The Motley Fool would like to reassure our readers that reports of pigs flying over the skies of Boston this afternoon were completely false. Those were the four horsemen of the apocalypse. Don't be alarmed, however. Hell already froze over last week when the Red Sox beat the Yankees for the American League pennant.

Congratulations, Red Sox Nation. You're champions of the world. Enjoy it. Just be careful not to slip and hurt yourself when you're coming down off cloud nine.

In today's Motley Fool Take:

Stay Off the Volatility Carousel


Bill Mann (TMF Otter)

A few weeks ago all of the brokers and market makers were coming to the confessional claiming that their earnings were down as a result of reduced trading and volatility in the stock market. Well, the last few weeks should have been quite a relief from the drought for Schwab(NYSE: SCH) and other brokers. Volumes on the Nasdaq and the New York Stock Exchanges have surged. Perhaps more importantly, volatility has jumped, especially in the most speculative corners of the market.

The most popular gauge for market volatility is the VIX, which measures the implied volatility of the Standard & Poor's 100 companies' puts and calls. But it's not the largest companies on the market where things have obviously heated up -- it's the little guys. Everyone's looking for "the Next Taser" (Nasdaq: TASR), another small company with a smaller float that can take off like a chipmunk on nitrous oxide. Well, don't.

Over the last few weeks, we've seen some companies that have moved 40, 50, 60% or more in a single day, sometimes on no news, or on news of marginal importance. Tuesday, Mace(Nasdaq: MACE), which has a share float of 8 million, traded almost four times that amount as the company's stock rose almost 80%. Such rises are generally the result of a takeover or a going-private transaction, something that pegs the value of the company far higher than the market had granted it. What happened at Mace? It announced a new less-than-lethal product. Great. Wednesday it was down 16%, also on heavy volume. Absolutely nothing has changed.

But Mace isn't alone. Travelzoo(Nasdaq: TZOO) has an average trading volume over the last 10 days that equals its share count. This means that the average holding period for a Travelzoo shareholder at the moment is one day. Isotope manufacturer Isonics(Nasdaq: ISON) has traded an average of 2 1/2 times its float daily over the last 10 days. The average holding period for Isonics at the present rate? Two hours. That's simply absurd. Meanwhile, the company trades up 40% one day, down 20% the next. It leapt from $1.70 a stub on October 8 to $5.50 two weeks later. Now, after a 17%-plus gain Wednesday, Isonics sits at about 35% below its high of last week. I suspect that most people trading this company have no idea what isotopes are, nor do they care.

Whereas the big movers on the markets had generally been in the 9-12% range over the last several months, routinely each day you'll find companies moving several times that amount. Wednesday, for example, aaiPharma(Nasdaq: AAII) increased in price almost 60% (admittedly on some actual good news, from an extraordinarily depressed level), Laserscope(Nasdaq: LSCP) 32%, and Microstrategy(Nasdaq: MSTR) 31%. On the downside, Israeli motion control company ACS-Tech 80(Nasdaq: ACSEF) dropped 30% on the news of a weaker fourth quarter.

There is really nothing fundamental that suggests most of these violent moves are appropriate. The last time we saw an extended period of time where the most speculative companies on the market acted like this was just before the meltdown happened in 2000.

All I'm saying is that if the big moves up and down give you the impression that there is easy money floating around out there, put it out of your head. This is rank speculation, plain and simple, and a great number of people who feel pretty smart at this moment are going to get mauled when the carousel stops.

Bill Mann owns none of the companies mentioned in this story. He does think that the brokers are a little interesting, though. For true hidden gems, not traders' playthings, consider a free trial to the Motley Fool's Hidden Gems newsletter .

Discussion Board of the Day: Best Travel Spots/Tips

Pilates of the Caribbean? What do you think of cruising spa services? Which boats are worth sailing on? Have any cruising horror stories to share? All this and more -- in the Best Travel Spots/Tips discussion board. Only on

Garmin's Got the Goods


Dave Mock

Quick, somebody pinch me.

That's always my first thought when a company goes almost exactly the way I thought it would. It's pretty rare that I put a strong endorsement on a stock, but Fools have seen me gushing about Garmin Ltd.(Nasdaq: GRMN) for some time now. I was first turned on to the GPS powerhouse late in 2002 when shares were had for $18.

After seeing a lot of potential in pessimistically priced shares, Garmin's stock roared ahead in 2003, nearly tripling in 12 months. Still a solid company but pushing an excessive earnings multiple, I was hoping to see the stock back at a more reasonable valuation again to pick up more of the company. I got my chance earlier this year when it turned in less-than-stellar, but still solid, earnings. Shares then were available for a little more than $30.

Thanks to a good second quarter and blockbuster earnings released yesterday, shares now sell for north of $50. Garmin logged $193.6 million in revenue for its third quarter, an increase of 43% from the prior year. Earnings were $67.1 million, a 90% increase from last year. With foreign currency fluctuation factored out, Garmin earned $0.58 per share, knocking the socks off its previous guidance of $0.42 to $0.45 per share and impressing analysts.

One of few negatives from Garmin's last earnings release was a drop in its gross margins to the low 50% range, which had management concerned. This quarter showed improvement in this area, with gross margin kicking back up to 57.7%. Nothing makes me feel better than a team that spots "soft areas" of the business and then corrects them.

Going forward, Garmin is once again priced as a performer. Garmin has sustained 20%+ revenue growth for almost a decade and should be able to continue on this path, putting it in a stable growth category. Many investors are more comfortable in high growth investments such as Garmin or Starbucks(Nasdaq: SBUX) that aren't subjected to the torrents of hyper-growth seen in companies such as eBay(Nasdaq: EBAY), AMZN), or Yahoo(Nasdaq: YHOO).

At a recent major wireless industry show, the floor was lined with companies promoting all sorts of GPS solutions for mobile consumers. There's certainly more opportunities out there for Garmin's products, and the company looks well positioned to capitalize on its share.

Fool contributor Dave Mock is not afraid to pull over and ask for directions when he's lost -- though if he owned a Garmin GPS, he could save himself the embarrassment. He owns shares of Garmin and Starbucks.

Quote of Note

"One person with a belief is equal to a force of 99 who have only interests." -- John Stuart Mill

Saucony Laces Up


Rich Smith

Athletic footwear maker and Motley Fool Hidden Gems recommendation Saucony(Nasdaq: SCNYA)(Nasdaq: SCNYB)reported strong third-quarter profits on Tuesday, with net earnings up 54.5% year-on-year on a 32% increase in sales. However, share dilution knocked about 10% off of those profits by the time they fell to the per-diluted-share level. As a result, profits on both the company's Class A and Class B shares (which are allocated 110% of Class A profits but lack voting rights) rose "just" 40%.

Dilution aside, though, Saucony's overall profitability shows few signs of coming apart at the seams. The quarter's superb results were anything but an aberration, as can be seen from the company's year-to-date results, also reported Tuesday: Sales were up 26% year-on-year, generating net profit growth of 53% and about 37% growth in diluted earnings per share. Since the third-quarter growth rate exceeded the average growth over the past nine months, it appears that this company is gaining speed -- not slowing down -- as time jogs on. What's more, the third quarter's numbers actually carried a handicap -- $300,000 in extra legal fees incurred as part of the company's search for a buyer of this little cash-generating powerhouse.

Strengthening margins was one factor helping the company's earnings outpace revenue growth. Year-on-year, all of gross, operating, and net margins for the first three quarters of the year have increased. The bottom line result was a rise in the net margin from 6.6% to 8.0%.

Saucony now projects full-year 2004 profits of about $1.54 per diluted Class A share and about $1.69 per diluted Class B share. With both classes currently priced at approximately $23.30, that gives Saucony's shares forward P/E ratios of 15 and 14, respectively. Considering that for fiscal 2003, the two classes earned profits per diluted share of $1.26 and $1.38, yielding a year-on-year earnings growth rate of 22% for each (and PEGs of 0.68 and 0.64), both classes of Saucony stock appear to be quite attractively priced. They also carry a significant discount to the valuations attached to shares of competitors Reebok(NYSE: RBK) with a 0.9 PEG and Nike(NYSE: NKE) with a 1.3.

Read more about these three sneaker sellers in:

Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.

Is Verizon's Call Waiting?


Alyce Lomax (TMF Lomax)

Verizon (NYSE: VZ) reported flat earnings today, along with the unsurprising disclosure that strong wireless revenues offset the lackluster landline business. Although Verizon's wireless success may be heartening, the telecom industry's tough climate is still apparent.

Today's press announcement, of course, emphasized the positive aspects in its headline, such as Verizon's 6.7% increase in overall sales to $18.2 billion and the 23% increase in wireless revenues alone. (In fact, Verizon Wireless contributed more than 40% of the company's total sales.) However, the company's third-quarter net income was flat, at $1.8 billion, or $0.64 per diluted share, after a $20 million, $0.01-per-share special item related to pension settlements.

Industrywide, stalwart telecom companies such as AT&T(NYSE: T) are turning away from more traditional telecom offerings such as long distance. Verizon's press announcement played to its strengths and the evolution within the industry, stating, "We are steadily building momentum and accelerating our transformation into an industry-leading wireless and broadband company."

Despite the increasing migration of just about everyone and their brother to broadband, even that is questionable as a growth vehicle, though Verizon showed some positive aspects in that regard, with a 52% increase in DSL subscriptions since this time last year.

However, it's still impossible to ignore the fact that cable companies such as Comcast(Nasdaq: CMCSA) and Cox(NYSE: COX) have seen much success within their own high-speed Internet offerings. Meanwhile, Motley Fool Stock Advisor pick SBC Communications(NYSE: SBC) has once again lowered the price for broadband in its bundled package, a move that should encourage lower prices industrywide.

Other notes of interest included Verizon Wireless's low churn rate of 1.5%. The company's free cash flow decreased a bit compared with this time last year; on the other hand, it reduced its debt burden by 10.7% to $40.5 billion.

Although some may argue that now's the time to pick the future winners in the telecom industry, it's clear that it's still experiencing a massive amount of turmoil and competition. With some of the positive aspects of today's quarterly results, it's arguable that Verizon is one of the stronger players in the beleaguered industry, with its hold on wireless customers and its high-speed Internet offerings. However, given the current climate, the industry is enough to make anybody a bit skittish.

Alyce Lomax does not own shares of any of the companies mentioned. She gets her home broadband service from Verizon.

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For a list of all our stories from today, see our Today's Headlines page.