TheStreet.com's MIDDAY UPDATE
September 9, 1999
QUESTION: Which emerging Internet company has partnered with corporate giants, Lucent Technologies, AT&T, Bell Atlantic and Hewlett Packard to lead the Wireless Internet industry into the next millennium?
Market Data as of 9/9/99, 1:14 PM ET:
o Dow Jones Industrial Average: 11,031.91 down 4.43, -0.04%
o Nasdaq Composite Index: 2,833.23 up 24.49, 0.87%
o S&P 500: 1,342.40 down 1.75, -0.13%
o TSC Internet: 603.43 up 8.02, 1.35%
o Russell 2000: 436.85 up 0.95, 0.22%
o 30-Year Treasury: 100 15/32 down 8/32, yield 6.084%
In Today's Bulletin:
o Midday Musings: Market Searches for Inspiration Ahead of Economic Data
o Herb on TheStreet: Why Some Smart Investors Think One Bankrupt Company's Stock Is Worth the Risk
TheStreet.com on the Fox News Channel
This week's "Stock Drill" guest is Christopher Vroom of Thomas Weisel Partners. Our writers will be drilling Vroom -- who's covered major retailers such as Home Depot (HD:NYSE) and Staples (SPLS:Nasdaq), and major e-tailers such as Amazon.com (AMZN:Nasdaq) and Drugstore.com (DSCM:Nasdaq) -- about his favorite stock picks.
Plus, Cramer revisits his Red Hot Index. What are the Red Hots? Where are they now? And what do you need to know about them to make money in today's market? Check out the index at http://www.thestreet.com/comment/wrongtactics/778760.html and then make sure to catch this week's show for some red hot insight.
The show airs Saturday 10 a.m. ET and again Sunday 1 p.m. ET. For more info and how to find Fox News in your area, please see our TSC on Fox page at www.thestreet.com/tv.
Don't get Fox News Channel? Check out clips of the show on our TSC on Fox page Saturday afternoon.
Also on TheStreet.com:
Wrong! Dispatches from the Front: Set the Advertising Free
The trick with selling ads isn't getting the ads. It is what price the advertisers will pay you.
Mutual Funds: A List of Lists for Investors to Study -- and to Sometimes Avoid
The key to list-driven investing is to focus on those lists that spotlight good old-fashioned stock-picking or that adhere to a proven strategy.
Retail: When the (Retro) Shoe Fits
Makers of athletic sneakers are going back to the future by reissuing old favorites.
Dear Dagen: Dear Dagen: Pointed Questions Often Stump Fund Company Phone Reps
Anything can happen when you get a phone rep to depart from the script.
Midday Musings: Market Searches for Inspiration Ahead of Economic Data
9/9/99 1:22 PM ET
Technology and oil stocks led an uninspired climb as major proxies lingered in narrow trading ranges ahead of tomorrow's economic data.
A slew of analyst upgrades and positive research injected some fuel into the tech sector.
moved up 3.8% and
rose 0.5% , after
CIBC World Markets
initiated coverage with a strong buy rating.
lifted 3.2% after the stock receiving a buy rating.
The excitement carried the
Nasdaq Composite Index
up 25, or 0.9%, to 2834, while the
TheStreet.com Internet Sector
was up 8, or 1.4%, to 604.
Oil stocks were also enjoying a pop, as signs of economic strength from Britain and Japan stirred up some optimism about potential for improved demand amid a global recovery. Crude oil for October delivery hit a 23-month high, above $23 a barrel on the
New York Mercantile Exchange
American Stock Exchange Oil &Gas Index
was movin' on up 2.8% as a result, powered by gains in
, up 3.6%,
, up 3.3%, and
, up 3%.
Earlier in the morning, the market paused briefly to mull the effects of strong Japanese
data on the dollar but concerns were quickly shrugged off. "Ordinarily it's really negative when the dollar falls below 110 against the yen, but its being taken in stride," said Peter Cardillo, chief strategist at
. "The market is basically positioning itself for tomorrow's
economic report. Right now we're in a trading range and I don't expect any major gains," said Cardillo, referring to the release of tomorrow's
Producer Price Index
Interest rate concerns continued to weigh on the broader market. While tech and oil stocks were enjoying some outdoor fun, financial stocks
were sitting inside sulking, unable to come out and play until the market gets a grip on which way the Fed will lean at its October meeting. After the market digested two interest rate hikes in recent months, investors thought it was okay to kick back and relax for a bit. Now the relief looks a bit premature. J.P. Morgan was down 2.9%.
Tomorrow's PPI, like any other number that has been released in recent weeks, will be carefully watched, said Jim Maguire,
New York Stock Exchange
. "People are going to remain focused on interest rates. I wouldn't be surprised to see choppy market between now and the next time the Fed meets."
After enjoying a modest rise, the
Dow Jones Industrial Average
returned to the red, down 4 to 11,032. The broader
was also feeling a little burned, off 2 to 1342, while the
was managing to keep its ahead above water with a rise of 1 to 437.
On the NYSE, decliners were leading advancers 1,454 to 1,331 on 453 million shares, while on the
Nasdaq Stock Market
leaders were edging laggards 1,793 to 1,714 on 607 million shares. New lows were beating new highs 71 to 63 on the Big Board, while new highs were trouncing new lows 124 to 45 on the Nasdaq.
The benchmark 30-year Treasury was down 8/32 to 100 14/32, its yield at 6.09%. (For more on the fixed-income market, see today's early
Thursday's Midday Watchlist
Earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified
Shares of biotech companies
were getting killed today, apparently due to rumors circulating at the
Carson Group and BioCentury Conference
in New York.
The rumor was that Idec CEO William Rastetter talked down numbers for third-quarter U.S. sales of its cancer drug Rituxan. The drug is jointly sold by Idec and Genentech, and the rumor is they would miss the high end of the range and the whisper number. But the company said in fact, the high-end estimate of $80 million in U.S. sales is "achievable," according to a hedge fund analyst who attended the breakout session.
Wall Street's consensus for Rituxan's third-quarter sales rests in the mid-$70 million range, but there was speculation that the drug could hit $85 million to $90 million in sales in the third quarter. The drug had $68 million in U.S. sales in the second quarter. Idec said sales would be higher in the fourth quarter than in the third quarter, according to the hedge fund analyst, who was buying more Idec stock midday.
Rastetter, who spoke at the breakout session, was not immediately available for comment. Idec was recently trading down 20 3/16, or 15%, at 116 1/2, while Genentech was off 7 1/2, or 4.3%, at 167 1/2.
As noted above, CIBC World Markets ignited the Internet sector today, rolling out coverage of America Online, Yahoo! and eBay with strong buy ratings. Shares of AOL were up 1/2 to 94 1/2, while eBay was soaring 5 1/8 to 140. Yahoo shares were also rocketing 6 5/16 to 159 3/4.
CIBC also started coverage of Amazon.com, with a buy rating. Amazon shares were climbing 1 15/16 to 63 1/2.
Mergers, acquisitions and joint ventures
was up 1/8 to 24 15/16 after it announced its plans to acquire the privately held trading card maker
Wizards of the Coast
for $325 million. The deal is not expected to effect Hasbro's 1999 earnings but will contribute to EPS in 2000.
The Wall Street Journal
was close to assuming a 32% stake in
, giving the network access to a slew of television stations around the country. According to the
, the agreement carries an estimated value of $400 million. NBC's owner
was sliding 1 15/16 to 119.
decision to quit its venture with
could end up costing the company greatly,
The Wall Street Journal
reported. Viacom is breaking ties with UPN in an effort to gain government approval for its acquisition of
. Shares of Viacom were off 3/4 to 45 9/16, while CBS was also down 11/16 to 49 1/2.
was off 1 5/16 to 32 5/16 after
Morgan Stanley Dean Witter
sliced its rating on the stock to neutral from market outperform.
was increasing 1 7/8 to 58 after
U.S. Bancorp Piper Jaffray
raised its price target on the shares to 65 from 56.
was up 11/16 to 39 9/16 after
began coverage of the stock with a market performer rating.
was climbing 13/16 to 89 7/8 after
cut its rating to buy from strong buy.
was falling 1 1/16 to 44 1/16 after
Donaldson Lufkin & Jenrette
lowered its rating to market perform from a buy. Yesterday, Heinz posted first-quarter earnings of 65 cents a share, just missing the analyst estimate of 66 cents.
Helmerich & Payne
was up 5/8 to 29 3/4 after CIBC World Markets upped its rating to a buy from a hold.
was up 15/16, or 7.5%, to 14 5/16 after
Credit Suisse First Boston
sliced its third-quarter earnings estimates on the shares to 13 cents a share from 42 cents. Yesterday, Ingram warned investors that it expects to post third-quarter earnings of 10 cents to 14 cents a diluted share, greatly missing the analyst estimate of 41 cents. The company also said that its current chairman and CEO, Jerre Stead, plans to relinquish his role as chief executive as soon as a successor is found.
was down 1 15/16 to 49 13/16 after
reduced its fiscal 1999 estimates to $2.32 from $2.36.
was declining 3/16 to 9 9/16 after
downgraded its shares of to neutral from attractive.
was up 3/4 to 59 7/16 after DLJ sliced the shares rating to market perform from a buy.
was hopping 3 5/16, or 5.1%, to 67 15/16 after ING Barings raised its rating to a buy from a hold.
7/16 to 12 3/16 after ING Barings cut its rating to a hold from a strong buy.
was plummeting 7 7/8, or 30.5%, to 17 7/8 after Merrill Lynch cut its near-term opinion to accumulate from a buy. Yesterday, the company warned investors to expect third-quarter earnings in the range of 52 cents a share to 58 cents, greatly missing the three-analyst estimate of 88 cents and the year-ago 59 cents. ING Barings also downgraded its shares to a hold from a strong buy.
was up 3/4 to 22 1/2 after CIBC World Markets upgraded the shares to buy from hold.
Earnings/revenue reports and previews
was off 1/4 to 8 1/4 after it reported second-quarter earnings of 20 cents a share, in line with the 11-analyst estimate of 20 cents but down from the year-ago 42 cents. The company said it plans to sell 350 of its restaurants over the next year.
Dave & Busters
was up 1/4 to 12 3/16 after it posted second-quarter earnings of 15 cents a share, in line with the eight-analyst estimate of 15 but down from the year-ago 21 cents.
was slipping 2 1/8, or 10.9%, to 17 5/8 after it posted a fourth-quarter loss of 8 cents a share, better than the two-analyst estimate for a 9-cent loss but reversing the year-ago 5-cent profit.
was declining 2 7/16, or 12.9%, to 16 7/16 after it reported third-quarter earnings of 24 cents a share, beating both the seven-analyst estimate of 23 cents and the year-ago 18 cents.
Offerings and stock actions
was down 1 11/16 to 13 after it set an initial public offering of 4.7 million shares. Morgan Stanley,
will be underwriting the deal.
was unchanged at 19 7/8 after it set an initial public offering of its Australian unit.
Food and Drug Administration
regulators to determine how
American Home Products
received approval in 1996 for its controversial diet drug
The Wall Street Journal
reported. American Home Products was off 1 5/16 to 126 15/16.
said that its executive vice president and CFO, Lawrence White, has left the company to assume a similar role at
. Shares of CBRL were down 1/16 to 13 1/4.
Electronic Data Systems
was hopping 1 7/16 to 59 7/16 after it said it would implement changes along a few of its service lines in an effort to boost slow growth. EDS said it would consolidate the organization into four groups which include
, its business consulting and executive search division,
, its Internet business subsidiary,
Business Process Management
, its customer service unit and
its outsourcing business. The company has faced stiff competition for
and is now being rivaled by new Internet service consultants. Tomorrow, EDS plans to discuss their new strategy with industry analyst in New York.
was off 1/8 to 49 5/8 after it announced plans open 10
Parade of Shoes
stores to its chain by the end of the year and an additional 50 in 2000. Payless also said that
, its online store, has surpassed management's sales expectations.
Herb on TheStreet: Why Some Smart Investors Think One Bankrupt Company's Stock Is Worth the Risk
9/9/99 6:30 AM ET
And now, for something completely different: Like a broken record, this column often warns that any time a company files for bankruptcy, existing shareholders are likely to wind up with little or nothing. But there
exceptions, such as
, the former department store operator that turned its underlying real estate into a gold mine.
Another example, according to several investors -- including one who made a bundle on Alexander's:
, a Rockville, Md.-based mortgage real estate investment trust. Here's a company that "very quickly went from the top of the world to bankruptcy court," says California hedge fund manager Eric Von der Porten, of
, who owns Criimi Mae's preferred and common stocks.
No stranger to this column, Von der Porten, a former bank credit manager who specializes in distressed securities, is most often quoted here bashing the likes of
bankruptcy so different? Assets exceed liabilities, for one. "Criimi, it would appear, at last has some fundamental soundness to its asset base, and the trends are moving in the right direction." By that he means that even in bankruptcy, Criimi is profitable, generates positive cash flow and continues to report positive shareholders' equity. (Criimi sought bankruptcy protection after a liquidity crunch related to, among other things, the
Long Term Capital
fiasco and its impact on the financial markets.)
Of course, there's plenty of risk, including a crummy (criimi??) quality balance sheet loaded with junk-grade mortgage-backed securities, the chance of defaults among its mortgage holdings and the possibility of dilution to existing investors if the company issues stock as part of its bankruptcy reorganization. A plan is expected to be announced Friday. Von der Porten, meanwhile, believes the company could eventually earn 50 cents per share a year, once it emerges from bankruptcy, even after suffering dilution from any new stock that's offered and higher financing costs.
Those, of course, are only his assumptions, but you won't find any argument in the possibility that Criimi's common stock may hold value from William Ackman, a partner at
, which owns a 9.8% stake in Criimi bought
the bankruptcy filing. (Ackman also bought into Alexander's after its bankruptcy filing.) Ackman believes the company's reorganization will include selling 30% to 50% to another buyer, who will get convertible stock that could convert in the 3 to 4 range. (The stock, which traded as high as 13 over the past year, closed yesterday at 2 1/4.) He also believes the company will resume paying a dividend after bankruptcy in the form of preferred stock (it used to pay an annual cash dividend of $1.60 per share) and that it could make a special one-time dividend to cover past dividends that have been held back.
Criimi officials couldn't be reached.
, first mentioned
here May 12 in a column headlined, "Will the Bears Finally Get It Right About Conseco?" The stock was around 30 at the time; yesterday it closed at 25 and fell a few points in after-hours trading after the company preannounced a lousy quarter and said it would change its accounting policies. (Timing is everything, and
is down 4, or 11%, since it was
mentioned here in early August. Bad weather and a rash of industrywide ride accidents has raised concerns about future earnings growth.
And for the umpteenth time:
No, I don't have a clue what
owns (other than what he discloses at the end of his column). And he doesn't know beans about what I'm gonna write until he sees it at 6:30 in the morning with everybody else. His office is on the other side of lower Manhattan -- a good 10-minute walk. His computers are not linked to the
editorial computers. The only time we see one another, for the most part, is during the taping of "TheStreet.com" TV show on
, and our discussion in the Green Room generally is about one investment we share in common (actually, the only stock I own):
. (Yep, I'm still getting those questions.)
And in response to something else I was asked yesterday, there's no real secret to how I do my job: No, I'm not sitting around reading
filings all day looking for a story. Remember, I'm a journalist trolling for sources, not an investor keeping up on my investments. I generally (but not always) rely heavily on my sources, who spend time reading documents to point them out. As any regular source knows, the first question I usually ask is, "Is it in the documents? If so, where?" You can't imagine how many investors
read the regular filings of companies in which they're invested, which is good, otherwise I wouldn't have a job!
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
firstname.lastname@example.org. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
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