FOOL PLATE
SPECIAL
An Investment Opinion by
Randy Befumo
An End to Whining
Among the pessimistic, one of the most persistent complaints has been the ongoing advance of the market indicies in the 90s. The absence of a 10% correction in the Dow Jones Industrial Average (DJIA) has fueled years of moaning, as if the 30-stock index was something other than an arbitrary measure of the overall market's performance. Talking heads have pounded investors again and again with the grim reminder that there has not been a 10% fallback in the Dow since August of 1990 when Iraq saw fit to invade Kuwait. Finally, the long awaited 10% correction is here. Of course, for those who have been out of the market since its recovery in 1991 waiting for the correction, it has been a very expensive 10% haircut to avoid.
As of this writing, the Dow stands at 6370.42, down 21.47 on the day. More interestingly, the Dow is down 10.1% from the closing high of 7085.16 recorded in early March. In less than six weeks, more than 10% of the Dow's value has vanished without a trace, flushed down the twin toilets of the Federal Reserve and overvaluation. Although the Dow has been particularly resilient, another market measure has been falling 10% regularly over the past seven years -- the Nasdaq Composite. The measure of the market capitalization of the Nasdaq over-the-counter exchange dropped to 1053.49 from 1249.14 last summer, a decline of 15.7% over two months. In fact, once one escapes the limited universe of large, blue chip companies, one finds that 5% to 15% are a regular occurence in the smaller, less global companies that comprise the majority of the market.
So why are all eyes on the Dow? Inertia, really. The gradual shift the index has undergone has passed the eyes of most pundits virtually unnoticed. As the index has transformed itself from eleven speculative, capital intensive railroads and General Electric in 1896 to a vibrant roster of 30 multinationals today, it has become far less volatile -- the price of fame. The last 10% drop took it from 2999.80 to 2483.40 in a month, a 16.3% decline. Had some savvy market timer sold at the high, bought in at the low, and sold at the high the next year of 3168.80 on December 31, 1991, he would have netted 27.5% before taxes. Waiting for the next 10% drop in the Dow to buy in would have caused him to miss a 101% gain over five years and four months, a 13.9% annualized rate sans dividends. An expensive lesson that illustrates the white, intellectual underbelly of market timing -- you have to buy and sell at the right time in order beat the market.
UPS
Healthcare management system company FPA MEDICAL MANAGEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FPAM)") else Response.Write("(Nasdaq: FPAM)") end if %> gained $2 1/4 to $17 3/4 after HMO and medical insurance company FOUNDATION HEALTH SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FHS)") else Response.Write("(NYSE: FHS)") end if %> said it does not have immediate plans to sell over four million shares of FPA.
HOLLYWOOD ENTERTAINMENT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HLYW)") else Response.Write("(Nasdaq: HLYW)") end if %> moved up $1 to $21 7/8 after Piper Jaffray raised its rating on the video rental superstore to "strong buy" from "buy."
Pharmaceutical and vitamin company REXALL SUNDOWN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RXSD)") else Response.Write("(Nasdaq: RXSD)") end if %> gained $1 7/8 to $21 3/4 after making an appearance in this weekend's Barron's, in which some of the positives of the company's financial picture were set against a discussion of the "unsavory personal histories of some of the people associated with the company."
BALLARD POWER SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLDPF)") else Response.Write("(Nasdaq: BLDPF)") end if %> added $2 5/8 to $28 3/8 after the zero-emission engine fuel cell company announced an agreement with DAIMLER-BENZ AG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAI)") else Response.Write("(NYSE: DAI)") end if %>.
Design software company AUTODESK INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADSK)") else Response.Write("(Nasdaq: ADSK)") end if %> rose $3 5/16 to $32 13/16 after Goldman Sachs raised its rating on the company to "trading buy."
DOWNS
NOVELLUS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> tanked $17 7/8 to $57 3/8 after the company said a patent infringement jury verdict on Friday in a lawsuit brought by APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> will have a material adverse effect on the company's earnings. Novellus also said its book/bill ratio fell to less than 1:1 in its first quarter, for which it reported EPS of $0.91.
Training software company CBT GROUP PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBTSY)") else Response.Write("(Nasdaq: CBTSY)") end if %> fell $1 3/4 to $45 after reporting Q1 EPS of $0.18 (before acquisition expenses), beating the First Call estimate of $0.16, on revenues of $22 million.
LEASING SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LSSI)") else Response.Write("(Nasdaq: LSSI)") end if %> dropped $8 3/8 to $9 1/4 after the PC and equipment leasing company said DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> will form its own leasing unit, hurting Leasing Solution's "near-term growth."
Laboratory supplies company MERIDIAN DIAGNOSTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KITS)") else Response.Write("(Nasdaq: KITS)") end if %> lost $4 1/4 to $5 7/8 after pre-announcing Q2 EPS of $0.08, which will miss the sole estimate of $0.12 because of a sales shortfall.
FX ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FXEN)") else Response.Write("(Nasdaq: FXEN)") end if %> was cut down $3 1/8 to $6 1/2 after the oil and gas driller said it hit water in its Orneta #1 well.
Solid waste handling company UNITED WASTE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UWST)") else Response.Write("(Nasdaq: UWST)") end if %> lost $4 9/16 to $33 1/16 after signing a merger agreement with USA WASTE SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UW)") else Response.Write("(NYSE: UW)") end if %> that values each United Waste share at 1.075 shares of USA Waste, or $37.89 as of last Friday's close.
Real estate investment trust REDWOOD TRUST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RWTI)") else Response.Write("(Nasdaq: RWTI)") end if %> fell $2 11/16 to $39 1/2 after a discussion of the mortgage acquirer in this weekend's Barron's scared more bulls than bears.
AIRGAS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARG)") else Response.Write("(NYSE: ARG)") end if %> was deflated $2 3/4 to $14 1/2 after the industrial gases company said it will take a non-recurring charge of $26 million in its fourth quarter related to its purchase of phony goods from a supplier.
Fluid handling equipment manufacturer GRACO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GGG)") else Response.Write("(NYSE: GGG)") end if %> lost $3 3/8 to $26 5/8 on reporting Q1 EPS of $0.35, up 9.4% from last year, but missing estimates of $0.42.
CONFERENCE CALLS
CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %>
(800) 938-0941 (code: 319193) (code: 319193) -- replay through midnight 4/15
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 336995) -- replay through 4/18 (North America) (320)
365-3844 (code: 336995) -- replay through 4/18 (International)
TENET HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THC)") else Response.Write("(Nasdaq: THC)") end if %>
(402) 220-1007 -- replay from 3:00 PM EDT on 4/10
INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
(402) 280-9021 -- replay through 4/18
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