FOOL PLATE SPECIAL
An Investment Opinion by MF Templar

The Golden Goose

A flurry of legal news surrounding the tobacco industry has put shares of tobacco companies on their keister over the last few days. The latest flash is the decision of rogue tobacco-vendor Liggett Group, owned by BROOKE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGL)") else Response.Write("(NYSE: BGL)") end if %>, to break with its peers in an effort to settle all outstanding liability lawsuits against it. In March 1996, under the leadership of the ever-iconoclastic Bennet LeBow, Liggett settled with five states seeking to recover Medicaid and Medicare costs related to treating sick smokers. The company decided last night to extend the terms of that deal to the 16 other states seeking reimbursement. The financial terms of the deal call for Liggett to make an up-front cash payment of $25 million and pay out 25% of its pretax profits over the next 25 years.

The biggest losers in the deal appear to be the other four major tobacco companies, PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>, RJR NABISCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RJ)") else Response.Write("(NYSE: RJ)") end if %>, LOEWS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTR)") else Response.Write("(NYSE: LTR)") end if %> and B.A.T. INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTI)") else Response.Write("(NYSE: BTI)") end if %>. Liggett plans to acknowledge that cigarettes are addictive and cause cancer, labeling all of its cigarette packages with warnings that say as much. The company will turn over reams of documents to the states and even help interpret them in the ongoing lawsuits against the other tobacco-makers. The documents that Liggett will turn over could include the records of meetings held by the legal counsels of all of the major U.S. tobacco companies to plan their strategy. Liggett also plans to nullify confidentiality agreements with employees so they can testify against other tobacco companies.

This combination is the legal equivalent of throwing a Molotov cocktail at the combined legal front of the four major tobacco companies, who are uniform in their denial that the harmful effects of smoking have been proven beyond a shadow of a scientific doubt. It is important for investors to note, however, that the terms of the deal do not put the tobacco companies out of business. In fact, this deal transforms the tobacco companies into cash cows to help bridge the budget deficits of a number of states, turning them into clucking gooses with the capability of laying golden eggs. Certainly any further settlements would heap much more draconian fiscal terms on the four remaining tobacco giants, but even if the states were to take 50% of food and tobacco giant Philip Morris' estimated 1998 earnings, the company would still trade at 22 times earnings at the current price and be free of any future liability.

UPS

U.S. BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USBC)") else Response.Write("(Nasdaq: USBC)") end if %> jumped $6 1/4 to $54 1/2 after the Northwestern bank agreed to merge with Midwestern and Mountain State bank FIRST BANK SYSTEM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FBS)") else Response.Write("(NYSE: FBS)") end if %> in a stock swap that values U.S. Bancorp at $59.08 per share as of last night's close, and creates one of the largest super-regional banks in the country.

Contract oil driller and oil services company CLIFFS DRILLING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLDR)") else Response.Write("(Nasdaq: CLDR)") end if %> gained $3 3/8 to $54 3/8 after Lehman Brothers rated the shares a "strong buy" this morning.

YAHOO! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> gained $3 3/4 to $28 1/2 after announcing a far-reaching strategic alliance with NETSCAPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> yesterday, prompting a number of analysts to upgrade their ratings on the company. Robertson Stephens raised its 1998 revenue estimate to $82 million from $68 million.

CABLETRON SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CS)") else Response.Write("(NYSE: CS)") end if %> added $2 1/2 to $30 3/4 after the company's Chair appeared on this morning's CNBC Squawk Box program with nothing but soothing comments. CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> and 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> also benefited slightly, as did ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>, which gained $3 5/8 to $49 3/8.

Disk drive companies are moving up today, with SEAGATE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> up $2 1/8 at $43 1/4 and WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> up $2 7/8 to $56 5/8. PC companies are also regaining some lost ground, as DELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> rose $2 1/2 to $65 3/8 and COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> added $3 to $75.

DOWNS

Network access equipment company VERILINK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VRLK)") else Response.Write("(Nasdaq: VRLK)") end if %> was sliced in half, losing $5 7/8 to $5 7/8, on announcing that it expects Q3 revenues to decrease 11% to 17% sequentially. The company also forecasted quarterly earnings per share (EPS) of $0.05 to $0.07, below estimates of $0.13.

GT BICYCLES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GTBX)") else Response.Write("(Nasdaq: GTBX)") end if %> lost $1 3/4 to $8 1/2 after saying it doesn't think it will meet revenue estimates or EPS estimates of $0.24 due to lower-than-expected order volumes for mountain bikes despite encouraging sales of kids' bikes. That news didn't help CANNONDALE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIKE)") else Response.Write("(Nasdaq: BIKE)") end if %>, which lost $1 1/8 to $18 1/8.

Plastic film and plastics company APPLIED EXTRUSION TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AETC)") else Response.Write("(Nasdaq: AETC)") end if %> fell $1 3/4 to $10 1/4 on announcing that it doesn't expect to meet revenue goals for the second quarter because of manufacturing problems, but that it has sufficient inventory to keep customers happy.

THE CARBIDE/GRAPHITE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CGGI)") else Response.Write("(Nasdaq: CGGI)") end if %> lost $1 to $23 after Robinson-Humphrey Co. downgraded its short-term rating on the shares, despite the graphite electrode company's main competitor saying it will hold the line on pricing.

Business records storage company IRON MOUNTAIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMTN)") else Response.Write("(Nasdaq: IMTN)") end if %> lost $1 to $24 1/4 after the company reported that a fire at one of its facilities has caused "extensive damage."

Paper products distributor UNISOURCE WORLDWIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UWW)") else Response.Write("(NYSE: UWW)") end if %> slid $3 7/8 to $15 7/8 on announcing that it expects to report Q2 EPS of $0.16 to $0.21, below estimates of $0.36, because weak pricing has hurt sales results.

PHYSICIANS RESOURCES GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PRG)") else Response.Write("(NYSE: PRG)") end if %> fell $1 1/4 to $10 3/4 after Salomon Brothers dropped its rating on the physician practice management company to "hold" from "buy."

Agricultural and industrial equipment dealer RDO EQUIPMENT CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RDO)") else Response.Write("(NYSE: RDO)") end if %> dropped $1 to $15 5/8 after announcing its purchase of Midwest Mack, Inc., a Mack Truck dealership.

COEUR d'ALENE MINES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDE)") else Response.Write("(NYSE: CDE)") end if %> fell $1 to $16 1/8 after electing to withhold dividends this quarter.

Calvin Klein and DONNA KARRAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DK)") else Response.Write("(NYSE: DK)") end if %> distributor DESIGNER HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DSH)") else Response.Write("(NYSE: DSH)") end if %> fell $3 1/8 to $7 1/2 after announcing it will change its marketing strategy, which it estimates will result in sales growth in 1997 of up to 6% and EPS growth of 12%.

Biopharmaceutical company SOMATOGEN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMTG)") else Response.Write("(Nasdaq: SMTG)") end if %> was smashed for a $3 3/8 loss to $5 7/8 after ELI LILLY & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %> said it will discontinue support of the Somatogen's rHb1.1 hemoglobin substitute.

CONFERENCE CALLS

NIKE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %>
4:45 p.m. EST
(800) 633-8284 (reservation # 2559993) -- replay

BRODERBUND SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BROD)") else Response.Write("(Nasdaq: BROD)") end if %>
(800) 642-1687 (reservation # 301115) -- replay avail through 3/23

3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %>
available after 7:00 PM EST through 7:00 PM EST on 3/21
(800) 633-8284 (reservation # 2468610) -- replay

ADOBE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADBE)") else Response.Write("(Nasdaq: ADBE)") end if %>
available until 3/20
(800) 633-8284 (reservation # 2508068)

SUNGLASS HUT INT'L <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAYS)") else Response.Write("(Nasdaq: RAYS)") end if %>
(800) 475-6701 (access code: 334838) -- replay through midnight 3/27

ROSS STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROST)") else Response.Write("(Nasdaq: ROST)") end if %>
(402) 222-9948 -- replay available through 3/25

FOOL PORTFOLIO STOCKS

FOOL PORTFOLIO               BORING PORTFOLIO
ATCT unch. at $7             ATLS down $1/4 at $22 3/8
AOL up $1 1/2 at $40 3/8     BGP down $7/8 at $40
CHV down $3/8 at $67 3/8     CSL down $1/8 at $31 3/8
COMS up $1 7/16 at $33 5/8   CSCO up $1 1/4 at $51 1/4  
GM unch. at $56 1/8          GNT down $1/4 at $35 3/8
IOM unch. at $14 3/8         ORCL up $7/8 at $40 1/4
KLAC up $1 1/2 at $37 3/8    OXHP up $1 3/4 at $62 1/8
LU up $1 1/4 at $50 5/8      PMSI  up $1/4 at $10 3/4
MMM down $5/8 at $88         TDW up $5/8 at $44 3/4
T down $5/8 at $34 3/8