<THE EVENING NEWS>
Friday, February 5, 1999
DJIA 9304.24 -0.26 (-0.00%) S&P 500 1239.40 -9.09 (-0.73%) Nasdaq 2373.45 -36.45 (-1.51%) Russell 2000 412.72 -5.07 (-1.21%) 30-Year Bond 98 15/32 -29/32 5.35 Yield
Online advertising firm Modem Media.Poppe Tyson (Nasdaq: MMPT) jumped $29 to $45 after selling 2.6 million shares at $16 per stub amid a hectic day for initial public offerings. The company's client list runs the gamut from today's Internet darlings, such as E*Trade Group (Nasdaq: EGRP), to corporate titans from yester-year, such as J.C. Penney (NYSE: JCP). With some nice support on the sidelines from 53%-owner True North Communications (NYSE: TNO), Modem Media looks poised to storm the advertising playing field at a time when the industry's near-term growth prospects look quite bright. Lending support to the rosy outlook for advertising today was Morgan Stanley Dean Witter, which raised its rating on Ogilvy & Mather and J. Walter Thompson parent WPP Group (Nasdaq: WPPGY) to "outperform" from "neutral" based on the strong U.S. economy, sending that company's shares up $2 1/16 to $77 13/16.
Big oil got a long-awaited boost today as Schroder & Co. issued a handful of upgrades based on the reasoning that the share prices of some of the major integrated oil companies have fallen about as low as they can go. Of course, the companies' business prospects continue to look bleak, with oil and gas prices still hovering close to 12-year lows. Therefore, how low the share prices of the individual players can actually go is anyone's guess. Still, Texaco (NYSE: TX) rose $3 5/8 to $52 and USX-Marathon (NYSE: MRO) gained $15/16 to $23 15/16 on matching upgrades to "outperform significantly" from plain-vanilla "outperform." Tagging along for the ride, Atlantic Richfield (NYSE: ARC) added $2 5/8 to $62 15/16, Mobil (NYSE: MOB) advanced $2 11/16 to $88 7/16, and Dueling Fools subject Exxon (NYSE: XON), which also received an upgrade, gained $1 7/8 to $71 11/16.
QUICK TAKES: Auto parts supplier Delphi Automotive Systems (NYSE: DPH) rose $1 5/8 to $18 5/8 in its first day of trading after parent General Motors (NYSE: GM) sold a 17.7% stake in the company in an initial public offering at $17 per share... Singapore-based Internet services provider Pacific Internet Ltd. (Nasdaq: PCNTF) soared $31 to $48 from its IPO price of $17 per share after the company sold a total of 3 million shares... Post-secondary education services company Corinthian Colleges (Nasdaq: COCO) advanced $4 to $22 after the company sold 2.7 million shares in an IPO at a price of $18 per stub.
Online sports information provider SportsLine USA (Nasdaq: SPLN) raced ahead $4 3/4 to $42 3/4 after The Wall Street Journal reported that 12.5% owner CBS Corp. (NYSE: CBS) may consolidate its Internet holdings into a separate company. Financial news website Marketwatch.com (Nasdaq: MKTW), which is 38% owned by the Tiffany Network, fell $4 1/4 to $69 5/8... Digital audio and video tool creator Avid Technology (Nasdaq: AVID) rose $3 17/32 to $32 after reporting "tax-effected" Q4 earnings of $0.57 (excluding charges), ahead of the Zacks mean estimate of $0.22. Morgan Stanley Dean Witter and Piper Jaffray both raised their ratings on the firm... Information technology training firm Learning Tree International (Nasdaq: LTRE) sprouted $1 higher to $8 3/4 after posting fiscal Q1 EPS of $0.12, beating the Zacks mean estimate by $0.04.
Online and TV-based specialty retailer Shop At Home (Nasdaq: SATH) added $3 7/16 to $25 1/8 after direct broadcast satellite (DBS) system operator EchoStar Communications (Nasdaq: DISH) agreed to broadcast the company's shopping network free of charge to its DBS subscribers starting Feb. 8... Pacemakers and cardiovascular medical devices company St. Jude Medical (NYSE: STJ) got investors' blood pumping today, rising $1 7/8 to $ 27 15/16 after agreeing to buy conglomerate Tyco International's (NYSE: TYC) Angio-Seal hemostatic arterial puncture closure device business for $167 million in cash... Internet portal Lycos (Nasdaq: LCOS) gained $7 5/8 to $137 after the magazine Industry Standard reported that the company is in talks to sell a 35% stake to General Electric's (NYSE: GE) NBC unit.
Internet website co-location services and direct access provider AboveNet Communications (Nasdaq: ABOV) tacked on $1 1/4 to $33 1/4 after saying three Asian online content providers will use its co-location services at AboveNet's San Jose Internet Service Exchange... Aerospace, engineered materials, and automotive parts maker AlliedSignal (NYSE: ALD) gained $3 7/16 to $43 1/16 after raising its quarterly dividend to $0.17 per share from $0.15 per share... Farm and lawn care equipment maker Deere & Co. (NYSE: DE) ran $2 5/8 higher to $35 after announcing that its Homelite hand-held power tools unit has developed a two-cycle combustion engine that could cut emissions by 75% compared to engines on the market today.
Cancer treatments developer Boston Life Sciences (Nasdaq: BLSI) rose $1 3/16 to $6 1/8 after announcing it has discovered a new anti-angiogenesis protein that could possibly be more effective in stopping cancerous cell growth than its current lead anti-angiogenic agent, Troponin... International microcomputer hardware and software products distributor Tech Data (Nasdaq: TECD) gained $1 1/2 to $23 5/8 after Credit Suisse First Boston started coverage with a "buy" rating. Rival Ingram Micro (NYSE: IM), which also received an initial "buy" rating from the firm, added $1 to $29 1/4... Lawn and pet supply products company Central Garden & Pet Co. (Nasdaq: CENT) moved up $2 3/16 to $17 1/2 after reporting a fiscal Q1 loss of $0.01 per share, which was in line with the Zacks mean estimate.
While Wallace Shawn's immortal performance as Vizzini in The Princess Bride emphasized the folly of land wars in Asia and going in against a Sicilian when death is on the line, he might well have included a price war with chipmaking giant Intel (Nasdaq: INTC) on his list. Advanced Micro Devices (NYSE: AMD) is in just such a pickle, losing $2 1/8 to $16 13/16 today following yesterday afternoon's warning that it could post an operating loss this quarter due to pricing pressures. The company said that in light of earlier-than-expected price cuts by arch-nemesis Intel, it is "reassessing [its] competitive response." That's a tall order, since Intel can afford to cut prices on the low end -- AMD's territory -- and grab market share while reaping profits from high-margin server products. More on this is available in this morning's Breakfast With the Fool.
There's nothing more disappointing to rocket fans than a stalled space launch... unless it's one on which they happen to have their money riding. Satellite-to-car digital radio broadcaster CD Radio (Nasdaq: CDRD) jammed its foot on the brakes today, skidding $7 1/8 to $25 on news that it will need to raise another $175 million -- 18% more than first thought -- before launching its digital radio service. The launch, planned for April 2000, now looks to be held off until June. The former StockTalk subject must delay its satellite launches, which will cost the company $50 million, and pay $80 million for an additional satellite. The company also said it will have to pay Lucent Technologies (NYSE: LU) $27 million for the development of chip sets for its radio receivers, three times the originally anticipated sum, as the technology has turned out to be more complex than expected.
Worries about slowing software sales pulled down shares of e-commerce software developer Sterling Commerce (NYSE: SE) today. The company saw its stock slashed by $9 15/16 to $32 1/2 after yesterday reporting fiscal Q1 EPS of $0.33, which beat last year's $0.26 figure but was flat with Wall Street's projections. In a conference call, the company gave analysts the typical software company explanations for disappointing software revenue projections -- increased competition and diverted client spending toward Year 2000 projects -- and Wall Street gave Sterling the typical analyst response. At least three brokerages downgraded the stock, which traded nearly 1200% its 30-day average volume today. Some watchers, however, noted that Sterling plans to launch several new products this year and remained strong in the service and support sectors.
QUICK CUTS: Electronics manufacturing services (EMS) provider SCI Systems (NYSE: SCI) shed $7 7/16 to $35 1/2 after telling investors it is revising its expectations for the coming two quarters. For the full tale from Fool Dale, click here... Electronic design automation (EDA) tools maker Cadence Design Systems (NYSE: CDN) announced the close of the purchase of Design Acceleration Inc., a supplier of design automation technology used in system-on-a-chip (SOC) design, and slowed $1 15/16 to $28 11/16 today... Computer retailer CompUSA (NYSE: CPU) fell $13/16 to $13 1/16 as news spread that the company plans to spin off its direct business. The story was first reported by Computer Retail Week... Healthcare products and services distributor Henry Schein (Nasdaq: HSIC) dulled $5 1/2 to $35 7/8 after the company said last night that one of its affiliates is extending a recall of dental anesthetics that began Jan. 11.
Procom Technology (Nasdaq: PRCM) was jolted for $2 1/8 to $6 3/8 after the data storage systems company said it expects fiscal Q2 EPS of between $0.01 and $0.03, down from last year's $0.14... Contract nonclinical pharmaceutical testing firm BioReliance Corp. (Nasdaq: BREL) dropped $2 1/8 to $6 7/8 after saying Q4 results are seen coming in "well below expectations" and will likely fall short of Q3's $0.14 mark, itself a penny below the year-ago Q4 tally... Information technology services firm Electronic Data Systems (NYSE: EDS) lost $3 7/8 to $48 1/8 after reporting Q4 EPS of $0.53, a penny above Street projections before charges. The charges -- which included a $12.7 million bill for the retirement of Vice Chairman Gary Fernandes -- pulled the quarter's final score down to $0.29 per share.
Radiant Systems (Nasdaq: RADS), which makes software systems for retailers, dimmed $1 3/8 to $11 after turning in Q4 losses of $0.02 per share, down from EPS of $0.15 a year ago but better than First Call's projection of a $0.06 loss. The company also said Tricon Global Restaurants (NYSE: YUM) will adopt Radiant software in its offices and restaurants... Ziff-Davis (NYSE: ZD), the leading publisher of computer magazines, was zapped for a $1 15/16 loss to $18 3/8 after releasing Q4 EPS of $0.40 (before charges), down from $0.73 last year and below the $0.46 estimate reported by First Call... Northwest Airlines (Nasdaq: NWAC) descended $1/4 to $25 after the company said January passenger load factor, which measures the percentage of seats on all flights filled by paying passengers, remained flat from last year's 66.2% mark.
IT conversion technology and tools firm Crystal Systems Solutions (Nasdaq: CRYSF) darkened $1 7/16 to $9 as the Israeli company earned a downgrade to "market perform" from "market outperform" at Goldman, Sachs & Co... Manufactured housing firm American Homestar (Nasdaq: HSTR) tumbled $1 15/16 to $8 3/16 after saying it expects fiscal Q3 EPS to come in below the year-ago $0.25 mark. A replay of a conference call on the news is available through Feb. 12 at (402) 398-4723... HIV drug developer Trimeris Inc. (Nasdaq: TRMS) stumbled today, returning $4 1/16 to $21 1/8 after taking on $4 3/16 yesterday on news that its T-20 developmental drug earned fast-track review status from the FDA.
Another Great Stock Will Always Be Available
Yesterday, I was grumbling to my coworkers here at the Fool about how a couple of stocks that I had been drooling over surged before I had a chance to pick up shares. Although these two stocks have jumped appreciably, several other companies have made it onto my radar as potential investments. One of the wonderful things about our stock market is that good investment candidates are always available.
As I mentioned in a Fool on the Hill column a couple of weeks ago, I am trying to reduce my trading tendency by restricting the frequency at which I make stock purchases. This strategy is forcing me to stockpile investment candidates so that I can compare them with one another to choose the most promising long-term prospects. Purchasing the best companies I can find will give me an opportunity to hold onto them for a long time and let their earnings (and value) compound without the onerous burden of capital gains taxes.
Seventeen stocks have already made it onto my watch list after a little more than a month. I certainly will not buy all of these companies, but it is amazing how quickly qualified prospects pile up. Over the next few weeks, I will have to be buckle down and ferret out the stocks that offer the greatest likelihood of increasing value in the decades ahead.
Two of the companies that I'm most interested in, Safeguard Scientifics (NYSE: SFE) and Timberland (NYSE: TBL), have jumped pretty dramatically since the beginning of the year. Year to date, Safeguard stock is up around 50%, while Timberland has increased a not-too-shabby 25% (remember, these are returns over just five weeks). These companies are not necessarily overpriced because of the huge jumps; that evaluation must be made in the eyes of the beholder based on expectations about future prospects. Nonetheless, it can be stated irrefutably that the two stocks are more expensive than they were just a short time ago.
My initial emotional response to having missed out on the short-term gains is frustration. I found these companies trading at what appeared to be great values, yet I didn't make the investment because of a self-imposed trading restriction. On the face of it, I am losing out because of this recently imposed strategy.
Looking a little deeper, however, I still may be benefiting over the long run. For one thing, I have more time to investigate these companies and better understand their business models. Being attracted to a company after developing a full understanding of its prospects will lead to an increased willingness to stick with it through the ups and downs that are a regular occurrence in the stock market.
While I have missed out on the short-term gains in Safeguard and Timberland, I have also avoided short-term losses that have occurred in two other stocks on my watch list, Whole Foods Markets (Nasdaq: WFMI) and Network Associates (Nasdaq: NETA). These two stocks have already fallen 37% and 31% this year, respectively, on concern about their near-term prospects. That little trading restriction that I was grumbling about a few paragraphs ago saved my hide in these two companies (at least in the short-term).
Before whining about the winners you miss out on because of the time required by your investing guidelines, be sure to remember how that strategy has impacted your performance from both a positive and negative perspective. Combining the year to date performance of the four stocks mentioned above, I have missed out on about a 2% gain. Not great, but certainly not as bad as missing out on the 50% gain in Safeguard that my mind was focused upon before thinking logically about the situation.
Many people are smitten with "hot tips" because of the dramatic movements experienced lately in the markets. The Nasdaq Composite Index has surged around 50% since last fall's stumble, and many individual stocks have increased several hundred percent. Investors who historically avoided listening to a frantic call from a broker or a "must act now" posting on a message board might be tempted to act. Heck, last time Fast Eddie gave you a great tip, it jumped 75% in two weeks.
Don't fall for it. Remember the losers that you've avoided by not pursuing hot tips before pursuing the next one you hear about. Most likely, your intuitive sense to avoid tips has kept you out of many stocks that have fallen significantly. Be sure to include the "opportunity profit" from staying out of these losers as well as the "opportunity costs" from not putting money into winners. You'll find that over time, you're better off being patient and doing your research.
Just because you rationally know that avoiding hot tips is beneficial to your financial well-being, you're likely to still be irritated when you miss a big gain. That's human nature. Remember, however, that stock prices change daily. As some prices move closer to or above what you deem to be a reasonable valuation level, others move down. I have a list of 17 stocks developed just over the past month that demonstrates that fact. As a long-term investor, you will be rewarded for patience and research. Good long-term investments are always available in the stock market.
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Brian Graney (TMF Panic), a Fool
David Marino-Nachison (TMF Braden), a new Fool