The Week in Review -- October 15, 1999

The Markets

  10/8 Close 10/15 Close Change %Change
DJIA 10,649.76 10,019.71 -630.05 -5.92
S&P 500 1,336.02 1,247.41 -88.61 -6.63
Nasdaq 2,886.59 2,731.83 -154.76 -5.36

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Earnings Emergence
by Jerry Thomas (TMF Cheeze)

Greetings, Fools.

This week, in Pakistan, military leaders dismissed the government and placed themselves in control. In Los Angeles, basketball star Wilt Chamberlain passed away. On Thursday, Federal Reserve Chairman Alan Greenspan expressed some concern over the risks in the stock market, sending stock prices down sharply on Friday. Also Friday, we learned that the Producer Price Index, a measure of inflation, rose more sharply than expected in the month of September. On Wednesday, the United States Senate refused to ratify a nuclear test ban treaty, while on Tuesday, if only symbolically, a baby boy born in Sarajevo was designated Earth's 6-billionth inhabitant. On Friday, the international medical group Doctors Without Borders was awarded the Nobel Peace Prize.

An investor's job is to make sense of events, which so often seem so random. What is really important? While all of these events have their significance, not all of them are going to have a material impact on your long-term investments. That's why Fools look forward to earnings season, when reliable information emerges, and solid data becomes available for study and analysis. In Monday's Rule Breaker report, Jeff Fischer (TMF Jeff) talks about the importance of quarterly earnings reports and why investors anticipate them so eagerly. He also talks about America Online (NYSE: AOL) and its phenomenal prospects for growth. It's surprising how fast those numbers can grow.

In Thursday's Rule Breaker, Jeff talks about Iomega (NYSE: IOM) and its phenomenal prospects for disappointment. Iomega's earnings report tells the story in a way that only stark numbers can relate, and Jeff's postmortem reveals a great deal about what went wrong.

If you are a new investor, earnest in your studies, you will soon come to understand why a quarterly earnings report can mean so much. This week Intel (Nasdaq: INTC) fell short of expectations by two cents per share, and the stock sold off sharply in response. Meanwhile Apple Computer (Nasdaq: AAPL) surprised to the upside by six cents, and the stock rallied. In Monday's Foolish Four report, Ann Coleman (TMF AnnC) gives you a pretty good primer on the importance of earnings and why they make such a difference, focusing specifically on one of the Dow's more interesting performers of the year, International Paper (NYSE: IP).

In fact, you'll see earnings and quarterly reports getting a lot of attention in Fooldom this week: If you'll look at our Today's Features page -- which lists all of our features, specials, and reports of the last week -- you'll find that word "earnings" mentioned over and over again. This is no accident, because when a company reports, we get one of the few untainted glimpses into what is really going on at a company. And even then, the matter can be the source of controversy. Monday's Rule Maker report by Bill Mann (TMF Otter) gives a fascinating look at Coca-Cola (NYSE: KO) and the eyebrows that are being raised thanks to the way it reports its earnings.

Are you getting a sense of my general theme by now? Are you beginning to understand that it might be a good idea for you to learn a thing or two about how a company's profits can affect your investments? Good.

So look at Tuesday's Drip report (yet another by Jeff), which examines Intel's third quarter. Or Thursday's Fool Plate Special, where Dave Marino-Nachison (TMF Braden) looks at the latest numbers from VISX Inc. (Nasdaq: VISX). Better yet, spend some time with the 13 Steps to Investing Foolishly, giving special attention to Step Eight, "Get Information on Great Companies." Earnings reports are one of your most important tools as an investor, Fool.

Of course, earnings are not the only thing that matters. This week we kicked off our 1999 Fool Charity Drive, and this year we're asking for your suggestions as to what organizations are most worthy of our support. Since our first charity drive in 1997, Fools have raised over $320,000 to lend a helping hand to those who need it. So please participate, even if it's only to make a suggestion. Even your word can mean a lot.

Until next week,
Fool on!

Cheeze

 




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