Friday, January 15, 1999
DJIA 9246.57 +125.64 (+1.38%) S&P 500 1230.37 +18.18 (+1.50%) Nasdaq 2320.03 +43.21 (+1.90%) Value Line Idx 926.80 +9.38 (+1.02%) 30-Year Bond 101 31/32 -31/32 5.12 Yld

An Investment Opinion
by Dale Wettlaufer

Practice Makes Permanent

Normally, we deal with a topical issue in this space. We look at what stock is moving and write about whatever we feel we have an insight on. Never one to be held down too tightly by convention here or elsewhere, I just wanted to hit one point that I've seen in a few articles on the Web this morning. Basically, I want to respond to the articles that assume the market's screwed up and that we're in a bubble. I don't know if we are or we aren't, because spending time trying to figure out what the market will do is a waste of time in comparison to learning about individual industries and companies.

Punditry too often focuses on what the market is doing and how people are going to react to that. If you pay too much attention to this sort of thing, your brain is going to melt. Stop listening to stuff about historical P/Es and start figuring out what particular companies are about. If there's one thing we're not going to dwell on in this space, it's historical market P/Es. That would be as useful as the people of Florence in the year 1500 continuing to warn everyone that the world really is in a dark age and that this Renaissance stuff is going to go away. Maybe that analogy isn't so apt. The Roman guy that sounded the early alarms on the fall of the empire was derided, too, so we're careful not to get too wrapped up in foreseeing anything about the world in general.

Foretelling the market is just not that much of a value-driver for an individual's portfolio. The marginal cost of spending 50% of your time on the market in general is higher than the marginal opportunity cost of learning what makes particular companies tick. The former is based on stuff that highly paid Ph.D.s on Wall Street can't even get right on a consistent basis. The latter is based on what reasonably intelligent and diligent people can get right.

In a world where money market funds are selling at over 30 times earnings after taxes and fees, worrying about the market's 25 P/E or whatever it is today just trains you to fret about the collapse of Western Civilization when short-term interest rates are 18% and Coca-Cola Company is selling at 10 times earnings. To elucidate that a bit, if you're going to spend all your time worrying about the market and not individual companies now, you're likely to repeat that behavior when other macro events beyond your control dominate the headlines while great franchises are selling at ridiculously cheap prices. "Practice makes permanent," a golf pro once said. Practice stands a great chance of permanence in investing, as well.


Utility and network security software firm Symantec Corp. (Nasdaq: SYMC) gained $1 3/4 to $22 after reporting fiscal Q3 EPS of $0.42 (excluding charges), up from $0.37 a year ago and a penny ahead of the First Call mean estimate. The company said it had "solid" retail and corporate sales increases, with "substantial" growth occurring in Europe.

Streaming media technologies company RealNetworks (Nasdaq: RNWK) picked up $7 7/16 to $57 1/2 after announcing it will work with cable-based online services provider and Rule Breaker Portfolio holding @Home Network (Nasdaq: ATHM) to develop a new broadband streaming media platform based on RealNetworks' RealSystem G2 technology. @Home also gained $5 5/8 to $108 1/4.

Internet-based direct marketing company XOOM.com (Nasdaq: XMCM) sped ahead $13 1/16 to $61 after saying Web content integrator and aggregator InfoSpace.com (Nasdaq: INSP) will provide online white pages, yellow pages, and classified ads to Xoom.com's 5.6 million members. In exchange, InfoSpace.com users will be able to join Xoom.com's Buyers Club and receive free discounts on merchandise. InfoSpace.com rose $4 1/2 to $57 3/8.

Website developer and operator Telescan Inc. (Nasdaq: TSCN) moved up $2 to $18 after NBC and GE Capital's Equity Capital Group, both units of General Electric (NYSE: GE), said they acquired more than 1.22 million shares of the company in a private placement at a price of $7.70 per share. The shares represent a 9.9% stake in Telescan.

Enterprise software company BMC Software (Nasdaq: BMCS) was boosted $1 3/4 to $39 1/2 after Prudential Securities raised its rating to "strong buy" from "accumulate" with a 12-month price target of $55 per share.

Shares of several Latin and South American companies rose this morning, perhaps as bargain hunters went shopping amidst the rubble following this week's financial problems in Brazil. Telecomunicacoes Brasileiras S.A. (NYSE: TBH), which is now a tracking stock for the twelve companies resulting from the breakup of telephone monopoly Telebras last year, gained $11 7/8 to $66. Mexican telecom provider Telefonos de Mexico (NYSE: TMX) tacked on $4 13/16 to $47 3/4, and Telefonica de Argentina (NYSE: TAR) picked up $3 3/4 to $25 7/16.

Quicken and TurboTax software developer Intuit Inc. (Nasdaq: INTU) added $6 9/16 to $85 1/4 after Credit Suisse First Boston raised its rating to "strong buy" from "buy" on views that the company's upcoming Web TurboTax software will be a hit.

Biotechnology firm Biogen (Nasdaq: BGEN) advanced $3 to $93 1/4 after reporting Q4 EPS of $0.54, up from $0.42 a year ago and in line with the preview management gave at an investment conference earlier this week. Revenues rose 36% in the quarter to $168.4 million, thanks to increased acceptance of its Avonex multiple sclerosis drug in Europe and the U.S.

Online auctioneer eBay (Nasdaq: EBAY) gained $9 11/16 to $235 after saying it will work with the e-commerce solutions unit of transaction processing and credit reporting firm Equifax Inc. (NYSE: EFX) to develop a new personal privacy and authentication solution for users of eBay's website. Equifax climbed $1 5/16 to $32 15/16.

Magazine publisher Reader's Digest Association (NYSE: RDA) gained $3 to $29 1/16 after Business Week quoted sources saying that the company is in discussions to combine the company with "several Time Inc. publications and direct-marketing businesses" owned by media giant Time Warner (NYSE: TWX). Time Warner rose $1 5/16 to $60 7/8 this morning.


Information technology software company Platinum Technology (Nasdaq: PLAT) dulled $5 11/16 to $13 after last night's news that it expects Q4 EPS of about $0.40, well off Wall Street's $0.53 estimate. The company blamed weakness in its global consulting organization and said it is reorganizing the division. At least two brokerages downgraded the stock this morning.

DRAM chip enhancement technologies developer Rambus (Nasdaq: RMBS) slowed $8 1/8 to $89 7/8 on last night's news of fiscal Q1 EPS of $0.08, ahead of last year's $0.02 mark and even with the five-analyst estimate reported by First Call. The company also warned that earnings for the next two or three quarters will likely be "no better than flat" compared with Q1 results.

Financial information provider Data Broadcasting Corp. (Nasdaq: DBCC) lost $3 1/16 to $28 1/8 this morning as financial news website operator MarketWatch.com (Nasdaq: MKTW) was to IPO today in a highly anticipated offering, the first of 1999. For more on the MarketWatch joint venture between CBS Corp. (NYSE: CBS) and Data Broadcasting, head to today's Breakfast News.

International long-distance carrier IDT Corp. (Nasdaq: IDTC), which last night said fiscal Q2 EPS is expected to come in about a dime below Street projections at $0.06 per share, hung up $3 3/16 to $10 3/16 this morning. Revenue is seen meeting or beating expectations but gross margins were hurt by, among other things, increased losses at its Internet division.

Specialty semiconductor company Microchip Technology (Nasdaq: MCHP) crumbled $4 1/8 to $35 5/8 after reporting fiscal Q3 EPS of $0.34 last night, ahead of the year-ago $0.30 (pre-charge) figure but a penny short of analysts' expectations. "Microchip's December quarter was characterized by continued low order visibility along with some weakness in end-of-quarter turns order shipments,'' said CEO and President Steve Sanghi.

Semiconductor maker International Rectifier (NYSE: IRF) dropped $3/4 to $10 3/4 following its announcement of fiscal Q2 EPS of $0.02 (excluding items), down from last year's $0.13 profit and flat with the four-analyst estimate reported by First Call. Demand in Asian markets and increased royalties offset slower European demand.

Automated industrial production equipment maker DT Industries (Nasdaq: DTII) fumbled $2 3/8 to $16 1/4 after it said it expects fiscal Q2 EPS of between $0.10 and $0.12, down from both last year's $0.66 figure and First Call's $0.41 consensus estimate. Revenues didn't meet expectations in the quarter because of delays in orders from several significant automation group customers, according to President and CEO Stephen Gore.

Offshore Logistics (Nasdaq: OLOG), which supplies helicopter transportation services to the offshore oil and gas industry, was chopped by $1 3/16 to $10 15/16 after it said it expects fiscal Q3 EPS to come in below the Street's $0.35 projection -- at between $0.20 and $0.25 -- because of reduced demand for flight services in its major markets.

Telecom services integrator Premiere Technologies (Nasdaq: PTEK) shed $3/4 to $10 1/16 as Raymond James downgraded the stock to "accumulate" from a "buy" rating.

Drug developer Cytel Corp. (Nasdaq: CYTL), one of yesterday's heroes, lost $1 9/16 to $5 13/16 this morning after rising nearly 270% in Thursday's session on news that its Epimmune reported encouraging results in early tests of an experimental HIV vaccine.


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