<% ' AvantGo:MarketClose %>DJIA 9314.28 +13.13 (+0.14%) S&P 500 1186.87 +3.88 (+0.33%) Nasdaq 1985.21 +19.33 (+0.98%) Value Line ndx 901.40 +2.42 (+0.27%) 30-Year Bond 100 31/32 +11/32 5.19% Yield<% ' AvantGo:End %>
<% ' AvantGo:Heroes %>"E-commerce" was the phrase of the day on the Street, as investors piled into all kinds of stocks poised to benefit from this "new" way of doing business. America Online's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> decision yesterday to go ahead with plans to acquire Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> and form an e-commerce deal with Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> helped get things rolling, while an optimistic story about the sector on the front page of The New York Times' business section today didn't hurt either. Of course, the opportunities presented by e-commerce are nothing new. Still, there's no such thing as too much publicity, especially with the holiday shopping season ready to kick into high gear. With that in mind, Onsale <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> rose $16 1/8 to $60, Egghead.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGGS)") else Response.Write("(Nasdaq: EGGS)") end if %> picked up $3 3/16 to $21 7/16, and CyberShop <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYSP)") else Response.Write("(Nasdaq: CYSP)") end if %> gained $2 13/16 to $18 5/8 on the retailers' side. E-commerce software maker Open Market <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMKT)") else Response.Write("(Nasdaq: OMKT)") end if %> climbed $5 5/8 to $12 7/16 and payment software firm CyberCash <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %> added $4 5/16 to $15 7/16.
K6 chip maker Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> gained $3 1/2 to $29 1/8 after influential Merrill Lynch analyst Tom Kurlak came out with a bullish report on the company and raised his near-term and long-term ratings on the stock to "accumulate" from "neutral." AMD's fiscal 1999 earnings estimate was also boosted to $1.55 per share, which is well ahead of the latest First Call mean estimate of $0.99 per share. Kurlak based his optimism on the strength of the sub-$1,000 PC market, saying that is "where growth is fastest." AMD's K6 chip has performed well against Intel's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> Celeron chip in the low-end PC segment, splitting the market virtually 50-50. Thanks to that growth, Kurlak sees gross margins at AMD hitting the 40% range in Q4 and into fiscal 1999. That's good news, but the margin performance still lags the 55% - 56% margins Intel expects to see in Q4, thanks in part to strong demand for its high-end, 70% gross margin Xeon chips.
QUICK TAKES: Integrated oil and gas company Mobil Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOB)") else Response.Write("(NYSE: MOB)") end if %> tacked on $3 7/16 to $78 3/8 following a rekindling of speculation that the company may merge with a rival, such as Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XON)") else Response.Write("(NYSE: XON)") end if %> or Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHV)") else Response.Write("(NYSE: CHV)") end if %>... Consumer and business services firm Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> rose $1 5/16 to $16 7/8 after the company sold $1.55 billion in bonds, or more than three times the amount originally planned, in a well-received offering yesterday. Cendant plans to use the proceeds from the sale to refinance part of its short-term debt load... Network software developer Novell Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOVL)") else Response.Write("(Nasdaq: NOVL)") end if %> rose $3/4 to $18 1/8 after reporting fiscal Q4 EPS of $0.12, up from $0.02 a year ago and ahead of the First Call mean estimate of $0.09.
Computer workstations and Java programming language developer Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> moved up $2 13/16 to $75 3/4 after Merrill Lynch boosted its 12-month price target to $86 per share from $80 per share, following the company's agreement yesterday with America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> to become AOL's lead e-commerce services and systems provider... Book retailer Books-A-Million <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAMM)") else Response.Write("(Nasdaq: BAMM)") end if %> stormed ahead $8 9/16, or 195.7%, to $12 15/16 after launching an "enhanced" website that offers books to members of its discount card club at prices 28% to 46% lower than the retailer's normal prices... Disk drive magnetic recording heads manufacturer Applied Magnetics Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: APM)") else Response.Write("(NYSE: APM)") end if %> jumped $11/16 to $7 5/8 after agreeing to merge with privately held DAS Devices Inc. in a stock swap valued at about $90.2 million, based on Applied Magnetics' closing price of $6 15/16 per share yesterday.
Interactive entertainment software maker THQ Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THQI)") else Response.Write("(Nasdaq: THQI)") end if %> added $1 3/8 to $29 1/2 after unveiling a redesigned website, which features an online store, a chat room, and video-clip previews of upcoming games. The most encouraging feature for investors, however, may be the firm's plans to broadcast its earnings conference calls live over the site every quarter... Canadian broadband telecommunications products company Newbridge Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NN)") else Response.Write("(NYSE: NN)") end if %> climbed $4 3/8 to $29 1/2 after reporting pro forma fiscal Q2 EPS of $0.18 (excluding gains and charges), down from $0.23 last year but in line with the Street's expectations... Information technology consulting services company Ciber Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBR)") else Response.Write("(NYSE: CBR)") end if %> picked up $2 1/8 to $22 3/16 after Credit Suisse First Boston started coverage with a "strong buy" rating and a 6-month price target of $40 per share.
Network security products maker Network Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NETA)") else Response.Write("(Nasdaq: NETA)") end if %> rose $4 to $49 after Credit Suisse First Boston started coverage with a "buy" rating... Arts and crafts retailer Michaels Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MIKE)") else Response.Write("(Nasdaq: MIKE)") end if %> moved up $1 1/2 to $18 7/8 after posting Q3 earnings of $0.24 per share, topping estimates by $0.03 per share. For more details, see today's Fool Plate Special... Information technology consulting firm Cambridge Technology Partners <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CATP)") else Response.Write("(Nasdaq: CATP)") end if %> added $2 1/4 to $19 3/4 after Credit Suisse First Boston started coverage with a "buy" rating and a 6-month price target of $32 per share... Programmable logic device maker Lattice Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LSCC)") else Response.Write("(Nasdaq: LSCC)") end if %> rose $1 5/8 to $37 1/8 after Credit Suisse First Boston raised its rating to "strong buy" from "buy."
Contract printed circuit board (PCB) and backplane manufacturer Hadco <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HDCO)") else Response.Write("(Nasdaq: HDCO)") end if %> rose $1 1/16 to $37 after reporting fiscal Q4 earnings of $0.03 per share, beating the Street's mean estimate of a loss of $0.06 per share. The earnings surprise, along with bullish comments from an analyst reported by Bloomberg News, helped firms in the contract electronics manufacturing biz reach higher as well. Heavy-duty PCB user Jabil Circuit <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JBL)") else Response.Write("(NYSE: JBL)") end if %> gained $3 3/4 to $58 1/2, Solectron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLR)") else Response.Write("(NYSE: SLR)") end if %> added $4 to $67 1/2, and SCI Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCI)") else Response.Write("(NYSE: SCI)") end if %> advanced $4 7/16 to $48 15/16... Cable TV systems operator Cablevision Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVC)") else Response.Write("(NYSE: CVC)") end if %> moved up $2 5/8 to $44 following initial reports by CNBC yesterday that the company has ended negotiations to buy a controlling stake in the New York Yankees baseball team.<% ' AvantGo:End %>
<% ' AvantGo:Goats %>The Rocap line of pre-filled flush syringes has been a major driver of sales for Sabratek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBTK)") else Response.Write("(Nasdaq: SBTK)") end if %> since the therapeutic and diagnostic medical systems developer picked it up in February 1997, so news that Sabratek suspended distribution of the product line had a predictable effect on the company's stock today. The shares dove $9 1/8, or 39.3%, to $14 1/8. The FDA requested that Sabratek refile several forms in connection with Rocap, and while the company insists the halt isn't connected to quality-related problems with the product, Rocap has already received two letters from the FDA about quality controls this year. Sabratek is "uncertain" when it will resume shipping Rocap products, and it expects a "material shortfall" to analysts' consensus $0.24 per share Q4 profit estimate. "We hope that its financial impact will only affect results for the fourth quarter," CEO K. Shan Padda said.
Investors were unimpressed with the latest offering in this year's move toward consolidation in the oil and gas exploration/production industry. Exploration company Seagull Energy <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGO)") else Response.Write("(NYSE: SGO)") end if %> dropped $1 to $9 13/16 after agreeing to buy competitor Ocean Energy <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OEI)") else Response.Write("(NYSE: OEI)") end if %> in a stock deal valued at $1.1 billion that will create the 10th-largest independent U.S. oil and gas company. The combined company will be named Ocean Energy and will be headquartered in Houston. Ocean Energy lost $3/4 to $9 1/2 today. The market may have expected the pair to be targets for merger-minded integrated oil companies -- Kerr-McGee Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMG)") else Response.Write("(NYSE: KMG)") end if %> announced plans to buy Oryx Energy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ORX)") else Response.Write("(NYSE: ORX)") end if %> for $3.14 billion in mid-October, for example, while ARCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARC)") else Response.Write("(NYSE: ARC)") end if %> said in early May it would buy Union Texas Petroleum for about $3.3 billion -- possibly interpreting today's move as a sign that Seagull and Ocean Energy weren't quite as desirable.
QUICK CUTS: The American depositary receipts of Rhone-Poulenc SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RP)") else Response.Write("(NYSE: RP)") end if %> and Hoechst AG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HOE)") else Response.Write("(NYSE: HOE)") end if %> fell today -- Rhone-Poulenc's dropping $13/16 to $50 1/8 and Hoechst's slipping $1 9/16 to $44 3/8 -- after the companies confirmed weeks-old rumors that they were in merger talks... Healthcare products giant and Drip Port holding Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> gave back $2 5/8 to $82 5/8 after a Donaldson, Lufkin & Jenrette analyst bumped his rating to "buy" from "top pick," improving his full-year 1998 EPS estimate a penny to $2.67 but cutting his 1999 number by $0.04 to $2.96 per share... Personal finance and tax preparation software developer Intuit Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> gave away $1 3/8 to $58 1/2 after it handed in a fiscal Q1 loss of $0.45 per share last night, a penny better than the Street's mean estimate but well off last year's $0.26 per share loss.
Internet portal operator Yahoo Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> retreated $3/8 to $209 7/8 after Needham & Co. started coverage of the company with a "hold" rating... Waste services firm Eastern Environmental Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EESI)") else Response.Write("(Nasdaq: EESI)") end if %> dumped $15/16 to $22 7/16 following yesterday afternoon's news that it acquired five privately owned trash hauling companies. Eastern's planned $1.3 billion stock swap merger with Waste Management <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMI)") else Response.Write("(NYSE: WMI)") end if %> has come under Federal fire recently. Waste Management slipped $1 11/16 to $44 1/16... Paper and paperboard maker International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>, which yesterday agreed to buy competitor Union Camp Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCC)") else Response.Write("(NYSE: UCC)") end if %> in a $6.6 billion stock swap, fell $15/16 to $43 1/16 today after CIBC Oppenheimer downgraded the company to "buy" from "hold."
Potash distributor IMC Global <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IGL)") else Response.Write("(NYSE: IGL)") end if %> slid $2 11/16 to $23 9/16 after it was dropped to "underperform" from "perform in line" by Schroeder & Co... Pharmaceutical developer Warner-Lambert <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLA)") else Response.Write("(NYSE: WLA)") end if %> digested a loss of $1 3/8 to $77 following the news that it awarded healthcare marketing and communications services company Healthworld Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HWLD)") else Response.Write("(Nasdaq: HWLD)") end if %> a contract sales organization (CSO) contract for a new product line in the U.S... Oilfield services company OMNI Energy Services Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMNI)") else Response.Write("(Nasdaq: OMNI)") end if %> was drilled $1 1/16 to $7 5/16 after it announced the retirement of President Roger Thomas effective Dec. 31. He held the position for two and a half years... Marshall Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MI)") else Response.Write("(NYSE: MI)") end if %> slid $1 15/16 to $26 9/16 after the industrial electronics and production supplies maker said fiscal Q2 results will be below Wall Street's $0.41 per share estimate when it reports earnings in mid-December because of weak customer demand and pricing pressure.
Allstate Insurance parent Allstate Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALL)") else Response.Write("(NYSE: ALL)") end if %> was handed a loss of $1 to $42 after Bear, Stearns & Co. downgraded the company to "neutral" from "attractive"... Pegasystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PEGAE)") else Response.Write("(Nasdaq: PEGAE)") end if %>, which provides software that streamlines a company's interactions with customers, molted $1 11/32 to $6 9/32 after falling $2 5/8 yesterday. The company earned an "E" at the end of its ticker after it delayed the filing of its 10-Q quarterly financial report so auditors can take a closer look at "certain revenue transactions" that will "likely" result in adjustments to operating results... Bank holding company Flagstar Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FLGS)") else Response.Write("(Nasdaq: FLGS)") end if %> frayed $3 7/16 to $26 3/8 after PaineWebber downgraded it to "neutral" from an "attractive" rating... Toymaker Ohio Art Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: OAR)") else Response.Write("(AMEX: OAR)") end if %> shook off $5 3/8 to $34 after it reported Q3 EPS of $1.11, better than last year's $0.31 loss. The company said gross margins are improving but increased advertising expenditures are hurting earnings.<% ' AvantGo:End %>
FOOL
ON THE HILL
An Investment Opinion
by
Louis Corrigan
Thanks for Inefficient Markets
<% ' AvantGo:FOTH %>'Tis the season to take stock of all that we are thankful for. Family, friends, good health and gainful employment probably top your lists. It's my sincere wish that they do. Yet as investors, we also must make room for some special thanksgivings.
For starters, we should probably thank Federal Reserve Chairman Alan Greenspan for having the good sense to know how to manage financial markets so that the bleak days of early fall now seem like a mere bad dream from which we have been pleasantly awakened. We all tried hard not to lose our heads when professional investors were throwing themselves on the guillotines and the media was encouraging us to do the same, but it's nice to have our Dr. G in the house in times of panic. It's easier on the collar.
As we gather around a financial column posted to a vibrant online community with hundreds of thousands of participants, we must also thank the various wizards who have conjured the Internet into existence, the Brothers Gardner who have fostered its use in the name of financial freedom, and perhaps most of all, each other.
Make no mistake, all of us revolutionary do-it-yourselfers who are teaching each other the stuff we never learned in school are like pilgrims settling in a new world that's still as ripe with promise as America's supposedly virgin land was 378 years ago. As Fools, we even have our own funny hats. The truth is that we individual investors have simply never before had access to such astonishing resources for managing our own money. And one of our best resources is each other. As you send greetings to those who have not yet made the perilous journey to our new world, note that the threats of sea monsters and unfriendly natives so often sensationalized in the press are unimportant compared to the community that awaits them.
Thank yourself for having the smarts and the gumption to turn away from the multimillion dollar ad campaigns designed to convince you that financial ignorance is bliss and that the ability to underperform the S&P 500 index fund is a marketable skill for which you should pay top dollar. Congratulate yourself for venturing into the land of Emersonian self-reliance where you have the opportunity and the power to shape your own destiny and remake the world according to your most Divine sense of justice.
When I survey everything for which I'm thankful, though, I find I must return to what I wrote in this space a year ago. As an investor, I'm most thankful for market inefficiency and for every instance that reminds me that at every hour of every day there's an opportunity available to the patient and sensible investor willing and able to seek it out.
The academic research tells us that markets are efficient, that stock prices always rapidly adjust to the latest incremental piece of news that could affect a company's business. The assumption is that stock prices are set on the margin by the most knowledgeable investors so that the current price is always the fair price. The logical conclusion is that one cannot beat the market by picking individual stocks because one is never in a position to know what other investors do not. So the best plan is to aim to match the market by buying into an index fund. Clearly, that's not a bad plan when faced with mutual fund managers who do their best to prove the theory accurate.
But in the real world, markets are often inefficient, highly so when it comes to smaller, less followed companies. That's because fund managers get graded on their quarterly and annual performance numbers rather than on their long-term results. So they're more prone to suffer from shifts of psychology (and fears of redemptions) than is the average individual investing for the long term. That's one reason why a giant blue chip technology stock like Cisco <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> can be valued at $68 on July 20, $44 on October 7, and then at $77 1/16 today. There's nothing efficient about that.
On the other end of the spectrum are day-trading types who to some degree could care less what a business is actually worth. They work from the "greater fool" (small f) theory, buying stocks with little care for the price as long as they think they can sell them at a higher price to someone else, possibly later the same day. Many of the Internet stocks work as such simple trading vehicles. There's no way anyone can offer you a reasonable argument to justify their valuations because reasonable arguments don't figure into the decision-making process of the buyers.
That's why I'm thankful today for Books-A-Million <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAMM)") else Response.Write("(Nasdaq: BAMM)") end if %>, the nation's third largest store-based bookseller with 172 bookstores in 17 states. The stock traded around $3, near its all-time low, for most of the last few months due to deteriorating year-over-year results. Today it soared $8 9/16 (196%) to $12 15/16 after trading as high as $16 1/4.
The big news? The retailer has beefed up its website (www.booksamillion.com)! It hopes to expand its customer base by offering members of its Millionaire's Club super discounts of up to 46% off bestsellers, 37% off all other in-stock hardcovers, and 28% off all in-stock paperbacks. Books-A-Million was surely wildly undervalued when it dipped to just 0.38 times book value earlier this fall. Now at 2.2 times book value, the price seems off-the-map excessive.
But there's nothing that unusual about this. What we've seen over and over again during the last three months is that markets are never as efficient as the academics think. In fact, they're sometimes insanely inefficient. For individual investors willing to do their own research and exercise their own judgment, that's definitely something to be thankful for because it means there's always a new opportunity. Thank goodness.<% ' AvantGo:End %>
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