Investment Opinion
FOOL PLATE SPECIAL

Cabot Stocks Get Crushed Again

"The momentum in Iomega is weakening," Carlton Lutts informed Cabot Market Letter subscribers over his telephone hotline this morning, urging them to take 200% profits in IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> and run. The same can be said of the model portfolio Lutts runs in the Cabot Market Letter -- Mark Hulbert of the Hulbert Financial Digest reports that the portfolio slid more than 40% in the month of June alone. Between Cabot's admonition and a front-page article in the Wall Street Journal detailing his trading practices vis a vis PRESSTEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRST)") else Response.Write("(NASDAQ: PRST)") end if %>, many of the stocks that Cabot recommended are being crunched today as confidence in his stock-picking ability continues to deteriorate.

Particularly disheartening is the revelation that the money management firm Cabot's son runs was selling shares of Presstek and Iomega while Cabot Sr. was pounding the table on it in his newsletter. On May 21st, Cabot Money Management began liquidating its Iomega position in spite of the fact that on May 31st, Lutts Sr. said it had "absolutely no desire to sell [Iomega] until momentum faltered". On May 16, Cabot Money Management sent a letter to clients suggesting they trim their large Presstek positions while on May 17th Lutts Sr. said in the newsletter it "certainly did not intend" to get rid of any Presstek. This is the same activity that caused the massive hue and cry over at Fidelity when former Magellan manager Jeffrey Vinik said positive things about MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> in a semiannual report while he ended up selling that position by the time the report hit mailboxes across America.

Allegations that Cabot was de-facto front-running Presstek have apparently caused investors to wonder whether or not other Cabot stocks are being front-run as well. Presstek slumped $3 1/2 to $64 1/2 today; Iomega was off $4 1/8 to $22 3/8 on the sell recommendation; AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %> fell $2 to $40 1/2; ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASND)") else Response.Write("(NASDAQ: ASND)") end if %> was off $4 3/4 to $48 3/4; JLG INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: JLGI)") else Response.Write("(NASDAQ: JLGI)") end if %> lost $2 1/2 to $69 1/2; SHARED MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SMED)") else Response.Write("(NASDAQ: SMED)") end if %> gave back $4 1/4 to $60 3/4; ZOLTEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZOLT)") else Response.Write("(NASDAQ: ZOLT)") end if %> was crunched for $4 1/8 to $32 1/4; MRV COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MRVC)") else Response.Write("(NASDAQ: MRVC)") end if %> gave back $4 1/4 to $40 1/4; CHECKPOINT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKP)") else Response.Write("(NYSE: CKP)") end if %> tumbled $1 3/8 to $31 1/8; NETSCAPE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %> got pounded for $3 3/8 to $55 3/8; and CORRECTIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CXC)") else Response.Write("(NYSE: CXC)") end if %> pummeled for $1 3/4 to $63 3/4.

UPS

REPUBLIC INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RWIN)") else Response.Write("(NASDAQ: RWIN)") end if %> continues on its acquisition trail. The Wayne Huzeinga proxy has signed a definitive agreement to buy ADDINGTON RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ADDR)") else Response.Write("(NASDAQ: ADDR)") end if %> for 0.45 shares each, pushing shares of Addington up $1 3/16 to $24 3/16.

VISHAY INTERTECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VSH)") else Response.Write("(NYSE: VSH)") end if %> has made overtures to competitor KEMET ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KMET)") else Response.Write("(NASDAQ: KMET)") end if %>, suggesting it is interested in a possible business combination. Vishay has been pretty laid back about it all, saying they could merge with a cash tender, a stock tender or any combination of the two. Vishay rose $1 5/8 to $22 3/4 and Kemet was up $2 5/8 to $19 1/2 on the news.

DOWNS

Brokerage firm Asensio & Co. made the bold prediction two days ago that DIANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> would give back all of its gains this year, returning to $5 a stub. After today's $7 1/8 to $40 3/4 drop, we are starting to become believers.

UNITRODE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UTR)") else Response.Write("(NYSE: UTR)") end if %> became the latest integrated circuit manufacturer to announce a slowdown in orders. The company is experiencing "weakness" in second quarter orders, down sequentially from the first quarter, and sees the third quarter impacted as well. Shares plunged $4 3/8 to $19 1/2.

The Food and Drug Administration (FDA) issued a warning letter to ION LASER TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ILT)") else Response.Write("(AMEX: ILT)") end if %> yesterday, citing a number of deficiencies in the company's manuals for its dental lasers as well as its filings with the regulatory agency. Ion Laser was shot down $2 1/8 to $15 3/4.

All of the sellers have not left paper and office products giant ALCO STANDARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASN)") else Response.Write("(NASDAQ: ASN)") end if %> yet. The stock fell $2 3/8 to $45 1/8 after announcing a dismal third quarter outlook and a plan to split the company in two last week.

DIGNITY PARTNERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DPNR)") else Response.Write("(NASDAQ: DPNR)") end if %> lost a lot of its dignity today, down $4 3/8 to $7 5/8 on no news. The company stated a block of 350,000 shares crossed on the sell-side and they have no idea who it was or why they sold. Dignity Partners does viatical settlements.

DANKA BUSINESS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DANKY)") else Response.Write("(NASDAQ: DANKY)") end if %> was absolutely mashed for $12 13/16 to $30 3/8 today after reporting first quarter earnings would come in at only $0.24 to $0.25 EPS because of expenses related to headcount expansion.

Apparently investors are not too excited about SECURE COMPUTING's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SCUR)") else Response.Write("(NASDAQ: SCUR)") end if %> latest acquisition. This time it is Enigma Logic for $71 million in stock and Secure expects it to be "mildly dilutive" to 1996 earnings and accretive to 1997. Secure plunged $5 1/2 to $21 in heavy trading.

PROTEON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PTON)") else Response.Write("(NASDAQ: PTON)") end if %> reported this morning that second quarter earnings will be substantially below the first quarter. Revenues in their "legacy local area network" business have softened considerably more than previously expected. Proteon lost nearly a quarter of its value, dropping $1 3/16 to $3 3/4.

QUEST MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QMED)") else Response.Write("(NASDAQ: QMED)") end if %> dropped $1 1/2 to $6 after it warned of a breakeven second quarter in contrast to consensus expectations of $0.07 to $0.08 EPS. Lower-than-expected sales from its newly acquired Neuromed subsidiary are blamed for the shortfall.

People just aren't renting enough videos this year. MOVIE GALLERY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MOVI)") else Response.Write("(NASDAQ: MOVI)") end if %> slumped $6 1/2 to $25 1/2 after filing for a $125 million credit line. In the letter, it stated that soft sales due to bad weather could impact quarterly revenues by $0.06 to $0.09 EPS and announced expectations that same store sales will decrease 2% to 3% in the current quarter.

It was the Southeast and Texas editions of the Wall Street Journal that caused little ol' MEDCATH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCTH)") else Response.Write("(NASDAQ: MCTH)") end if %> to plummet $11 to $22. The regional versions cited "deep-pocketed competitors" coming in, a key doctor going out, and allegations of cooking the books with regards to Medicare payments.

ACTION PERFORMANCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACTN)") else Response.Write("(NASDAQ: ACTN)") end if %> fell for the second day in a row, down $1 7/8 to $12 7/8, after announcing a strategic alliance with HASBRO <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HAS)") else Response.Write("(AMEX: HAS)") end if %>. Could the Street have been looking for an acquisition and not an alliance?

CABLE DESIGN TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CDTC)") else Response.Write("(NASDAQ: CDTC)") end if %> dropped $5 1/2 to $34 after Merrill Lynch made negative comments about the company, downgrading it from "accumulate" to "neutral".

Semiconductor equipment companies continue to get dumped on the open market. Yesterday it was COHU <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: COHU)") else Response.Write("(NASDAQ: COHU)") end if %>, today it is GASONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GSNX)") else Response.Write("(NASDAQ: GSNX)") end if %>, down $5/8 to $9 3/4. Are the leading indictors foretelling an economic slowdown?

GENERAL MAGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GMGC)") else Response.Write("(NASDAQ: GMGC)") end if %> gave back $1 1/4 to $7 1/2 today after making a few online related announcements yesterday. Used to be that online related announcements were good for a week's worth of gains... now those poor traders can barely manage an afternoon.

Internet search engine VERITY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VRTY)") else Response.Write("(NASDAQ: VRTY)") end if %> dropped $3 1/2 to $24 3/4 this morning after reporting fourth quarter earnings that came in two cents below Wall Street expectations.

TRANSCEND SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TRCR)") else Response.Write("(NASDAQ: TRCR)") end if %> dropped $1 to $8 1/2 today after announcing yesterday that it had terminated an outsourcing pact with Pinnacle Health.

CONDUCTUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CDTS)") else Response.Write("(NASDAQ: CDTS)") end if %> slumped $1 to $10 3/4 this morning after offering one million shares priced at $11 a pop.

HUTCHINSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HTCH)") else Response.Write("(NASDAQ: HTCH)") end if %> lost $4 1/2 to $37 after reporting that it sees third quarter earnings at $0.90 to $0.95 EPS versus last year's $1.09, on lower than expected demand.

CLEARNET COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLNTF)") else Response.Write("(NASDAQ: CLNTF)") end if %> fell $1 1/2 to $16 1/4 today after Smith Barney downgraded the shares from "buy" to "outperform."