CONFERENCE CALLS
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FOOL PLATE SPECIAL
Tobacco Shares Up In Smoke
Tobacco shares reeled today after the case of Grady Carter versus Brown & Williamson Tobacco Corp. reached a shocking conclusion on Friday. A six-person jury unanimously found Brown & Williamson guilty of making "unreasonably dangerous and defective" products, awarding Mr. Carter $750,000 in damages. A Wall Street Journal article pinned the decision on the availability of "internal Brown & Williamson documents" that admitted smoking was addictive despite public denials.
The quotes for many of these Big Board listed stocks are going to be absolutely confusing for many investors. After closing in New York on Friday at around $103, shares of PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> dropped more than $12 to end up at $90 7/8 at 4:30 PM EDT in San Francisco. This meant the consolidated tape showed the stock closing at $90 7/8, which is why the stock is up $2 to $92 7/8 this morning. Almost every other tobacco stock showed a similar pattern, with the ironic exception of Brown & Williamson-owner B.A.T. INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTI)") else Response.Write("(NYSE: BTI)") end if %>, down $5/8 to $15 from only $16 last week, in spite of the fact that this jury decision was against one of its units. UST INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UST)") else Response.Write("(NYSE: UST)") end if %>, which makes chewing tobacco and snuff, has fallen more than this cigarette concern, holding steady today at $31 3/4.
The major cigarette companies affected by this decision are the Smokin' Five: Philip Morris, B.A.T. Industries, RJR NABISCO HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %>, steady at $28 after dropping on Friday, BROOKE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGL)") else Response.Write("(NYSE: BGL)") end if %> up $1/4 to $4 7/8 and LOWE'S CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOW)") else Response.Write("(NYSE: LOW)") end if %>, slipping $1/4 to $36 7/8.Leaf-tobacco producers DIMON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DMN)") else Response.Write("(NYSE: DMN)") end if %> and UNIVERSAL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UVV)") else Response.Write("(NYSE: UVV)") end if %> were down $1/2 to $18 3/4 and $5/8 to $26 1/4, respectively. SCHWEITZER-MAUDIT INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWM)") else Response.Write("(NYSE: SWM)") end if %>, which makes cigarette paper, was up $5/8 to $31 1/8.
Investors reacting to today's news see it as a major loss for the tobacco industry. The key here, however, is whether or not the tobacco industry is going to win on appeal. Unlike a jury trial where individual emotions dominate, an appeal is decided by a judge who determines whether or not the jury in the case properly applied the law and the judge in the case properly ruled on various evidentiary and procedural issues. A 1988 ruling that gave $400,000 to the family of Rose Cipollone was overturned later on appeal. The ultimate fate of this case will be at federal appeals court or the Supreme Court, a path that could take years and perhaps even decades.
Gearing up for an era of deregulation, the utility industry continues to consolidate from a lot of small, single focus regional players into fewer large, multiservice panregional companies. These next four companies were involved in utility mergers this morning:
ATLANTIC ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATE)") else Response.Write("(NYSE: ATE)") end if %> and DELMARVA POWER & LIGHT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEW)") else Response.Write("(NYSE: DEW)") end if %>, two small power utilities in slow-growth geographical regions, have agreed to merge. The market does not think too much of this combination of the Delmarva peninsula and the southern New Jersey coast, though, as shares as Atlantic shares only rose $5/8 to $17 3/4 and Delmarva hardly budged, up $1/8 to $20 3/4.
Electric utility NORAM ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NAE)") else Response.Write("(NYSE: NAE)") end if %> surged $3 to $14 5/8 after natural gas concern HOUSTON INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HOU)") else Response.Write("(NYSE: HOU)") end if %> acquired it in a $3.8 billion deal. Noram Energy holders will get $8 in cash and $8 in Houston Industries stock per share. This multiservice deal allows the two companies to provide consolidated service in their joint geographical areas, the second deal of this kind this year.
PRIMARK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PMK)") else Response.Write("(NYSE: PMK)") end if %> continues its acquisitions of information services companies, grabbing up privately-held Yankee Group Research this morning for $34 million in cash. Shares of the data conglomerate clambered up $1 3/8 to $28 1/2.
A New York Times story focusing on CADIZ LAND COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CLCI)") else Response.Write("(NASDAQ: CLCI)") end if %> caused shares of the real estate concern to jump $23/32 to $4 31/32 this morning. Cadiz wants to make money off of water in the Mojave Desert.
KASH N' KARRY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KASH)") else Response.Write("(NASDAQ: KASH)") end if %> rebounded $2 to $23 after getting waxed last week following the termination of merger discussions with FOOD LION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FDLNA)") else Response.Write("(NASDAQ: FDLNA)") end if %>. Investors are apparently hopeful that another merger candidate will come along.
Some free advertising on the pages of the New America in Investor's Business Daily boosted shares of ICTS HOLLAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ICTSF)") else Response.Write("(NASDAQ: ICTSF)") end if %> this morning, pushing shares of the "enhanced security" service up $7/8 to $11 1/8.
OBJECTIVE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OSII)") else Response.Write("(NASDAQ: OSII)") end if %> has been pumping out press releases. Last week, the computer services concern received a contract for networks in China and made positive comments about its potential, growing the shares by $1 1/4 to $21 today.
IVI PUBLISHING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IVIP)") else Response.Write("(NASDAQ: IVIP)") end if %> was crushed for $1 1/2 to $1 3/8 after the online health and fitness publisher discovered that AT&T had discontinued the AT&T Healthsite. The company called this a "sudden and totally unexpected" change of direction.
Shares of sports apparel and shoe retailer FINISH LINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FINL)") else Response.Write("(NASDAQ: FINL)") end if %> were mashed for $2 15/16 to $23 1/4 as weakness in overall retail sales began to gnaw at some of the higher-flying specialty retailers.
Trendy jean concern GUESS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GES)") else Response.Write("(NYSE: GES)") end if %> continued to be flailed by the market, falling $7/8 to $15 3/8 this morning... quite a ways from its $18-per-share offering price.
FIRST BRANDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FBR)") else Response.Write("(NYSE: FBR)") end if %> was treated like a Glad garbage bag today, falling $3 1/4 to $21 3/4 after RUBBERMAID <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RBD)") else Response.Write("(NYSE: RBD)") end if %> announced it was getting into the trash bag business. TENNECO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TEN)") else Response.Write("(NYSE: TEN)") end if %>, the maker of Hefty, was not junked, however, virtually unchanged at $50 3/4.
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Randy Befumo (MF Templar), a Fool
Selena Maranjian (MF Selena) another Fool
Prem Kumar (MF Prem) another
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