> shed $31/32 to $7 17/32 after Moody's downgraded the company's senior debt rating to "Caa3" from "B3," citing weak business prospects and limited financial flexibility.<% ' AvantGo:End %>
FOOL
ON THE HILL
An Investment Opinion
by
Warren Gump
Listen, Investigate, and Profit
<% ' AvantGo:FOTH %>Investment ideas are everywhere. Some folks get them from newspapers or magazines and lots of people turn to on-line forums, while others simply observe their environment. (Hey, I love eating at Steak 'N Shake, who owns that company?) One of my favorite places to find stocks to investigate is in the listings of the biggest winners and losers found in the business section of most newspapers. These ideas are not necessarily ones to act on right away, but rather stocks to investigate further and see if they are companies worthy of investment. You never know exactly what information is behind the story, but at a minimum you'll expand your universe of potential investments.
Last week I noticed that K2 <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KTO)") else Response.Write("(NYSE: KTO)") end if %> had been pummeled on news that its Q3 earnings would not meet expectations. Among other problems, the company's press release pointed out that its bike group was having problems as "the high end of the full-suspension market declined rapidly." Due to the widespread nature of the problems, I decided not to delve further into K2 at this time.
The day after the K2 warning, I saw a headline that caught my eye: "Cannondale Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIKE)") else Response.Write("(Nasdaq: BIKE)") end if %> Announces Increased Revenue and Earnings." This bicycle maker crossed my radar last March when it issued an earnings warning of its own (and fell around 25% in one day). I snooped around at the time, but didn't look into it further until this week. Heck, a company growing earnings and revenue while its competitors are not sounds worthy of further investigation to me. A quick check of the Fool website snapshot and estimates indicated that Cannondale is trading at 0.9x book value, has anticipated earnings growth of 17%, and carries a P/E ratio on fiscal 1999 estimates (ending in June) of 10x. Those attractive valuation statistics piqued my interest even more.
The first line of Cannondale's most recent 10-K states that it is one of the leading makers of high-performance bicycles. Hey, isn't that the same market segment in which K2 is suffering? How is that happening? Cannondale has significant international exposure, with 51% of its fiscal 1998 sales coming from abroad. About 90% of these sales come from Europe, with the remaining portion coming from Japan and Australia. During 1998, the company experienced 16% sales growth in Europe while U.S. sales were down slightly. Gross margins fell to 35.8% from 37.6% due to adverse currency moves and an unfavorable product mix in the U.S. It looks like the company is doing fairly well because it is focused on the European market, which is stronger than the domestic one. This hypothesis is supported by the fact that K2 has much less international exposure than Cannondale.
Beyond weaker margins, why did Cannondale's EPS fall from $1.51 in 1997 to $1.08 in 1998? A big portion of the decrease is related to increased spending on research and development (R&D), which jumped from $3.6 million to $6.8 million during the period. It turns out that beyond normal R&D for bicycles, the company is working on developing motocross motorcycles. The company believes that this product line will build on its core competencies of aluminum frame fabrication, Headshok needle bearing suspension, and short-development cycles. The product line should be introduced in the summer of 1999. My initial reaction to this move is that while Cannondale might have the manufacturing prowess, motorcycles have a completely different distribution channel that the company will need to conquer. Nonetheless, only time will tell if this investment proves to be a worthwhile product expansion or a value destroying di-worsification.
I have decided to hold off on making an investment decision on Cannondale. Characteristics such as the company's respected brand, its seemingly attractive fundamental valuation, and improving Q1 results are appealing. On the other hand, the first quarter is a small portion of the company's full year earnings (less than 10%). I want to see the year-on-year profit improvement continue into the more important later quarters of its fiscal year.
Another concern is that the company's inventory is increasing more than sales. The $39 million inventory level at the end of June was up 30% from the year earlier level, while sales increased 6%. Without some stabilization of inventory growth, the company might find it necessary to make one of those painful write-offs of obsolete stuff. Finally, I need to learn more about the motorcycle move. Is this going to rev up growth or cause a crash and burn? Despite not taking action now, I have socked away some information about the company and will be prepared to take action down the road if my questions and concerns are satisfactorily answered.
Why, dear Fool, did I take you through this exercise? Hopefully to demonstrate that keeping a keen eye on happenings around you will lead to numerous worthwhile investment ideas. My love of greasy food in college led me to Consolidated Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COP)") else Response.Write("(NYSE: COP)") end if %>, the owner of Steak 'N Shake. I didn't buy the stock after falling for its food, as the company was highly leveraged and counting on an unproven ad campaign to jump-start sales. I did, however, keep my eye on the company. After a couple of quarters delivering on its promises, I took the plunge and have enjoyed annualized returns of 25%+ over the past six years.
If you find something interesting, but aren't sure whether the stock will work out, put it on a watch list. Cannondale may never become part of my portfolio. Then again, it may become a valuable contributor. As a long-term investor, wait until you're comfortable that a particular investment is one you want to hold. Watch developments and listen to what others have to say. When you become confident that the company's prospects are attractive, add it to your portfolio and reap the profits of investing.
By the way, a great place to find information about a company you are investigating is on the Fool Message Boards. You'll find Fools around the world willing to help you out!<% ' AvantGo:End %>
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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