FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

PacifiCare Not Pacific

PACIFICARE HEALTH SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHSYA)") else Response.Write("(Nasdaq: PHSYA)") end if %> tumbled $17 3/8 to $63 5/8 after the health maintenance organization (HMO) issued an earnings warning. Although it could not provide any specific guidance on what its earnings will be, the company believes it will miss First Call estimates of $1.16 per share by a "substantial" margin. Difficulties integrating some regions covered by the recently acquired FHP and "disappointing" results in California for May were blamed. The desultory California results were particularly disappointing given that the February acquisition of FHP made the company one of the largest players in the California market.

Although PacifiCare did not provide any details as to why returns in the crucial California market were so miserable, many investors speculated that closing the $2 billion FHP merger caused the company to take its eyes off of the marketing ball during the critical January enrollment season. With the FHP deal originally scheduled to close in December, the delay until February possibly caused the company to focus on the merger rather than building the business for that quarter. Although 3.9 million member PacifiCare says it is reviewing the performance of its business units and considering divestitures, if the company did miss the January season it may take some time for results to return to levels previously anticipated.

Merrill Lynch, Morgan Stanley, Salomon Brothers, and Robertson Stephens all downgraded Pacific to "neutral" or some reasonable facsimile thereof, while Smith Barney maintained its "buy" rating on the company. Uncertainty over future results makes any valuation of the company difficult, but assuming that the earnings shortfall for this year was because of weak January marketing, earnings of around $5.00 per share for next fiscal year can be considered reasonable. This would put the company at around 12 to 14 times next year's earnings with long-term growth estimated in the 15% to 20% range. With 3.9 million members in its various plans, PacifiCare is currently valued at $952 per member compared to $3,460 per member for OXFORD HEALTH PLANS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OXHP)") else Response.Write("(Nasdaq: OXHP)") end if %> and $823 per member for HUMANA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HUM)") else Response.Write("(NYSE: HUM)") end if %>.

UPS

Non-standard auto insurer INTEGON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IN)") else Response.Write("(NYSE: IN)") end if %> jumped $8 7/8 to $24 7/8 after agreeing to be acquired by General Motors Acceptance Corp., the lending arm of GENERAL MOTORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>, for $26 per share in cash.

SUN HEALTHCARE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHG)") else Response.Write("(NYSE: SHG)") end if %> gained $1 1/4 to $19 7/8 after Morgan Stanley raised its rating on the long-term care provider to "strong buy" from "neutral."

British bank NATIONAL WESTMINSTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NW)") else Response.Write("(NYSE: NW)") end if %> gained $5 to $82 1/2 after SBC Warburg raised its rating on the company to "buy" from "hold," noting that a takeover would cut costs at the bank and that it sees the company's breakup value around $140 per share.

DM MANAGEMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DMMC)") else Response.Write("(Nasdaq: DMMC)") end if %> rose $2 1/8 to $10 1/8 after the marketer of women's apparel said it expects to turn in a 50% increase in Q2 sales, which "bodes well for the bottom line..."

Virginia-based CENTRAL FIDELITY BANKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CFBS)") else Response.Write("(Nasdaq: CFBS)") end if %> moved up $6 to $37 7/8 after agreeing to merge with WACHOVIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WB)") else Response.Write("(NYSE: WB)") end if %>, giving Wachovia the largest deposit base of any bank in Virginia (pending the completion of its Jefferson Bankshares deal). Central Fidelity shareholders will receive 0.63 shares of Wachovia for each Central Fidelity share.

IMMUNEX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMNX)") else Response.Write("(Nasdaq: IMNX)") end if %> rose $4 1/4 to $34 1/2 after the biopharmaceutical company reported that "Flt3 ligand can induce large numbers of dendritic cells, a type of immune system cell that plays a key role in initiating an immune response to cancer..."

Scrap metals recycler SCHNITZER STEEL INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SCHN)") else Response.Write("(Nasdaq: SCHN)") end if %> added $2 3/8 to $27 3/8 on saying that scrap metal prices have improved and that ferrous scrap prices rose 6.9% during Q3. The company also said that bookings are looking even more encouraging.

DOWNS

Biotech company CAMBRIDGE NEUROSCIENCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNSI)") else Response.Write("(Nasdaq: CNSI)") end if %> imploded $5 3/4 to $3 3/4 after suspending the Phase III trial of a stroke treatment drug after a data analysis created concerns over the risk/reward profile of the drug.

ULTRAK INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ULTK)") else Response.Write("(Nasdaq: ULTK)") end if %> lost $3 1/8 to $8 3/4 after the maker of closed circuit video systems, which was set to merge with CHECKPOINT SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKP)") else Response.Write("(NYSE: CKP)") end if %> earlier this year, said it sees Q2 EPS of $0.05 to $0.08, below estimates of $0.19 per share.

Long-distance reseller MIDCOM COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCCI)") else Response.Write("(Nasdaq: MCCI)") end if %> slumped $1 to $5 5/16 after the company said it has received notification from the Nasdaq over its compliance with national market system listing requirements.

Immunotherapies developer IDEC PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDPH)") else Response.Write("(Nasdaq: IDPH)") end if %> lost $2 11/16 to $23 3/16 after the company and partner SMITHKLINE BEECHAM PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBH)") else Response.Write("(NYSE: SBH)") end if %> said they have suspended tests of a rheumatoid arthritis treatment after seeing decreased counts of CD4 immune system cells in test subjects.

LA QUINTA INNS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LQI)") else Response.Write("(NYSE: LQI)") end if %> slid $2 3/8 to $20 5/8 after Bear Stearns lowered its rating on the company to "neutral" from "attractive" and adjusted downward its 1998 EPS estimate to $1.34 from $1.40, saying supply in the no-frill lodging market is expanding.

CONFERENCE CALLS

ECHLIN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
(800) 683-1535 (password: McCurdy) -- replay through 6/27

06/26/97 (Thursday)
COGNOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COGNF)") else Response.Write("(Nasdaq: COGNF)") end if %>
(800) 997-6910 -- replay available from 1:15 p.m. EDT to midnight 6/30

THIS WEEK'S CONFERENCE CALL SYNOPSES

JABIL CIRCUIT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBIL)") else Response.Write("(Nasdaq: JBIL)") end if %> Q3 Call
ST. JOHN KNITS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJK)") else Response.Write("(NYSE: SJK)") end if %> Q2 Call
MICRON ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> Q3 Call
MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> Q3 Call
BRODERBUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BROD)") else Response.Write("(Nasdaq: BROD)") end if %> Q3 Call
COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> / TANDEM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDM)") else Response.Write("(NYSE: TDM)") end if %> Merger

FOOL PORTFOLIO                  BORING PORTFOLIO

ATCT down $1/8 at $5 13/16      ATLS down $11/16 at $32 5/16
AOL down $1/4 at $58 1/2        BGP unch. at $23 3/4
CHV up $3/16 at $72 15/16       CSL up $1/4 at $36 3/8
COMS up $15/16 at $49 3/16      CSCO up $1/16 at $69 7/8
DJT up $1/8 at $10              GNT up $1/4 at $36 3/8
GM up $1/2 at $55 3/4           ORCL up $3/8 at $48 5/8
IOM down $9/16 at $21 3/16      OXHP down $1/16 at $73 1/8
KLAC down $1/2 at $50           PMSI down $1/8 at $10 7/8
LU up $3/4 at $71 1/2           TDW up $1/16 at $43 9/16
MMM down $1/8 at $99 7/8
T up $3/16 at $36 7/16

WE DELIVER - Get The Lunchtime News delivered
to your e-mailbox every afternoon!

ANOTHER FOOLISH THING
The Industry Snapshot

Ever wish you were more knowledgeable about different industries? Wish you had the time to study them, looking for possible investments? Well, let us do the work for you! The Motley Fool is pleased to unveil our new Industry Snapshot, dedicated to demystifying stock valuation and providing an ongoing education for the individual investor. Each week, the six-page information feast offers you an overview of an industry, a closer look at a handful of major players in the industry, an in-depth examination of the most promising company in the group, and several tables of financial numbers so that you can compare the companies yourself. Complementing this product is its own online area at our website and on AOL, featuring more information on the companies and industries. Penned by our own Alex Schay (TMF Nexus6), of Sector Snapshot fame, the weekly Industry Snapshot is available by e-mail or fax. Check it out in FoolMart.

Randy Befumo (TMF Templr), a Fool
Fool Plate Special

Dale Wettlaufer (TMF Ralegh), another Fool
Ups & Downs

Brian Bauer (TMF Hoops), and yet another Fool
Editing