FOOL PLATE SPECIAL
An Investment Opinion
by Randy Befumo
Global Trouble
Southeast Asian exchanges tumbled again overnight as anxious speculators continued to convert various regional currencies into dollar-denominated assets. A mixture of currency crises, short-term interest rate crises, bankruptcy crises, and crises in confidence had most of Southeast Asia pinned against the wall. Europe followed Asia lower with the British Financial Times, the French CAC 40, the German DAX, and the Swiss OMX all closing down 5.5% or more. Early trading had U.S. stocks open lower with many companies on the New York Stock Exchange held in early trading due to order imbalances. Investors are speculating that the economic problems in Asia could translate into slower growth for U.S. and European companies
Hong Kong's Hang Seng index closed down 13.7% as stocks continued to react to short-term interest rates. Hong Kong government bonds closed at 8.7%, roughly 3 percentage points above where they have traded for most of the past year. As the rates stay high to help protect the Hong Kong dollar's peg to the U.S. dollar, investors are dumping anything related to property or mortgages as higher interest rates basically kill earnings growth. Malaysia, Singapore, Thailand, and the Philippines all closed at least 6.0% lower as investors rushed into U.S. dollars, fearing collapsing native currencies and slowing economic growth as all of these nations ratchet up short-term rates to defend their currencies and diminish their current accounts surplus. South Korea was also hosed as investors swapped won for dollars. Debt-laden Korean conglomerates (chaebol) in particular were selling anything denominated in won in order to make sure they can pay their foreign-denominated debt.
The theme dragging world markets lower is the fear that the local crises in Southeast Asian countries could cause growth in the region to slow tremendously. Malaysia has already reduced expectations for growth in its gross domestic product to 7% from 8%, the lowest rate in more than four years. Investors are actually trying to get Malaysia to go even farther, as higher short-term rates will help to stabilize the currency by making it more expensive for short-sellers to borrow ringgit. Thailand, the Philippines, and Singapore are all saddled with similar problems. Already in the grips of a pretty serious debt crisis, the destabilization has added to woes in South Korea, already in the midst of a two-year recession. Hong Kong is purely an issue of acidic short-term rates hitting basic real estate and financial shares and shearing prior expectations of earnings growth. All this said, should interest rates and currencies stabilize over the next few weeks, the region's growth will probably only slow a few percent -- perhaps enough to be noticed but hardly enough to plunge Europe and North America into depression.
Pharmaceutical company MONSANTO CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MTC)") else Response.Write("(NYSE: MTC)") end if %> extended its previously established plant genomics partnership with INCYTE PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INCY)") else Response.Write("(Nasdaq: INCY)") end if %>, which helped to extend Monsanto's share price $3 1/2 to $42.
Telecommunications and enterprise network products company GENERAL DATACOMM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GDC)") else Response.Write("(NYSE: GDC)") end if %> rose $9/16 to $6 3/8 after announcing that it had signed a multi-year agreement worth "up to $90 million" with LUCENT TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>.
Single family home builder STANDARD PACIFIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SPF)") else Response.Write("(NYSE: SPF)") end if %> gained $15/16 to $10 3/4 this morning after reporting 3Q EPS of $0.24, beating estimates of $0.20.
After dropping 11% yesterday, SCHLUMBERGER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> rebounded $5 to $84 3/4 this morning after investors in the oilfield services firm realized that the previous day's loss did not reflect any fundamental change in its business. In addition, Morgan Stanley put the company on its "shopping list for recovery."
Hardware and software giant INTERNATIONAL BUSINESS MACHINES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> rallied $5 15/16 to $95 15/16. Helping the company along was its announcement that it had allocated $3.5 billion to buy back its own stock.
PATINA OIL & GAS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: POG)") else Response.Write("(NYSE: POG)") end if %> gushed $11/16 higher to $8 15/16 after reporting Q3 EPS of $0.01 versus a loss of $0.07 per share in its prior year period.
Insurance company EVEREST REINSURANCE HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RE)") else Response.Write("(NYSE: RE)") end if %> gained $3 to $36 this morning after reporting Q3 EPS of $0.76 last night, blowing away estimates of $0.69.
Corporate news provider MEDIALINK WORLDWIDE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDLK)") else Response.Write("(Nasdaq: MDLK)") end if %> reported Q3 EPS of $0.09, matching estimates. Medialink shares are up $2 1/4 to $17 this morning.
Computer products reseller MICRO WAREHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWHS)") else Response.Write("(Nasdaq: MWHS)") end if %> gained 42 1/4 to $14 3/16 after posting a 3Q loss of $0.21 per share including a $0.37 per share charge for settling litigation. Backing out the charge, EPS of $0.16 missed estimates of $0.22 per share.
Programmable logic solutions company XILINX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XLNX)") else Response.Write("(Nasdaq: XLNX)") end if %> rose $6 9/16 to $38 1/2 after an upgrade from AG Edwards to "accumulate" from "maintain."
Of the companies that the Fool reported on last night that were hurt by yesterday's "correction" on a lack of fundamental news, all are up this morning, including laser sensors and sensor systems company CYBEROPTICS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYBE)") else Response.Write("(Nasdaq: CYBE)") end if %>, which rose $1 3/8 to $26 7/8; Internet search engine firm LYCOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> gained $4 5/8 to $26; contract electronics manufacturer SMART MODULAR TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMOD)") else Response.Write("(Nasdaq: SMOD)") end if %> was buoyed $5 to $46; and firewall software company RAPTOR SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAPT)") else Response.Write("(Nasdaq: RAPT)") end if %> gained $2 3/8 to $14 7/8.
Contract electronics manufacturer SANMINA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SANM)") else Response.Write("(Nasdaq: SANM)") end if %> rose $5 7/8 to $70 1/2 after reporting Q4 EPS of $0.63, topping estimates of $0.56. The company was upgraded by Morgan Stanley to "strong buy" from "outperform," and BancAmerica Robertson Stephens initiated coverage with a "buy."
Retailer MAZEL STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAZL)") else Response.Write("(Nasdaq: MAZL)") end if %>, which sells inventory other companies don't want, fell $6 11/16 to $12 9/16 after pre-announcing Q3 EPS of $0.16 to $0.17, well below last year's $0.23 EPS and the First Call mean estimate of $0.28. Mazel says operating expenses will be higher than expected and that disappointing results at joint ventures will hurt earnings.
Online and offline publishing company CMP MEDIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMPX)") else Response.Write("(Nasdaq: CMPX)") end if %> fell $8 3/8 to $16 after reporting Q3 revenues of $114 million and EPS (before charges) of $0.26, matching estimates. Goldman Sachs cut its rating on the company to "market outperform" from its "recommended list."
Regional bank FLEET FINANCIAL GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLT)") else Response.Write("(NYSE: FLT)") end if %> lost $2 1/2 to $61 7/8 after announcing an agreement to acquire the consumer credit card business of credit card and mortgage lending company ADVANTA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADVNA)") else Response.Write("(Nasdaq: ADVNA)") end if %> for a total value of $1.3 billion. Advanta says it will buy back $750 to $850 million of its shares in 1998.
SLM HOLDING CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLM)") else Response.Write("(NYSE: SLM)") end if %>, which operates the Student Loan Marketing Association, lost $9 3/4 to $145 3/4 after Prudential Securities cut its rating on the company to "hold" from "buy."
Wireless telecom equipment maker STM WIRELESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STMI)") else Response.Write("(Nasdaq: STMI)") end if %> fell $1 7/8 to $14 1/8 after reporting Q3 EPS of $0.17, beating the one First Call estimate of $0.15.
ACCEPTANCE INSURANCE COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIF)") else Response.Write("(NYSE: AIF)") end if %>
(800) 633-8284 (code 3217598) -- replay through 10/28 @ 6:00 pm EST
SEAGRAM COMPANY and HSN, INC.
Regarding combination of television assets
(800) 558-5253 (password: 330 9589) -- replay through 10/28
(416) 626-4151 (password: 330 9589) -- replay for international callers
APERTUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APTS)") else Response.Write("(Nasdaq: APTS)") end if %>
(800) 633-8284 (reservation # 3280075) -- replay through 10/29 @ 1:00 pm EST
CYBERCASH INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %>
(888) 566-0175 -- replay through 10/29
AVID TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVID)") else Response.Write("(Nasdaq: AVID)") end if %>
(402) 220-0105 -- replay through 10/29
BJ SERVICES CO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %>
(402) 220-9379 -- replay through 10/30
GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %> and GENZYME TRANSGENICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GZTC)") else Response.Write("(Nasdaq: GZTC)") end if %>
(800) 633-8284 (code: 3265950) -- replay through 10/30
(303) 248-1201 (code: 3265950) -- replay number for international callers
FORCENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FEN)") else Response.Write("(NYSE: FEN)") end if %>
(800) 411-5828 (code: 362389) -- replay through 11/3
(612) 321-9419 (code: 362389) -- replay for international callers
10/28/97 (Tuesday)
OLSTEN CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OLS)") else Response.Write("(NYSE: OLS)") end if %>
1-800-475-6701 (code: 361620) -- replay from 2:00 p.m. ET through 10/29
(320) 365-3844 (code: 361620) -- replay for international callers
10/28/97 (Tuesday)
MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %>
(402) 220-4249 -- replay available until 11/4
10/29/97 (Wednesday)
ECSOFT GROUP PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ECSGY)") else Response.Write("(Nasdaq: ECSGY)") end if %>
11:00 am EST
(800) 266-1762 -- live US, toll free
(212) 676-5383 -- live US
+44 (0)171 335 1400 -- UK freephone
0500 701 087 -- UK
10/29/97 (Wednesday)
BANCO FRANCES DEL RIO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BFR)") else Response.Write("(NYSE: BFR)") end if %>
3:00 pm EST
(719) 448-2082 -- live (code: 394466)
10/29/97 (Wednesday)
BUSINESS OBJECTS ADS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOBJY)") else Response.Write("(Nasdaq: BOBJY)") end if %>
(800) 633-8284 (code: 3195088) -- replay through 11/3
THIS WEEK'S CONFERENCE CALL SYNOPSES
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> Call
FOOL PORTFOLIO BORING PORTFOLIO AMZN up $4 1/4 at $55 1/2 ATLS down $7/8 at $22 5/8 AOL up $4 3/8 at $78 3/8 BGP down $1/4 at $24 1/4 CHV down $2 7/16 at $77 9/16 CSCO up $2 11/16 at $75 9/16 COMS up $4 1/16 at $45 1/4 CSL dn $1 11/16 at $40 13/16 DJT up $1/16 at $8 15/16 GNT up $1 at $42 7/8 GM up $1/8 at $64 1/8 ORCL up $1 7/8 at $32 7/8 INVX up $1 at $25 OXHP up $1 1/8 at $26 7/8 IOM up $1/4 at $24 7/8 PMSI down $5/16 at $11 7/16 KLAC up $1 7/8 at $48 7/8 TDW up $3/16 at $61 3/8 LU up $2 1/8 at $77 3/8 MMM unch. at $92 1/4 T up $2 1/16 at $47 5/16WE DELIVER - Get The Lunchtime News delivered
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Randy Befumo (TMF Templr), Fool One
Dale Wettlaufer (TMF Ralegh), Fool Two
Alex Schay (TMF Nexus6), Fool Three
Contributing WritersBrian Bauer (TMF Hoops), Fool Four
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