TheStreet.com's MIDDAY UPDATE
July 01, 1999
--- Weekly Investment Newsletter -- highlights small-caps with Dynamic Growth Potential that have been under publicized and undervalued. Register to WIN A PALM PILOT -- winner announced weekly !!
Market Data as of 7/1/99, 12:58 PM ET:
o Dow Jones Industrial Average: 10,992.97 up 22.17, 0.20%
o Nasdaq Composite Index: 2,695.71 up 9.59, 0.36%
o S&P 500: 1,374.45 up 1.79, 0.13%
o TSC Internet: 634.86 up 18.20, 2.95%
o Russell 2000: 453.94 down 3.74, -0.82%
o 30-Year Treasury: 89 04/32 down 31/32, yield 6.040%
In Today's Bulletin:
o Midday Musings: Wall Street Cheers Stocks' Resilience as Gains Continue
o Herb on TheStreet: More Winners Than Losers in This Column's Report Card for the First Half
Also on TheStreet.com:
Wrong! Dispatches from the Front: Cramer Berkowitz Plays Ball With the Bears
Your favorite team gets back in and scores.
Networking: Slowly but Surely, Tellabs Tiptoes Onto the Net
With its purchase of NetCore, Tellabs can move more easily into the market for Internet gear.
Market Features: Lehman Unleashes a Value List That's Short on Value Stocks
Forget the 'value' label, says Lehman's Jeffrey Applegate: The Uncommon Values list is all about being higher next year than now.
Dear Dagen: Dear Dagen: Is Now the Time to Invest in Small-Cap Value Stocks?
Don't take sides in the eternal growth-vs.-value debate. When it comes to small-caps, own both.
Midday Musings: Wall Street Cheers Stocks' Resilience as Gains Continue
Wall Street was just as impressed with stocks for edging higher at midday as it was with the big rally they put on after yesterday's
Easy to see why: In three days, the
goes up 4.4%, and on the fourth it's still finding strength. Even when the first of the big economic reports between now and the next
Federal Open Market Committee
meeting came in strong. Despite a bond market that's busy taking back all of yesterday's gains. That's the kind of market that Wall Street could fall in love with all over again.
It's as much about earnings as it is about the Fed. Sure, people will talk your ear off about how stocks are up today because the Fed signaled that it won't raise rates when it meets in late August. "One and done!" they'll shout. "Just a flu shot!" they'll exclaim. Never mind that most Fed watchers
haven't changed their takes on what will happen at the next meeting. Never mind that the bond market is selling off on a
Purchasing Managers' Index
that suggests the Fed may have to go.
What really matters is that the meeting's not going to happen until August, and August is
away. But earnings -- earnings are going to start coming out next week. And earnings look pretty damn good.
"Bonds aren't really responding well today," said Barbara Marcin, portfolio manager at
Gabelli Asset Management
, "but earnings look like they're coming in strong for the quarter. If we shake off concerns about interest rates and focus on earnings, then I guess we could have a strong summer."
That's a bet that investors are making today. The
Dow Jones Industrial Average
was up 25 to 10,996 while the
was up 2 to 1374. The
Nasdaq Composite Index
was up 8 to 2694.
TheStreet.com Internet Sector
index was up 17, or 2.7%, to 634.
was trading down 4 to 454 -- typical action on the day after the small-cap index was rebalanced, as investors who had been front-running the stocks that index funds would have to load up on sell their shares.
Market internals were positive. There were 72 new highs vs. 21 new lows on the
New York Stock Exchange
, where advancers were outpacing decliners 1,511 to 1,397. In
Nasdaq Stock Market
action, there were 137 new highs and just 18 new lows, but losers were topping gainers 1,891 to 1,746.
Volume was back, suggesting that the buyers' strike is over. On the NYSE, 466 million shares had passed hands. On the Nasdaq, 627 million shares had traded.
Those stats, combined with the recent move up, make technicians happy.
"We're back in the saddle on the upside," said Robert Dickey, managing director of technical analysis at
Dain Rauscher Wessels
in Minneapolis. "The reaction to the Fed announcement and the break through 10,900 is really good. For the next two or three weeks, we're going to be heading higher. We're pretty strong up to 11,400 on the Dow. I think the Nasdaq will perform even better than that. And the Russell even better than that."
Thursday's Midday Movers
"10 Uncommon Values" stock list were benefiting solidly from being anointed as such. (
looked at the absence of traditional value names on the list of values in an earlier
- America Online (AOL) was up 4 1/8 to 114 1/8.
AT&T (T) - Get Report was up 1 13/16 to 57 5/8.
Firstar (FSR) was up 15/16 to 28 15/16.
Ford (F) - Get Report was up 1 3/8 to 57 13/16.
General Instrument (GIC) was up 1 5/8 to 44 1/8.
Intel (INTC) - Get Report was up 1 7/8 to 61 1/2.
KLA-Tencor (KLAC) - Get Report was up 5 1/8, or 7.9%, to 69 15/16.
Eli Lilly (LLY) - Get Report was up 2 5/16 to 73 15/16.
Microsoft (MSFT) - Get Report was up 3/16 to 90 1/2.
Tyco International (TYC) was up 1 1/8 to 95 7/8.
, an e-commerce software firm, was flying 42 7/8, or 204.1%, to 65 1/16 after
Credit Suisse First Boston
priced its 3.3 million-share IPO above-range at $21.
Among other new issues,
was climbing 12 3/8, or 82.5%, to 27 1/2 after Credit Suisse First Boston priced its 4 million-share IPO top-range at $15. The telecommunications software company is based in Redwood City, Calif.
was hopping up 4 3/8, or 19.4%, to 27 after
Deutsche Banc Alex. Brown
priced its 8.4 million-share IPO above-range at $22.50. The company is a religious and family radio operator.
In other news:
was storming up 6 1/4, or 83.3%, to 13 13/16 after forming a strategic alliance to be
exclusive provider of books and related products. Wal-Mart was flat at 48 1/4.
was down 5 5/16, or 9.2%, to 52 1/4 after Deutsche Banc Alex. Brown said the company is planning to spend $100 million over the next 18 months to build brand awareness. The firm cut its 1999 estimate for the company to a loss of 50 cents a share from a profit of 20 cents.
was off 1 7/16 to 29 3/8 after
Morgan Stanley Dean Witter
downgraded the stock to neutral from strong buy, citing weakness in the company's creative content business.
was down 4 3/16, or 16.2%, to 21 11/16 after last night agreeing to acquire
for $26.6 million, or $25.74 a share, in cash. Eagle BancGroup was up 2 5/16, or 10.5%, to 24 3/8.
was up 1 1/4, or 5.2%, to 25 1/4 after last night saying it will issue about $100 million in new stock to its majority shareholder, Hearst, to raise cash for trimming debt.
was up 5 15/16 to 178 1/8 after expanding its marketing relationship with
Procter & Gamble
. P&G was down 3 to 86 1/4.
was up 2 1/4, or 10.8%, to 23 1/4 after last night posting fourth-quarter earnings of 48 cents a share, topping both the seven-analyst outlook for 37 cents and the year-ago 40 cents.
was down 3 to 60 3/8 even after last night posting fourth-quarter earnings of 38 cents a share, a penny higher than the 16-analyst outlook and above the year-ago 4 cents. The retailer said it sees 2000 percentage revenue growth in the mid-single digits.
was up 2 1/16, or 22.8%, to 11 3/16 after saying it expects to beat second-quarter estimates by 15 cents to 20 cents a share thanks to design agreements with big computer makers. The three-analyst view called for a loss of 20 cents vs. the year-ago loss of 23 cents.
was tanking 11 1/4, or 30.1%, to 26 3/16 after last night predicting fiscal 1999 earnings of 54 cents a share, below the 20-analyst forecast of 60 cents but above the year-ago 44 cents. The company, blaming slower than anticipated growth and costs from its Internet launch, said it expects the 6-cent shortfall to be evenly split between the last two quarters of the year. Today, Deutsche Banc Alex. Brown dropped the stock to buy from strong buy,
lowered it to market outperformer from recommended,
slashed it to hold from strong buy and
Thomas Weisel Partners
cut it to buy from strong buy.
Herb on TheStreet: More Winners Than Losers in This Column's Report Card for the First Half
Six months down. Six to go. This column historically grades itself and its sources at year-end. But, hey, do you
care that far from the fact? Do you care at all? I dunno, but for accountability's sake I care.
Not only does it keep me and my sources honest, but there's a moral to some of these stories, especially this year, thanks to tougher year-end audits and/or the inability of companies to hide from bloated inventories or botched business plans.
Classic examples, since January, include
no celebration -- delisted),
Family Golf Centers
(playing golf isn't as popular as watching it --
Just For Feet
(earnings got trampled,
lousy inventory controls),
not enough caution in the amount of surgical gloves -- its specialty -- put into the distribution channel),
(sad song --
surprising slowdown in earnings growth) and
deflated -- didn't sell as many airbeds as expected). Each one was a favorite of short-sellers, and each came apart with surprising speed. (A-pluses, all of them!)
This column also gets high marks for raising questions, starting last year, about
, a distributor of electronics products overseas. It received an incomplete in my last year-end report card. Funny what a difference a disclosure about
missed earnings coupled with an admission of forged documents can make. (Moral: Never pick a public fight with short-sellers, which is just what CHS' CEO did.)
Also at the head of the class:
Ashok Kumar, who correctly
revenue growth would slow, and money manager Jim Marquez, of
in Greenwich, for his A-plus prediction in
was ripe to rise (it has roughly doubled). Also high on his
list at the time:
(up 26%). Also:
Pioneer Natural Resources
(up 20%) and
, which he said would eventually get a takeover bid. It did, and now it's about 50% higher than when he first mentioned it. (Which goes to show that if you have passion about something, it can pay to go on the record.)
Speaking of which: Short-seller Marc Cohodes of
, no stranger to this column, finally gets an A-plus for predicting that
, a maker of PC hard disks, would get
flattened. (It did, stockwise and earningswise.) Ditto for Cohodes with
, which is roughly half of where it was six months ago,
Other columns worthy of the honor roll:
makes towels, and
distributes drugs to nursing homes. Both became very ill
they had already fallen in earlier plunges, proving that just because a company has already been hit by bad news doesn't mean it can't get hit even harder with worse news.
And this column deserves to be on the dean's list for mentioning
and its Internet spinoff,
Both are lower than where they were.
But this column gets failing marks, at least right now, for questioning
, which continues to defy the skeptics. And
Hibbett Sporting Goods
. (We could call both incompletes considering that short-sellers continue to whisper that they've got plenty of trouble.) And how about
, a fast-growing retailer of clothes for teenage girls? Hasn't budged since I
mentioned it. (Incomplete.) Other incompletes include
Lernout & Hauspie
(hello you unlovable
(the stock is down but there's certainly been
no funeral procession);
Pre-Paid Legal Services
(jury's still out on
Quite frankly, this is the lowest number of failures since I started this report card a decade ago. I had planned to give myself the worst possible failing marks for having the gall, earlier
this year, to question whether
was finally starting to lose its perk.
But Wednesday, after the market closed, the company did something very un-Starbucks-like: It reported that its fiscal 1999 earnings will miss analysts' estimates. Oops! Says one longtime Starbucks short, who was
short last night: "It's just a coffee company."
On that note, I'm sure there are plenty of others, especially failures, that I missed. If so,
let me know and I'll be more than happy to take the public humiliation.
Memo to the many readers who wonder when I'll be back on
: I won't, and thanks for watching. But you will get a chance to see me,
and a cast of (OK, not thousands, but quite a few)
new weekly show on the
Fox News Channel
starting July 17. (So, if your cable carrier doesn't carry
, tell 'em to get it and get it NOW!)
After all, the Fox is faster and slier than the Peacock.
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
email@example.com. Greenberg also writes a monthly column for Fortune.
As originally published this story contained an error. Please see
Corrections and Clarifications.
Get in the trenches with James Cramer... Invest a cool $500,000 without the risk - register for TSC's Investment Challenge and play for prizes, including a trip to NYC and a morning with James Cramer! Pre-registration - June 21. Game begins - June 28.
Copyright 1999, TheStreet.com