<THE EVENING NEWS>
Monday, July 12, 1999
MARKET CLOSE
DJIA 11200.98 +7.28 (+0.07%) S&P 500 1399.10 -4.18 (-0.30%) Nasdaq 2790.44 -2.63 (-0.09%) Russell 2000 459.30 +1.32 (+0.29%) 30-Year Bond 90 28/32 +1 7/32 5.91 Yield
Shares of NTL Inc. (Nasdaq: NTLI), a U.S.-based company that provides telecom and cable service in the U.K., rose $5 1/4 to $91 1/2 on yesterday's reports that the company was to be bought by Cable & Wireless Communications (NYSE: CWZ) this week. The sourceless story likely surprised market watchers. Although consolidation among U.K. cable providers has been due for some time, many expected Cable & Wireless (CWC) to swoop instead for British cable company Telewest Communications (Nasdaq: TWSTY); the companies disclosed talks in April. The Telewest-CWC talks reportedly stalled on price but may renew as Telewest will likely want to grab hold of the supposed deal's coattails. The window is open; another London newspaper today reported that CWC majority owner Cable & Wireless Plc's (NYSE: CWP) CEO Graham Wallace wants an agreement worked out between the three companies by the end of the month. With foreign companies like France Telecom (NYSE: FTE) -- apparently interested in buying out Cable & Wireless' 53% CWC stake -- observing with interest, more action seems certain.
It was "raise the roof" time for shareholders of economy hotel chain operator Red Roof Inns (NYSE: RRI) today, as the shares booked gains of $4 1/4 to $22 9/16 after French lodging giant Accor SA, operator of the Motel 6 chain among others, said it will buy the Columbus, Ohio company for $22.75 per share in cash. The deal represents a 24% premium to Friday's closing price. With Accor having commitments to tender their shares from holders of 68.3% of Red Roof's stock, the deal is almost sure to go through. Red Roof's shares have been languorous of late thanks to stiff competition and unimpressive earnings growth prospects despite a franchising plan aimed at boosting brand equity. Judging by the reaction of investors today, they'd been keeping the light on for an opportunity like this one. For more on Red Roof and Accor, head back to today's Lunchtime News.
QUICK TAKES: Shared Internet access company Ramp Networks Inc. (Nasdaq: RAMP) rose $4 13/16 to $23 7/8 on news of a deal, along with Ideal Technology Solutions U.S., to help upgrade General Motors' (NYSE: GM) customer Internet connectivity. The Fool interviewed Ramp's CEO on the day of the company's IPO... Photronics Inc. (Nasdaq: PLAB), which makes photomasks used in the production of semiconductors, won $2 3/8 to $28 1/2 on news that it will team with IBM (NYSE: IBM) to develop technology for making smaller, faster computer chips... Enterprise reporting software company Actuate Software Corp. (Nasdaq: ACTU) ascended $7 1/8 to $35 after Credit Suisse First Boston raised its rating on the stock to "strong buy" from "buy," setting a 12-month share price target of $45.
Spray finishing and coating application equipment company Sames Corp. (AMEX: BIN) added $4 to $23 7/8 after Chairman Wayne Edwards said Sames "has received a number of non-binding letters of intent" regarding a possible buyout, calling the process "ongoing"... Web traffic management software company F5 Networks (Nasdaq: FFIV) sped up $4 3/16 to $54 15/16 after saying it will release an upgraded version of its BIG/ip Controller that could increase throughput as much as three times over... Enterprise decision support systems (DSS) software developer MicroStrategy Inc. (Nasdaq: MSTR) moved up $1 3/8 to $41 1/2 after announcing a $3 million deal to provide software licenses, maintenance and consulting services to General Electric's (NYSE: GE) GE Capital Fleet Services.
Shares of World Color Press (NYSE: WRC) rolled up $5 3/16 to $35 after Quebecor Printing (NYSE: PRW) said it will acquire all outstanding shares of the company for $2.7 billion in cash, stock, and assumed debt. Quebecor's stock fell slightly, losing $23/32 to $22 31/32... Property and casualty insurance and reinsurance company St. Paul Cos. (NYSE: SPC), which agreed to sell its personal insurance operations to MetLife Auto & Home for approximately $600 million, gained $1 1/8 to $30 1/4... Property and casualty insurer Orion Capital Corp. (NYSE: OC) rose $6 9/16 to $47 5/16 after London's Royal & Sun Alliance Insurance Group agreed to buy the company for $1.4 billion in cash. The $50 per share deal represents a 23% premium to Friday's closing price.
Health care services company Specialty Care Network (Nasdaq: SCNI) rose $29/32 to $4 31/32 after its HealthGrades.com subsidiary inked an agreement with online women's network iVillage Inc. (Nasdaq: IVIL) to feature HealthGrades.com's proprietary health care ratings information on Better Health, iVillage's health channel... Medical products company Baxter International (NYSE: BAX) jumped $5 3/16 to $55 15/16 after it announced plans to spin off its cardiovascular business to Baxter shareholders on a tax-free basis in the first half of next year, creating a new publicly traded company... Educational programs company Argosy Education Group (Nasdaq: ARGY) advanced $1 1/8 to $8 9/16 on Friday night's news of fiscal Q3 EPS of $0.27, up from $0.16 a year ago and a penny ahead of the estimate one analyst gave First Call.
Indiana financial services company Peoples Bank Corp. of Indianapolis (Nasdaq: PPLS) deposited $21 7/8 to $69 7/8 after agreeing to be bought by Fifth Third Bancorp (Nasdaq: FITB) in a stock deal valuing Peoples at a 52% premium to Friday's closing price... Computing products distributor and PC value-added reseller (VAR) Inacom Corp. (NYSE: ICO) added $1 1/2 to $13 7/8 after Blue Cross/Blue Shield of Massachusetts signed the company to a five-year, $42 million technology services contract... Internet business software provider Vignette Corp. (Nasdaq: VIGN) cashed in gains of $1 5/32 to $67 7/32 after saying Amway Corp.'s new Quixtar Internet division chose the company's customer relations management software.
Paper maker Consolidated Papers (NYSE: CDP) wrapped up $1 3/4 to $29 7/8 after Donaldson, Lufkin & Jenrette boosted its rating on the shares to "buy" from "market perform"... Information technology training software developer CBT Group (Nasdaq: CBTSY) rose $1 11/16 to $23 9/16 after Morgan Stanley upgraded the stock to "outperform" from "neutral." Last week, the company hired a CFO and signed a five-year, $25 million deal provide virtual technical certification programs to Unisys Corp. (NYSE: UIS) employees... 3D graphics chipset maker NVIDIA Corp. (Nasdaq: NVDA) closed up $31/32 to $22 3/16 after Prudential Securities boosted its rating on the shares to "strong buy" from "accumulate"... EarthWeb (Nasdaq: EWBX), which provides online information and services to computer programmers, developers, and technicians, spread $2 1/2 to $45 after Pacific Crest Securities reiterated a "strong buy" rating on the shares.
Internet portal Infoseek (Nasdaq: SEEK) dropped $5 9/16 to $45 15/16 today after Walt Disney Co. (NYSE: DIS) agreed to acquire the remaining 57% of the company it does not already own and combine it with its Buena Vista Internet Group to create a single Web venture called go.com. The slide follows the old "buy on the rumor, sell on the news" saw, given that Infoseek's stock had risen 13% in the past ten trading days on speculation that such a deal was in the works. Each Infoseek share will be converted into 1.15 shares of go.com, which will trade on the New York Stock Exchange under the ticker symbol "GO." While the two companies declined to forecast go.com's eventual market value, analysts are putting a price tag of as high as $7 billion on the new company, or 20 times this year's expected revenues of $350 million. For the nitty-gritty on the deal, see this morning's Breakfast With the Fool.
Lawn and garden and pet supplies retailer Central Garden & Pet Co. (Nasdaq: CENT) was mowed down for a $1 7/16 loss to $8 7/8 after lawn care products firm Scotts Co. (NYSE: SMG) said it will end its exclusive distribution deal with Central for its Ortho products and Monsanto's (NYSE: MTC) Roundup consumer products when the arrangement runs out in September. Instead, Scotts will use direct sales and several distributors, with Central being the largest. Central said it will lose $200 to $250 million in sales over the next year due to the changes and about 4% to 7% of its gross profit for this year. "Substantial" charges will be recorded for the fiscal year ending this September as the company prepares its own distribution system for the changes ahead and reaccounts for its existing inventory of Scotts products. Scotts, which will assume some additional business risk while the distribution switcheroo takes place, was trimmed $3 1/8 to $41 1/16.
QUICK CUTS: Network server vendor Sequent Computer Systems (Nasdaq: SQNT) lost $5/32 to $17 9/32 after computing products and services giant IBM (NYSE: IBM) ended weeks of speculation and finally agreed to buy the company for $18 per share in cash, or about $810 million... Online horse race wagering network Youbet.com (Nasdaq: UBET) pulled up lame and stumbled $5/8 to $11 3/4 after casino and race track operator Hollywood Park (NYSE: HPK) said it is terminating its agreement with the company and will not permit Youbet.com to accept any wagers on Hollywood Park races, due to lower-than-expected wager volume... Computer scanners software developer Caere Corp. (Nasdaq: CAER) sank $2 7/8 to $10 7/8 after saying lower-than-expected sales will result in Q2 EPS between $0.18 and $0.20, short of the First Call mean estimate of $0.22.
Contract electronics manufacturing services (EMS) firm Sanmina Corp. (Nasdaq: SANM) slid $3 3/16 to $80 1/16 following a BancBoston Robertson Stephens downgrade to "long-term attractive" from "buy"... Online music technologies company Liquid Audio (Nasdaq: LQID) dropped $3 3/16 to $33 3/8 after rising 144% on Friday following its initial public offering of 4.2 million shares at a price of $15 per share... Black tie search engine company Ask Jeeves (Nasdaq: ASKJ) tripped $4 1/8 to $54 1/2 after privately held IPLearn LLC sued the company for patent infringement. When asked whether it was concerned about the lawsuit, Ask Jeeves' interactive butler declined to comment... Financial services firm Wells Fargo (NYSE: WFC) fell $1 1/2 to $43 11/16 following a Deutsche Banc Alex. Brown downgrade to "buy" from "strong buy."
Industrial gases company Air Products & Chemicals (NYSE: APD) leaked $1 3/4 to $41 1/4 on various reports that British industrial gas supplier BOC Group PLC will approve an $11.2 billion joint takeover offer from Air Products and France's Air Liquide... Online broker Ameritrade Holding (Nasdaq: AMTD) traded down $2 1/16 to $36 1/16 despite posting fiscal Q3 EPS of $0.05, which was $0.02 ahead of the First Call mean estimate. The company's average trades per day increased 14% sequentially, which was a slowdown compared to the 56% growth between Q1 and Q2... Keebler crackers maker Flowers Industries (NYSE: FLO) wilted $9/16 to $21 3/8 today. After the bell, the company said realignment costs and promotional expenses at its Mrs. Smith's Bakeries unit will lead to Q2 EPS of about $0.10, or roughly half of the $0.19 the firm said analysts had been expecting.
FOOL
ON THE HILL
An Investment Opinion
by
Bill Barker
The Inner Game of Investing
Is Donald Trump somewhat indifferent to whether he loses everything in Trump Hotels & Casino Resorts Inc. (NYSE: DJT) because he inherited his money? Could Alan Abelson be so skeptical because he was laughed at in first grade? These are a few of the questions that ran through my head as I read Derrick Niederman's new book on the psychology of investing entitled, The Inner Game of Investing: Access the Power of Your Investment Personality.
In his new book, Mr. Niederman, a contributing editor to Worth magazine and a former national squash champion, articulates the thesis that one of the general problems with books on investing is their insistence on providing a one-strategy-fits-all technique approach. The world of investment books is littered with examples of an author basically arguing, "This strategy works for me -- so it ought to work for everyone who is reading this book." However, according to Niederman, as investing animals each of us is ultimately controlled by our individual psychological make-ups, and a winning strategy that works for one type of person may very likely be completely unhelpful for somebody of a different psychological profile.
The "Inner Game" in the title thus refers not to any "secrets of Wall Street professionals" but the game inside one's own mind. As Niederman puts it, "If you could only reassemble the strengths of the various investment types, you'd be unstoppable. But guess what? You can't do it. It's impossible to be everything to everybody. What is possible is to better understand how various personality quirks and predispositions interact with that maelstrom of activity known as the stock market. After all, there are only a finite number of mistakes that we can make: We can sell too soon, we can buy too late, we can hold on too long, and perhaps we can commit a few other sins along the way. But for any one investor, some mistakes are far more likely than others." Recognizing and eliminating those mistakes is the major theme of the book.
Niederman divides the "investing personalities" into seven types: the Bargain Hunter, the Visionary, the Contrarian, the Sentimentalist, the Skeptic, the Trader, and the Adventurist. For each of these personalities the book offers five questions to help the reader decide whether he or she might be psychologically predisposed to succeeding with one strategy rather than another.
Many of the questions are transparent -- for instance under "Are you a Trader?" Niederman offers: "1) How many times per year do you not know the closing market numbers by the time you have dinner? 2) Do you ever 'fight the tape'?" You can probably answer off the top of your head where the answers to those put you along the trader/non-trader continuum. Other questions are more elusive, and therefore a bit more interesting: "Do you have children?"; "Did you have a contented childhood?"; "Are you absentminded?" These are posed to help you figure out whether you might be most successful by investing as a Visionary. To help you determine whether you are a Skeptic, the book asks, "Were you laughed at in first grade when you made a mistake in front of the class?" Some Adventurists perhaps share the trait of having inherited their money, rather than having earned it.
The Inner Game of Investing relies primarily on anecdotal evidence to support what types of investments would make the most sense for Niederman's categorizations of different psychological profiles. To that extent, numbers freaks are going to be somewhat disappointed in what the book can offer. Further, of necessity, the book does not claim that every (or any) individual can be perfectly categorized into one profile to the exclusion of others. If some readers might be dissatisfied with the level of detail included in the book on that level, it has to be recognized that a somewhat short and easily readable book on investing isn't likely to be able to give every reader a quick, easy, and definitive psychological self-evaluation. If it were that easy, there would be a lot of $200 an hour psychiatrists being put out of work awfully quickly.
Even if the classifications are not completely satisfactory, they do add some context to many of the ongoing discussions that visibly take place on the local message boards. Take the typical discussions contained in the Amazon.com message board. Many of those that invested in Amazon.com (NYSE: AMZN) a couple of years ago might be classified as Visionaries. (Here, I adopt Mr. Niederman's vocabulary without passing judgment on whether the term -- with any positive connotations it might carry -- is the appropriate one.) Visionary investors were perhaps foreseeing a day when Internet commerce would be a substantially more powerful business than others dreamt. Other investors might well also have purchased Amazon as Traders, or even as Contrarians. For any early purchasers, regardless of their reasons for investing, AMZN turned out to be a nice acquisition.
Fast forward a couple of years and Amazon.com presents itself as a different animal, both as a company generally and as a stock that has multiplied in value so many times. Amazon.com may be something that no longer appeals to the typical Trader, but appeals as much as ever to a Visionary. The dialogue on the Amazon.com board -- which often resembles the type of violent storm that might occur if a high and low pressure system were to meet somewhere above an exposed section of the American Plains states and just refuse to move for a couple of years -- hasn't necessarily been about the company in a long while. At a certain level, the subtext is simply and repeatedly one side asking "Why can't you be more of a Visionary?" with others answering, "Why should I be? I'm a Trader, and quite successful at it."
Niederman doesn't pick sides in this fight, though he barely represses his views about where his true thoughts lie about Traders. He writes, "I'm going to keep my promise of withholding judgment about what is right and what is wrong, other than to say that it is quite arguably wrong to tell someone to make only long-term investments when their psychological makeup doesn't permit it. Would you force your ADD grandchild to sit through La Traviata? Our job as investors is to do the best we can with what we've got."
A note from the author (imaginatively entitled, "A Note from the Author") is posted on our boards summing up Mr. Niederman's intent in the book. It states, "If you think that my thesis is kind of obvious, let me say that I agree: Knowing that personalities matter is not enough. The crucial next step is to learn the patterns of our mistakes and stop making them!" Just so.
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