Monday, November 03, 1997
DJIA: 7599.50 +157.42 (+2.12%) S&P 500: 932.73 +18.11 (+1.98%) Nasdaq: 1619.80 +26.19 (+1.64%) AMEX Disk Drive 255.05 +8.80 (+3.45%) 30-Year Bond 102 15/32 -20/32 6.19% Yield

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An Investment Opinion
by Dale Wettlaufer

The Liquidity Sop

Wow! Was that ever a correction. NOT! Corrections and crashes result in valuations that are either really reasonable or ridiculously cheap, not just marginally cheaper than their former record highs. The mutual fund complex, recent experience with the market, and now the media have it beaten into the head of everyone in the market that any dip -- even a 7% "correction" -- is some sort of huge buying opportunity. The individual investor unfortunately has become the liquidity sop for the Wise people on Wall Street that freak out at the touch of a button and the hero of half the pundits out there that think an investor's sagacity can be measured in the span of one week. One should measure investment results over a number of years, whether one is investing in mutual funds or individual securities.

To encourage the individual investor to run out and throw money into the market just because it has dipped is to encourage them to treat other investment decisions based on one variable. Purchase price certainly is a key variable in the selection of market-beating investments, but it's not the only variable. To see investors waiting in line to grab a wonderful company at a more attractive price than yesterday is heart-warming to a Fool. To see an investor waiting in line to hand over money to a group of people, 83% of whom (just equity funds) have not performed as well as the S&P 500 over the last five years, is heart-breaking to a Fool. The message drummed into people's heads is that every dip is an opportunity when the message should be "individual investors can outperform those who call themselves 'investment professionals.'"

The other message that shined through the other day was that it takes a market dip for bargains to appear. That's a bunch of bunk. Great investments make themselves available throughout the year, even as the market averages are hitting new highs. The idea that a market drop should be a Pavlovian signal to individual investors to buy makes a Fool wonder, because every day of the week the Wise make fun of individual investors in their demeaning commercials that liken investing to brain surgery or that claim that only the Wise have the time and tools to invest sucessfully. Terrific bargains appear quite often due to temporary industry-specific problems or because of reports that "such and such is selling such and such." When interest rates increase and the market drops 10% but the prices of excellent financial companies drop 20%, that's the time do bargain hunting. When the price of one sort of semiconductor drops and the stock price of a company making a totally different type of semiconductor also drops, that's the time to hunt for bargains. The bottom of a bear market is the time to entrust a great mutual fund manager with a boatload of cash or to dump that boatload into an index. The cheering on of the individual investor like he's a baby sitting on the potty for the first time is sickening, though, and belies that fact that much of Wall Street thinks you're a fool, small "f" intended.


KOREA ELECTRIC POWER CORP. (NYSE: KEP) added $7/16 to $8 5/8 after Standard & Poor's assigned an "A-plus" long-term rating to its UK50 million 8.5% bonds due 2007, its DM150 million floating-rate notes due 2002, and its 200 billion Italian lira 6.25% bonds due 2000 (the company had been downgraded along with the Republic of Korea's long-term foreign currency rating).

Integrated producer and distributor of aluminum OREGON METALLURGICAL (Nasdaq: OREM) jumped $10 3/4 to $34 3/16 after announcing on Friday that it will merge with tool and metal manufacturer ALLEGHENY TELEDYNE (NYSE: ALT). Each outstanding share of Oregon Metallurgical common stock will be converted into 1.296 shares of Allegheny Teledyne common stock in a deal valued at $560 million.

Shares of genomics company SEQUANA THERAPEUTICS (Nasdaq: SQNA) charged $2 3/8 higher to $13 5/8 after announcing that it will merge with ARRIS PHARMACEUTICAL (Nasdaq: ARRS) in a stock swap valued at $166 million. Arris will issue 1.35 shares for each share of Sequana.

TEARDROP GOLF CO. (Nasdaq: TDRP) gained $1 to $5 13/16 this morning after buying a great brand. The company agreed to acquire the assets of Tommy Armour Golf, a subsidiary of U.S. INDUSTRIES (NYSE: USI), for $10 million in cash, $10 million of preferred stock, and one million shares of Tear Drop common stock.

Automotive airbag company SAFETY COMPONENTS INTERNATIONAL (Nasdaq: ABAG) rose $1 3/4 to $15 after reporting Q2 EPS of $0.26 versus estimates of $0.24.

Avionics components company DECRANE AIRCRAFT HOLDINGS (Nasdaq: DAHX) flew $1 3/4 higher to $19 3/4 after acquiring Audio International, which solidifies Decrane's entry into the audio systems market for corporate aviation.

Long-distance concern ACC CORP. (Nasdaq: ACCC) rose $4 to $43 5/8 after potential acquirer TEL-SAVE HOLDINGS (Nasdaq: TALK) solidified its offer for ACC at $50 a share without the previous provision of lowering the price if ACC goes through with its merger with US WATS (Nasdaq: USWI).

ORBOTECH LTD. (Nasdaq: ORBKF), a maker of automated inspection systems for printed circuit boards, gained $3 13/16 to $47 1/16 after posting Q3 EPS of $0.70, topping estimates of $0.61.

Internet retailer ONSALE INC. (Nasdaq: ONSL) rose $2 1/4 to $25 1/4 after a successful debut of its "classified auction supersite" on Friday. BancAmerica Robertson Stephens initiated coverage of the company today with a "buy" rating.

Graphic board technology company DIAMOND MULTIMEDIA SYSTEMS (Nasdaq: DIMD) rose $1 1/8 to $11 1/4 after announcing that it will market a modem that utilizes 2-phone lines to double the existing bandwidth (112 Mbits) while enabling one line to still make and receive voice calls.

Wide area network connectivity products company NEWBRIDGE NETWORKS (NYSE: NN) rose $3 7/16 to $56 7/16 after J.P. Morgan initiated coverage on the company with a "buy" and a twelve month price target of $70.


Hip clothing designer MOSSIMO INC. (NYSE: MGX) fell $1 1/16 to $6 1/4 after announcing that it expects to report net sales of $17.1 million and a net loss of approximately $4.8 million, or $0.32 per share for the 1997 third quarter, which is less than expectations.

Construction giant FLUOR CORP. (NYSE: FLR) dropped $3 3/16 to $37 15/16 on reporting that 1998 operating profit is expected to be up to $100 million below estimates, which translates into $0.75-$1.00 in earnings per share.

Transportation safety and energy absorption technology company SIMULA INC. (NYSE: SMU) was crunched $13/16 to $15 7/16 after announcing that it will report a third quarter loss because of the "cost of inefficiencies in filling a record backlog of commercial airliner seats, and reduced revenues resulting from delayed throughput on higher margin production contracts for its government business."

Mexican food products company AUTHENTIC SPECIALTY FOODS (Nasdaq: ASFD) went stale, losing $1 1/8 to $11 1/4 after it announced that it had completed its acquisition of Texas-based Sauces Unlimited, Inc. The deal is for $2.4 million in cash, $450 thousand of assumed debt, and the issuance of 40,000 warrants at $11 1/8 per share.


(800) 411-5828 (code: 362389) -- replay through 11/3
(612) 321-9419 (code: 362389) -- replay for international callers

(800) 633-8284 (code: 3195088) -- replay through 11/3

(402) 220-4249 -- replay through 11/4

11/05/97 (Wednesday)
(800) 558-5523 (reservation #656249) -- replay from 4:30 pm EST through 11/7 @ 9:00 pm EST


ATLAS AIR (Nasdaq: ATLS) Call

FOOL PORTFOLIO BORING PORTFOLIO AMZN down $1/2 at $60 1/2 ATLS up $1/4 at $28 AOL up $1 3/16 at $78 3/16 BGP up $1/16 at $26 CHV up $3 3/16 at $86 1/8 CSCO up $1 31/32 at $84 COMS up $2 1/4 at $43 11/16 CSL down $1/4 at $43 DJT up $1/16 at $9 1/4 GNT up $1 1/4 at $43 1/2 GM up $1 11/16 at $65 7/8 ORCL up $23/32 at $36 1/2 INVX up $9/16 at $26 3/8 PMSI dn $1/16 at $13 3/16 IOM up $1 11/16 at $28 1/2 TDW up $1 3/8 at $67 1/16 KLAC up $3 13/16 at $47 3/4 LU up $5/8 at $83 MMM up $1/2 at $92 T up $1 at $49 7/8

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Every day, News writers Dale Wettlaufer and Randy Befumo engage in an impromptu discussion about the stories they find most compelling from the day's news, adding color, fresh commentary and the occasional wisecrack for your listening enjoyment. Check it all out in the Motley Fool's Lunch Report on RealAudio Produced by partner AudioNet.

Randy Befumo (TMF Templr), Fool One
Dale Wettlaufer (TMF Ralegh), Fool Two
Alex Schay (TMF Nexus6), Fool Three
Contributing Writers

Brian Bauer (TMF Hoops), Fool Four