NOVA CORP. (NYSE: NIS) moved up $1 3/4 to $18 7/8 after announcing an acquisition that will add about 15% to its annual transaction volume. The company said it has reached an agreement with bank holding company CRESTAR FINANCIAL (NYSE: CF) to acquire that company's merchant transaction processing business, adding 11,000 merchant locations to NOVA's client list. Last year, NOVA processed $11.9 billion of VISA and MasterCard purchases -- this additional business adds $1.8 billion in volume. NOVA came public last year and has seen its share price struggle even as annual revenues grew from $129 million in 1995 to $266 million in 1996. That has been somewhat diluted by the additional shares from the IPO -- earnings per share (EPS) stayed about level around $0.25 year-over-year. However, the company has used over $30 million to retire debt and preferred stock, and has only taken on $4 million in short-term debt in that period.
Butler, Indiana-based STEEL DYNAMICS (Nasdaq: STLD) shot up $2 1/4 to $20 after the mini-mill steel producer announced Q1 EPS of $0.30, flattening estimates of $0.21. The company came public late last year and has used that cash to build facilities and pay down debt while steeply ramping up production. Revenues were $98 million, up from $32 million in the first quarter last year when the company earned negative gross profits. Gross profit margin this quarter was about double that of mini-mill prototype NUCOR (NYSE: NUE), which is admittedly larger by an order of magnitude. Earlier this spring, company president Keith Busse told the Chicago Tribune that Steel Dynamics was booked almost 100% through June 30 and that "there is a good wind in our sails."
WD-40 CO. (Nasdaq: WDFC) gained $4 1/8 to $56 as investors apparently appreciated the lubricants company's announcement yesterday that it has formed an Americas division to head up growth in North, Central, and South America. The bulk of the company's sales come from domestic sales and sales in the U.K. Only $18 million of the company's $131 million in sales came from Latin American and Pacific Rim sales last year -- the company thinks it can do better. WD-40 has a veritable franchise with its well-known namesake brand in the U.S. Now it's trying to branch out with its 3-In-One Oil and T.A.L. 5 industrial lubricant, hoping that it will be able to duplicate its ultra-strong 25% operating margins in growth markets. Income-oriented investors have also appreciated the company's 4.5% dividend yield.
QUICK TAKES: VMARK SOFTWARE (Nasdaq: VMRK) rose $1 1/8 to $7 1/8 after announcing that Monolith Corp., a maker of server hardware, will distribute its UniVerse database software for WindowsNT... Flexible circuitry maker ADFLEX SOLUTIONS (Nasdaq: AFLX) gained $2 3/4 to $14 1/2 after Hambrecht & Quist initiated coverage with a "buy" rating and a 1997 EPS estimate of $0.87, just a hair ahead of the current mean estimate... ORCAD INC. (Nasdaq: OCAD) jumped $1 1/4 to $7 3/4 after Needham & Co. raised its rating on the semiconductor and circuit board design software company to "buy" from "hold"... Internet search engine/helper INFOSEEK CORP. (Nasdaq: SEEK) bounded $1 1/2 higher to $7 1/2 on signing an exclusive agreement with NBC Interactive Neighborhood (NBC-IN)... FILENET CORP. (Nasdaq: FILE) added $1 5/8 to $12 3/4 after the document workflow software company said MicroAge Inc., an IBM and Hewlett-Packard reseller, will distribute its products... ECHOSTAR COMMUNICATIONS CORP. (Nasdaq: DISH) moved up $1 5/8 to $21 3/8 on talk that partner NEWS CORP. (NYSE: NWS) will be acquiring more content, thus benefiting the satellite broadcaster... Retail security systems company CHECKPOINT SYSTEMS (NYSE: CKP) bounced back $1 3/8 to $11 3/8 after announcing an authorization to buy back 10% of its shares... TERADYNE INC. (NYSE: TER) gained $2 7/8 to $36 1/8 on announcing an order for its A567 mixed signal semiconductor test system... Semiconductor equipment manufacturer WATKINS JOHNSON CO. (NYSE: WJ) rose $1 5/8 to $27 3/4 after announcing yesterday that it is seeking a buyer for its defense components manufacturing unit... BREED TECHNOLOGIES (NYSE: BDT) gained $1 3/8 to $20 1/4 after it announced a major contract to supply steering wheels to General Motors... Oil services company HALLIBURTON CO. (NYSE: HAL) added $4 to $69 1/2 and SCHLUMBERGER LTD. (NYSE: SLB) moved $3 3/4 higher to $108 5/8 as each was upgraded by Goldman Sachs. Those upgrades also helped push TRICO MARINE SERVICES (Nasdaq: TMAR) $3 1/8 higher to $47 1/8... DETROIT DIESEL (NYSE: DDC) gained $1 to $17 after J.P. Morgan raised its rating on the engine maker to "buy"... Direct PC company DELL COMPUTER (Nasdaq: DELL) ran up $5 to $78 3/4 after market gooroo Abbey Joseph Cohen said "the correction is over -- buy the solid companies"... Tooth whitening laser company ION LASER TECHNOLOGY (AMEX: ILT) scampered $1 3/8 higher to $9 1/8 after the company said a study showed that its laser does indeed whiten teeth.
Mobile work platform company JLG INDUSTRIES (NYSE: JLG) was stomped for a $5 3/4 loss to $13 5/8 on announcing that it will miss earnings estimates of $0.33 to $0.36 per share in its third quarter. The company still expects to exceed record third quarter EPS of $0.28 recorded last year, which would mean that JLG will increase earnings sequentially, as it reported EPS of $0.26 last quarter. This quarter, the company says that its product mix has favored lower-margin equipment and that higher interest rates are making customers think twice about ordering. The company also made a cautious Q4 EPS forecast of at least $0.30, below current estimates between $0.37 and $0.39 per share. JLG is up from an average share price in the $2 to $3 range in 1994.
Athletic shoe retailer FINISH LINE INC. (Nasdaq: FINL) was trampled for a $3 1/8 loss to $19 1/8 after Montgomery Securities dropped its rating on the company to "hold" from "buy" today. Finish Line's controller Kevin Wampler told Dow Jones that the analyst at Montgomery linked the Finish Line downgrade to yesterday's downgrade of NIKE (NYSE: NKE) from Smith Barney and Gruntal. Wampler also implied that Finish Line is comfortable with analyst earnings expectations of $0.19 per share for the quarter. Analysts may be somewhat skittish about Finish Line since the company said only last week that it plans to expand store space by 40% to 45% in 1997, up from a planned 35%. Nike further clarified its position on yesterday's downgrade by saying its reduction in production only applies to excess production capacity, implying that the Smith Barney analyst is budgeting from an imaginary baseline like some fiscal policy wonk rather than like a businessperson.
QUICK CUTS: VIKING OFFICE PRODUCTS (Nasdaq: VKNG) crumpled $5 1/2 to $14 1/2 after the company said it expects Q3 EPS of $0.24 to 0.25 (extrapolating from the company's information), missing the mean estimate of $0.27... Retail anti-theft device maker SENSORMATIC ELECTRONICS (NYSE: SRM) slipped $1 to $16 1/2 on pre-announcing an 11% increase in Q3 revenues, yielding EPS of $0.08, below estimates of $0.14 per share... SAKS HOLDINGS (NYSE: SKS) fell $1 3/4 to $31 after the Wall Street Journal reported today that anyone looking at the bankrupt retailer Barney's (as Saks is rumored to be) may have to pay a higher price because of breakup fees and other contingent expenses.
FOOL ON THE HILL
An Investment Opinion by MF Templar
Selecting a Discount Broker
Before you can begin your illustrious investment career, you first need to have a brokerage account. All the prescient buy and sell decisions in the world will not make an ounce of difference to your net worth unless you are able to act on them. However, selecting a discount brokerage is probably the most confusing thing about the entire investment gig. How does a Fool go about selecting a discount broker? What factors are important and what are simply a smoke screen to make you fork over higher commissions than you might otherwise need to pay?
WHAT ARE DISCOUNT BROKERAGES AND WHO ARE THEY FOR? Discount brokers are for do-it-yourself investors. The idea of managing your own money is a powerful one to the same sort of personality that wants to install his own garbage disposal, change his own oil filter, and patch the hole in the ceiling. The idea of paying exorbitant fees to some full-price broker for sub-par returns is anathema to this hardy, independent soul. But much like you need to go out and select tools and materials before you can begin to fix things around your house, you need to go out and pick a brokerage.
Discount brokers are positioned relative to full-price brokerages, often called "full-service" by those who actually work with one in an attempt to justify the generous commissions they pay. Discount brokers basically will make stock trades for you for a lower price than a full-price shop because they have cut out all of the fat. There are no immaculately dressed fellows holding your hand, colorful research reports touting the latest breakthrough technology, or special access to the initial public offerings that all of the institutions have already turned down. Normally, it is just you, the telephone and the sweat of your research brow that stands between you and a stock trade.
STEP ONE: IS YOUR BROKER INSURED? The entire discount brokerage establishment became possible in 1975 when commissions were deregulated, ushering in the era of "negotiated commissions." Discount brokerages began to proliferate, developing alternative business models that put salaried employees in charge of executing client trades. Discount brokerages have always been just as safe as full-price brokerages, as they are covered by the same government-sponsored Securities Investor Protection Corporation (SIPC) that insures accounts up to $100,000 in cash and up to $400,000 in other assets. So the first thing to check when you are looking at a prospective brokerage is whether or not it is insured by the SIPC. If it is not, you should run, not walk, in the other direction.
STEP TWO: DOES YOUR BROKER MEET YOUR SPECIFIC NEEDS? Discount brokers are able to offer low commissions because they cut out the fat (special services) that most people do not use. Sometimes, however, you might need a particular piece of lard or suet that the broker has tossed in the wastebasket. Almost every brokerage is able to trade in all stocks that are listed on the New York Stock Exchange, the Nasdaq Composite and the American Stock Exchange. Beyond this, it is up for grabs. Do you want to buy and sell mutual funds, foreign stocks, bonds or even (gasp!) options? You better check and make sure that any security you might want to trade can be traded at the brokerage you are looking to park your account in, or you will suffer a lot of grief. Also be sure and check if the brokerage has minimums for opening or maintaining an account.
STEP THREE: HOW IS THE SERVICE? Before selecting a brokerage, you should get a sense of how well it services its current clients. The cheapest commissions in the world don't matter a bit if you cannot make a trade because you are always on hold or the brokerage is only open from 9:30 AM ET to 9:31 AM ET. How can you ascertain whether or not the current level of service is adequate? Talk to your friends. Ask them who they use and how happy they are with the service. Then, armed with this knowledge, hit the Fool's Consumer Rap message boards. People are pretty candid out there when they are upset, and this serves as a great way of determining whether or not the brokerage has managed to alienate many customers. Discount brokers are supposed to execute your trades just as fast as full-service firms, but it varies from brokerage to brokerage.
STEP FOUR: PRICE OUT THE FREEBIES. Free IRAs, special freebies in the mail, every fifth trade free... discount brokers try all kinds of things to get you to hand over your account to them. However, it makes absolutely no sense to pay $100 a commission in order to get yourself a freebie that you could have purchased yourself for $10. Find out the fair market value of any free product or service that a brokerage provides. You can do this by comparing it to what other brokerages would charge you for the same thing, or by simply looking up the normal subscription cost. For instance, a subscription to the S&P Stock Guide costs about $130 a year if you buy it on your own -- this is easily determined by a quick call to the folks at S&P. Free checking, electronic transfers and research reports are also things to ask about.
STEP FIVE: LOOK FOR HIDDEN COSTS. Sometimes discount brokerages make their commissions low by charging you out the ying-yang for everything else. The most common way is to say their commissions are $25, but there is a special handling charge of $5 that will be taxed on to that. Lose your account statement? It will cost $12 to get a new one. Need a wire transfer? $50 please. Brokerages will also charge for account transfers, software, inactivity fees and electronic transfers. You absolutely have to get an information packet from a prospective brokerage that includes all fees and charges in order to get a sense of whether or not those $25 trades will end up costing you $100 a pop after all is said and done.
STEP SIX: ADD UP THE TOTAL ANNUAL COST OF THE ACCOUNT TO COMPARE. Figure out how many trades you plan to make. You don't have to be precise, but you should have a good, ballpark figure. For example, the Fool Portfolio makes about 15 trades a year, including all buys and sells. Say the Fool Portfolio (yes, it has a mind of its own) was deciding whether it wanted to go to a broker that had $30 commissions but gave it a free S&P Stock Guide, or a broker that has $10 commissions. Well, for 15 trades it would cost you $450 a year at the $30 firm and $150 a year plus the $130 for the S&P Stock Guide at the $10 firm. Even though the one place gives you a nice perk, it will cost less money just to buy the S&P Stock Guide yourself. If you add up the total cost of the account on a yearly basis including the value of any freebies, you have better numbers to compare instead of just looking at commission costs alone.
STEP SEVEN: MAKE SURE YOU ARE TRADING IN THE WAY THAT YOU WANT TO TRADE. Remember that $10 a trade brokerage we were just talking about? Well, it turns out they are only $10 a trade if you trade by personal computer over the Internet. Can you be sure you will be near a computer each and every time you want to make a trade? Or say a brokerage will let you have unlimited trades for $1000 a year... if you use a computer. Can you be sure that its website will be up and running every time you want to do some business? Ask yourself if you really want to do business over the phone, the computer, by carrier pigeon, etc. The use of a brokerage should be convenient for you or else all the money saved in commissions will be paid back in full in aggravation.
STEP EIGHT: ASK FOR A SAMPLE ACCOUNT SUMMARY AND A SAMPLE YEAR-END STATEMENT. There is a little known contest between discount brokerages to discover who can create the most inscrutable account statement. Before going with a discount brokerage, see if you can get a sample summary and year-end statement in order to see if you will be able to track your stocks effectively. A shoddy year-end summary can make someone with poor record-keeping apoplectic when tax-time comes. This should come in the information packet you request from the brokerage, but make double sure that it is included by stressing to the customer service representative that you must see this. Although it sounds small, believe me, it can make a big difference when it comes time to figure out how you have done.
STEP NINE: CAN YOU GET ALL THE DAILY INFORMATION YOU NEED? Odds are, if you are reading this article, you have plenty of access to online information already. Delayed quotes, news, portfolios, charts -- the works. However, if you are an online kinda person, it makes sense to check out what the brokerage may or may not be offering online. Some brokerages have entire cities built online, while others don't even have a computer in the entire office. All things being equal, if you can access your account information online, you are probably better off than being reduced to calling customer service and standing in line. Just made a market order and want to know at what price the order was filled? If your brokerage lets you look at account information online, you can see it as soon as any customer service representative could.
STEP TEN: PRICE + CONVENIENCE = HAPPINESS. You should strive to find the broker that gives you everything you want at the lowest possible cost on an annual basis. Keeping your costs low is incredibly important when it comes to beating the market over the long term. Every dollar you do not waste in commissions is compounded by the market to become many more dollars over the years. If you cannot manage your money for a lower fee than you would incur buying a typical mutual fund, you should probably rethink whether or not an S&P Index fund or an S&P Depository Receipt might not really be the right investment vehicle for you. Fools should try to keep the cost of running an account below one percent of the total account value. Ideally, you should try to beat the index funds, which run about 0.30% to 0.40% of the account value depending on the specific fund. If you have lower costs than the average investor, you will have higher returns, all things being equal.
CASCADE COMMUNICATIONS (Nasdaq: CSCC)
(800) 936-0941 (code: 319193) -- replay through midnight 4/15
ASCEND COMMUNICATIONS (Nasdaq: ASND)
(800) 475-6701 (code: 336995) -- replay through 4/18 (North America)
(320) 365-3844 (code: 336995) -- replay through 4/18 (International)
TENET HEALTHCARE CORP. (Nasdaq: THC)
(402) 220-1007 -- replay from 3:00 PM EDT on 4/10
COGNOS INC. (Nasdaq: COGNF)
11:15 a.m. EDT
(800) 997-6906 -- replay available until midnight 4/11
SALLIE MAE (NYSE: SLM)
(800) 844-8633 (passcode 2334)
Replays at 5:00 PM ET on 4/10, 11:00 AM ET on 4/11,
and 11:00 AM ET on 4/14
THIS WEEK'S CONFERENCE CALL SYNOPSES
The Daily Double
Stock ideas? Stock ideas, anyone? If you've Foolishly armed yourself with stock evaluation know-how, but are stumped when it comes to finding promising companies, rejoice! Your friend the Fool, is happy to announce an exciting new feature -- the Daily Double! Penned by our own MFs Uptrend and RgeSeymour, the Daily Double will introduce you each day to a company whose stock has doubled in the past six months, adding their own thoughts on whether it is now overvalued or undervalued, a great momentum play or a bubble bound to burst. It's educational and handy, and best of all -- it's free! You'll find it every day under our Stock Research button. (E-mail subscriptions are available at FoolMart.)
Randy Befumo (MF Templar), a Fool
Fool Plate Special
Dale Wettlaufer (MF Raleigh), another
Ups & Downs
Brian Bauer (MF Hoops), and yet another