TheStreet.com's MIDDAY UPDATE
November 24, 1999
Market Data as of 11/24/99, 12:54 PM ET:
o Dow Jones Industrial Average: 10,995.33 down 0.30, -0.00%
o Nasdaq Composite Index: 3,382.44 up 39.57, 1.18%
o S&P 500: 1,409.72 up 5.08, 0.36%
o TSC Internet: 962.70 up 13.41, 1.41%
o Russell 2000: 454.00 down 0.45, -0.10%
o 30-Year Treasury: 98 25/32 down 9/32, yield 6.203%
In Today's Bulletin:
o Midday Musings: Indices Mixed at Midday as Volume's a Real Turkey
o Herb on TheStreet: How CHS Has Gone From a Saga to a Downright Disaster
"TheStreet.com" on Fox News Channel
Robert Olstein, manager of the Olstein Financial Alert fund, returns for another round of "Stock Drill" this week. See how the picks from his last visit are faring and what he's got his eye on now. Plus, we'll offer up tax tips for year-end investment moves and much more.
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Midday Musings: Indices Mixed at Midday as Volume's a Real Turkey
11/24/99 1:00 PM ET
Stocks were fighting off inertia and trying to move higher on featherweight pre-turkey trading volume.
With the exception of the
Nasdaq Composite Index
, (what's new you ask?) already stuffed from a plump 37-point gain this morning, major proxies were narrowly mixed and bouncing near opening levels.
Dow Jones Industrial Average
was lately just lower, off 1.53 to 10,994.10 after a fitful up-and-down morning. The Dow wasn't feeling so thankful to
today as news that its accounting methods have raised some eyebrows was putting pressure on the stock. Big Blue was feeling depressed, about 2.6%, to be precise.
"It's tough to really pick a direction today," said James Maguire, Jr. a
New York Stock Exchange
. Light trading, a little bit of profit taking, no heavy selling and continued strength in Internets summed up the session, said Maguire.
The recent tech-stock tear bears watching in the bigger picture to at least one strategist.
"I think the market is going to be very mixed in December. You've got a very overbought tech sector and a fairly oversold rest of the market," said Philip Roth, chief technical market analyst at
Morgan Stanley Dean Witter
"Tech is going to have to get in gear with the rest of the market. In the early part of the new year, market strength is likely to be rotational."
The ravenous tech-sector was reaching for a third helping, with
TheStreet.com Internet Sector
rising 11.97 to 961.26.
was yelling loudest in the DOT, lately jumping 11 3/16, or 5.1%, to 232 5/16.
In the Nasdaq Comp,
were feeling saucy thanks to analyst upgrades. Vignette was up 7.6%, while Sycamore was rising 4.5%.
NorthEast Optic Network
popped 15 13/16, or 26.3%, to 76 after it announced major network transport and carrier services agreements.
The January crude-oil futures contract was up 47 cents to $26.91 a barrel, off an intraday high of $27.10. The contract was up in part on weekly data from the
American Petroleum Institute
, which reported a 2.1 million-barrel decline in crude stocks. The
Philadelphia Stock Exchange Oil Service
was climbing 2.3%.
Oil supply worries were seeping into the transportation sector, where airlines in particular were taking it on the chin. The
American Stock Exchange Airline Index
was falling 2%.
was down 2.8%, while
was down 3.5%.
Dow Jones Transportation Average
was sliding 2%.
caused a slowdown after
Banc of America Securities
lowered its rating to buy from strong buy. USFreightways was slipping 4.2%.
On the Big Board laggards were beating leaders 1,657 to 1,223, on 426 shares, while on the
Nasdaq Stock Market
advancers and decliners were neck-and-neck 1,806 to 1,894 on 731 million shares. New lows trounced new highs 184 to 27 on the NYSE, while new highs topped new lows on the Nasdaq 104 to 53.
was up 4.76 to 1409.40, while the
was down 0.31 to 454.14.
The benchmark 30-year Treasury was down 6/32 to 98 28/32, its yield at 6.205.
Wednesday's Midday Watchlist
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified
Mergers, acquisitions and joint ventures
was up 1.1% to 67 7/16 after it said that it will not adjust its offer to purchase
soda brand, after a French government decision to stop the acquisition. The French government threw out the offer due to concerns that Coke was creating a monopoly in the French soft drink market.
said GE hasn't offered to sell
to Time Warner. The denials came after Rupert Murdoch said on the
Fox News Channel
that GE offered to sell NBC to Time Warner for $25 billion. Murdoch is chairman and CEO of
, which owns
Fox News Channel
. Shares of GE were at 137 3/4, while Time Warner was adding 2 7/8 to 62 9/16.
is talking with some market players, including the
Chicago Stock Exchange
, about creating an electronic options exchange. Goldman shares were losing 11/16 to 77 1/16.
was down 1.8%, to 35 13/16 after it said it sold a 50% stake in
, which owns and operates a pulp mill in Prince George British Columbia, to
. The purchase price was $635 million, payable by cash of $480 million and the issuance to Mead subsidiary
, a total of $155 million of convertible subordinated debentures of Canfor.
for about $744 million. Amora Maille is a French mustard maker. Unilever was gaining 1.3% to 57 9/16.
Earnings/revenue reports and previews
was slipping 5/8 to 60 5/8 after it said its nine-month operational net profit soared 51% to 2.42 billion euros. The Dutch financial services group said it expects operational net profit for the entire year to increase by 40% to 45% compared to 1998.
Offerings and stock actions
was sliding 1 5/16, or 6.1%, to 20 1/16 after it said it was offering 3.5 million common shares at 21 3/8.
was tacking on 1 9/16 to 42 after it said its board approved a 2-for-1 stock split.
filed with the
Securities and Exchange Commission
to raise up to $6.5 billion in an IPO. MetLife said it plans to sell 225 million shares, or 31% of the company, and expects to price the shares between $14 to $24 a share.
CIBC World Markets
priced 3.75 million shares of
at $17 a share, the top of the expected range. Shares of PVN were edging up 7/16 to 17 3/8.
J.P. Morgan started coverage of
Annuity & Life Re
with a buy rating and a price target of 34. Annuity & Life Re was edging up 13/16 to 27 1/8.
Credit Suisse First Boston
raised its rating on shares of
to buy from hold. Shares of Autodesk were jumping 3 7/8, or 16.1%, to 27 7/8.
Deutsche Banc Alex. Brown
raised its rating on
Black & Decker
to strong buy from buy. Black & Decker was climbing 3% to 46.
First Boston started coverage of
with a buy rating. Bsquare was bouncing 1/4 to 47 7/16.
initiated coverage of
with a long-term attractive rating. Celgene was sliding 3 7/8, or 6.2%, to 58 11/16.
Deutsche Banc Alex. Brown said it rolled out coverage of
with a buy rating. Shares of Digital Insight were falling 1 5/16 to 43 5/8.
rolled out coverage on
with a buy rating and a price target of 71. Epcos was jumping 3 9/16, or 6.2%, to 60 3/8.
Banc of America
raised its rating on
to strong buy from buy. Intel shares were tacking on 2 1/4 to 81 1/4.
reiterated a buy rating on
. First Boston reiterated a strong buy rating and
Warburg Dillon Read
raised Intuit's price target to 70 from 37. Shares of Intuit were hopping 3 15/16, or 8.9%, to 47 7/8.
to intermediate-term accumulate from neutral. Shares of Kent were tacking on 5/16 to 24 1/16.
Deutsche Banc raised its rating on
Martin Marietta Materials
to strong buy from buy. Martin Marietta Materials was climbing 9/16 to 39 13/16.
Merrill Lynch reinstated coverage of
with a buy rating and set a price target of 39. Shares of Masco was losing 5/8 to 26 1/16.
Merrill raised its price target on shares of
to the mid-40s from around 30. Shares of Methode popped 2 1/16, or 8%, to 27 3/4.
Morgan Stanley Dean Witter cut its rating on
to neutral from outperform. Novell shares were skidding 1 1/8, or 5.1%, to 20 15/16.
First Boston started coverage of
with a buy rating. Shares of SDL was leaping 9 1/8, or 5.4%, to 176 5/8.
First Boston started coverage on
with a buy rating. Shares of Sycamore were soaring 10 3/8 to 242 3/8.
Salomon Smith Barney
upped its rating on
to buy from outperform. Sovereign Bancorp was adding 5/16 to 8.
upgraded shares of
to strong buy with a 250 price target. Shares of Vignette were leaping 14, or 7.6%, to 197.
Deutsche Banc cut its rating on shares of
to buy from strong buy. Shares of Vulcan were slipping 1 to 39 1/2.
was advancing 3 7/8 to 101 9/16 after it said Dan Akerson would remain the company's chairman through 2000, a year longer than expected.
The "Heard on the Street" column in the
is facing scrutiny for its use of an accounting method which raised operating income by lowering reported costs.
IBM reported a 53% rise in operating income to $8.9 billion, on a mere revenue jump of only $63.4 billion, or 12%, in the nine months ended Sept. 30. At issue is the manner in which IBM booked one-time gains of $4 billion from the sale of its Global Network business to
in the second and third quarters. Shares of IBM were stumbling 2 to 103 1/8.
was skidding 9/16 to 14 after it said Glenda Dorchak has been named CEO, replacing Tom Morgan who's leaving for personal reasons.
Herb on TheStreet: How CHS Has Gone From a Saga to a Downright Disaster
11/24/99 6:30 AM ET
As ugly as it gets:
The third-quarter earnings release from
late Monday told only part of the story. On its own, the news in the release tells of nothing short of a disaster.
The rise and fall of highflying CHS, which distributes computer and electronics parts everywhere
the U.S., has been an unfolding
saga for more than a year. The company had rapidly grown by acquiring, or rolling up, distributors around the world.
A month ago, the story started to
unravel when CHS placed one of its three U.K. subsidiaries in receivership and its German and Austrian operations filed for bankruptcy reorg. Now, according to the company's latest news release, it's starting to sell off the very units it bought -- almost as fast as they were bought. So far in the current quarter, it transferred its interests in eight subsidiaries back to the original owners. It's negotiating to do the same with seven additional subs.
But wait -- there's more: Turn to the 10-Q filed Monday, and you learn that the
U.S. Department of Commerce
has launched "an investigation" into the export activities of one of the company's subs and its management regarding "alleged violations of certain federal exportation laws and other related violations, including money laundering." The company says Commerce has offered to settle for a $25 million fine and a guilty plea, but warns that its "ultimate exposure" could be "much higher" if the company is ultimately found to have violated any laws. (It further says it intends to fight the allegations.)
Herb's Latest: Join the discussion on
But wait -- there's still more: According to the 10-Q,
, the freight airline, is suing CHS for $3.1 million "for indemnification for assessments made by the Dutch government against DHL." The assessments are for certain shipments through DHL by several CHS European subs that the Dutch government alleges "understated the declared values in order to reduce payments for value-added tax and custom fees." CHS, whose stock yesterday closed at 63 cents, also plans to fight that one.
What a mess.
The moral? Whenever a company wages a public war against short-sellers, as CHS
did, watch out! There's usually a reason.
A lollapalooza of a day for
, at least in the early going, as its stock rose more than 10 after the company disclosed in an offering prospectus several new deals with
, including branded prepaid phone-to-phone calling cards with America Online. No mention of what share of the revs from the deal will go to AOL. A company spokeswoman declined comment, citing the "quiet period" surrounding the company's secondary stock offering. (Unlike
, Net2Phone's majority owner, at least Net2Phone returns my calls!)
The only clear winner, based on the disclosure, appears to be AOL. It'll get $7.5 million from Net2Phone in payments (such a deal!), and AOL will get warrants to buy up to 3.5% of Net2Phone's outstanding stock if certain revenue thresholds are met for a variety of AOL-related deals, including the phone card. According to Net2Phone's prospectus -- which is confusing and, at times, very convoluted on this issue -- if the first of four revenue thresholds is met, AOL would be able to buy 661,666 shares of Net2Phone's stock at $7.36 per share. That's our math, based on interpreting what Net2Phone appears to be trying to say. (That's not only below Net2Phone's current market price -- it's also below its IPO price of 15 just four months ago.)
Put another way, says one of my money-management sources, Net2Phone is not only paying AOL to market prepaid calling cards and other services, but based on the spread between the purchase price of $7.36 and yesterday's close of 66 3/4, it's also giving AOL a crack at pocketing an initial $39 million. If the stock price stays the same, it could wind up with a total of more than $109 million.
Nice work if you can get it.
A prescription for problems?
Kevin Caliendo, the convertible securities analyst for
markets who caused a stir
here recently when he put an "implied" value of $5 on
stock, is back. This time he initiated coverage of the preferred shares of
, a prescription-management company, with a much-dreaded sell recommendation. (Can't say he doesn't call 'em like he sees 'em.)
Caliendo was particularly disturbed to learn from the company's recent 10-Q that nearly $77 million of the $88 million in cash flows last quarter came from an increase in accounts payable. (The company put off paying its own bills to make its cash flow look good.) If it hadn't done that, Caliendo says, the company wouldn't have had enough cash to cover its capital expenditures.
Nothing like robbing Peter's payables to pay for Paul's prescriptions.
Company officials didn't return this column's calls.
And I'm not talking about some of the stocks mentioned throughout the year in this column. Have a great holiday. See you in a few days.
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.
Mark Martinez assisted with the reporting of this column.
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