FOOL PLATE SPECIAL
An Investment Opinion by MF Templar

Stores on Drugs

RITE AID <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RAD)") else Response.Write("(NYSE: RAD)") end if %> announced the intended acquisition of THRIFTY PAYLESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TPD)") else Response.Write("(NYSE: TPD)") end if %> today, offering 0.65 Rite Aid shares for each share of Thrifty. Shares of Thrifty surged $ to $ in early trading this morning, given the implied value of $23.32 per share of Thrifty (based on the Friday close of Rite Aid). The deal will greatly increase Rite Aid's geographic dominance, giving it a retail presence from sea to shining sea. Currently, Rite-Aid has 2,750 stores located snugly in 21 Eastern states while Thrifty Payless runs about 1,000 store-fronts on the nation's West Coast. This is Rite Aid's second bid to increase its size since February, when the company announced the intended acquisition of REVCO D.S. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RXR)") else Response.Write("(NYSE: RXR)") end if %>. Rite Aid was forced to abandon this $1.8 billion bid in April because of anti-trust concerns. The deal was scuttled by the Federal Trade Commission (FTC) because the resulting company would have dominated the East Coast drug store market, creating an unfair competitive advantage.

Why is Rite Aid so dead-set on getting bigger? Drug stores have been caught in the squeeze between pharmaceutical manufacturers and managed-care providers, with pricing power on the once high-margin drug sales eroding as a result. Forced to rely on the high-volume, low-profit sales of all of the other stuff in its stores, Rite Aid's solution to this dilemma has been to grow and consequently develop more bargaining power with the large managed-care providers which are strangling it. Rite Aid is hardly the only drugstore chain to stumble onto this solution, as old merger partner Revco D.S. is currently engaged in a hostile bid for BIG B <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BIGB)") else Response.Write("(NASDAQ: BIGB)") end if %>. JC PENNEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCP)") else Response.Write("(NYSE: JCP)") end if %>, long said to be evaluating buy-out opportunities for its company-owned chain of Thrifty Drug Stores, also makes out in today's Rite Aid deal, as the chain will give Penney 200 stores in North and South Carolina in an effort to get this deal through. Penney finalized its deal to buy the Fay's drug store chain just last week.

Even with all of this consolidation, Rite Aid, Revco and JC Penney (Thrifty) will hardly lack for competition. WALGREEN'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAG)") else Response.Write("(NYSE: WAG)") end if %> has generated almost two times the amount of annual revenues as Rite Aid for a long time, in spite of the fact that Rite Aid has almost 750 more units. Number two in the nation, ECKERD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECK)") else Response.Write("(NYSE: ECK)") end if %> would be unseated by this combination and relegated to the number three spot. All this merger stuff does not change the chain that holds the award for "fastest growing" -- a title MELVILLE'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MES)") else Response.Write("(NYSE: MES)") end if %> CVS Pharmacy chain holds. Melville will be breaking into two separate companies in a few months, allowing the market to independently value CVS for the first time ever. With consolidation the order of the day, one wonders how long smaller names like ARBOR DRUG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ARBR)") else Response.Write("(NASDAQ: ARBR)") end if %>, LONG'S DRUG STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LDS)") else Response.Write("(NYSE: LDS)") end if %>, DRUG EMPORIUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DEMP)") else Response.Write("(NASDAQ: DEMP)") end if %> and GENOVESE DRUG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GDXA)") else Response.Write("(NASDAQ: GDXA)") end if %> can stay solo.

UPS

ARCHER DANIELS MIDLAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADM)") else Response.Write("(NYSE: ADM)") end if %> is up $3/4 to $21 3/8 on news that the company will pay a total of $100 million to settle criminal charges in connection with its high-fructose unit.

Achieving record year/year sales growth and earnings in its third quarter, NOVELLUS<% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NVLS)") else Response.Write("(NASDAQ: NVLS)") end if %> is up $2 1/8 at $47 3/4. The company warned of lower bookings, though, as it enters the fourth quarter.

SUPERTEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUPX)") else Response.Write("(NASDAQ: SUPX)") end if %> is up $2 3/8 to $24 1/2 after the semiconductor maker reported favorable year/year earnings and sales results, highlighting its work with integrated circuits for flat panel displays.

Chi-chi clothing company MOSSIMO<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGX)") else Response.Write("(NYSE: MGX)") end if %> advanced $2 1/8 at $24 1/8 after Merrill Lynch upgraded its near-term rating on the company to "accumulate" from "neutral."

ORTHODONTIC CENTERS OF AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OCAI)") else Response.Write("(NASDAQ: OCAI)") end if %> is up $1 5/8 at $14 3/8 as the company pre-announced revenues and earnings that will fall within the expectations of analysts. The company believes that offline chatter in Worth magazine has pushed around trading in its shares.

Biotech tissue replacement specialist ADVANCED TISSUE SCIENCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATIS)") else Response.Write("(NASDAQ: ATIS)") end if %> rose $2 5/8 to $20 1/8 after Morgan Stanley upped its rating on the company to "strong buy," citing the performance of the company's Dermagraft in clinical trials.

Enterprise software company DATAWORKS<% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DWRX)") else Response.Write("(NASDAQ: DWRX)") end if %> is moving up $3 1/8 to $32 1/8 after unveiling object-oriented versions of its established software packages.

DOWNS

Grocery/drug chain ALBERTSONS<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABS)") else Response.Write("(NYSE: ABS)") end if %> is down $5 1/2 to $37 1/8 after reporting that third and fourth quarter earnings will come in below internally-forecasted results. The company said that various retail programs, such as customer service and Quick Fixin' Ideas, are costing more than planned.

WACKENHUT CORRECTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHC)") else Response.Write("(NYSE: WHC)") end if %> is down $2 at $20 1/2 after brokerage Stephens Inc. downgraded the company to "hold" from "buy," saying that it expects the company to win a 2,400-bed contract (instead of the 3,400 beds expected) with New Mexico.

Automotive safety/aerospace products company OEA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OEA)") else Response.Write("(NYSE: OEA)") end if %> continues to slip after reporting record numbers last week, including EPS of $0.33, which nonetheless left investors unimpressed.

VERIFONE<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VFI)") else Response.Write("(NYSE: VFI)") end if %> continues to trade down on uncertainty surrounding AT&T's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> plans for getting into the electronic transaction service provider market. Verifone slipped $2 1/4 to $39 3/4 at noon.

CONFERENCE CALLS

RITE AID, THRIFTY PAYLESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RAD, TPD)") else Response.Write("(NYSE: RAD, TPD)") end if %> merger
Available from 3:00 PM
(800) 475-6701 (Access number 319085)

CANANDAIGUA WINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WINEA)") else Response.Write("(NASDAQ: WINEA)") end if %>
1:30 p.m. EDT
1-800-274-8308 (password: 1234) -- replay

HUGHES ELECTRONICS/GENERAL MOTORSClass H <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMH)") else Response.Write("(NYSE: GMH)") end if %>
5:00-11:00 p.m. EDT on 10/14/96 and 9:00 a.m. - 9:00 p.m. EDT on 10/15/96
1-800-633-8284 (code: 2046516)

INTEL (NASCAD: INTC)
after 6:30 p.m. EDT
(402) 220-1010 (confirmation # 273163)

FOOL PORTFOLIO STOCKS

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