Publish date:

TheStreet.com's MIDDAY UPDATE

December 21, 1999


Market Data as of 12/21/99, 1:19 PM ET:

o Dow Jones Industrial Average: 11,150.69 up 6.42, 0.06%

o Nasdaq Composite Index: 3,828.48 up 44.61, 1.18%

o S&P 500: 1,424.52 up 6.43, 0.45%

o TSC Internet: 1,131.02 up 32.27, 2.94%

o Russell 2000: 471.18 up 3.99, 0.85%

o 30-Year Treasury: 96 12/32 up 16/32, yield 6.403%

In Today's Bulletin:

o Midday Musings: Another Tech Surge Rolls On as FOMC Decision Nears
o Herb on TheStreet: One Backdoor (Uh, Cheap) Way Into Hot Stocks

"TheStreet.com" on

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Well-known retail analyst Faye Landes from Thomas Weisel Partners and chief market technician from Raymond James, Ralph Bloch, join the regulars on "TheStreet.com" with a special holiday edition of the show. You'll hear if the group thinks a Santa Claus rally will come to Wall Street and how this record-breaking year will end. Also, we'll find out what retailers Faye Landes is hot on and our group will give their "Holiday Wi$hes" for investors.

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Also on TheStreet.com:

Wrong! Dispatches from the Front: Gadzooks, You're Buying the Wrong Stock!

Cramer says to be careful and make sure you are buying the right company.


Energy: Tech Rally Pulls Limelight Away From Value-Rich Oil Sector

Many of these stocks offer solid value and an improving fundamental picture, analysts say.


Mutual Funds: Viewpoint: Tracking Stocks Are No Substitute for the Real Thing

Too often, trackers offer little beyond the illusion of ownership.


Dear Dagen: Dear Dagen: What Happens to Tracking Stocks in Bankruptcy?

Also: Do shareholders of the parent company get shares of a newly created tracking stock?


Midday Musings: Another Tech Surge Rolls On as FOMC Decision Nears


Thomas Lepri

Staff Reporter

12/21/99 1:19 PM ET

Stocks were following their own destinies at midday, guided by momentum, analyst actions, and perhaps even strict fundamentals in certain rare cases. But few observers on Wall Street were betraying much apprehension over the

Federal Open Market Committee

meeting that was entering its final leg in Washington.

Someday -- perhaps someday soon, for all we know -- investors will start to care about interest rates.

"People have been saying that for months, and it hasn't happened," said Peter Boockvar, equity strategist at

Miller Tabak

. "I'm done thinking about when the market's going to react to bad news."

Then he's probably making money. As has been the case for some time now, the market's strength was concentrated in a sector that used to be considered pretty interest-rate sensitive -- technology. The

Nasdaq Composite Index

was lately up 44, or 1.2%, to 3828, extending its push into record territory.

Other major proxies were mixed.

The Dow Jones Industrial Average

was up 4 to 11,149, while the

S&P 500

was 7 higher to 1425.

TheStreet.com Internet Sector

index was surging 32, or 2.9%, to 1130, and the small-cap

Russell 2000

was up 4 to 471.

"No one's paying attention to the FOMC meeting," said Boockvar. "The bond market is pricing in a hike by February, but stocks are in their own world, and not paying attention to interest rates."

The market's lack of concern is understandable. Virtually no one expects Y2K liquidity concerns to keep the Fed from raising rates.

But next year is another thing. It's fast becoming conventional wisdom that rates are going up in 2000. About two-thirds of the primary dealers polled by


expect interest rates to go up when the FOMC meets in February. The question, then, is whether the Fed will adopt a tightening bias today to signal such a move is coming, and, if so, whether stocks will react.

"I don't see that as a tightening bias as negative for the market," said Barry Hyman, chief market strategist at

Ehrenkrantz King Nussbaum

. "The market has basically priced that in."

That depends on what you mean by "the market." The February fed funds futures contract was lately fully pricing in a 25-basis-point hike at the Fed's next meeting, Feb. 2, and was putting 58% odds on a 50-basis-point hike.



(QCOM) - Get Report

, up a further 3.5% today?



, up 3.5%?



, 9.9% higher? Money continues to flow into the winner stocks of a market following very different rules than those governing the bonds.

"It flies in the face of traditional theories," said Hyman. "Internet companies use equity for debt -- that's the key here. As long as Wall Street is willing to get behind this sector and finance new IPOs and secondaries, and companies can use that equity as capital, interest rates are not that important a factor."

"It's almost a religious, enlightening experience to see what's going on here," he continued." It's taken value players and turned them into growth player, and it's taken growth players and turned them into momentum players."

The Fed will announce any changes it makes to monetary policy at about 2:15 p.m. In the meantime, the bond market was rebounding from yesterday's declines. The 30-year Treasury was up 12 ticks to 96 7/32, putting its yield at 6.41%. (For more on the fixed-income market, see today's early

Bond Focus.)

Financial stocks were drifting higher, with the

Philadelphia Stock Exchange/KBW Bank Index

up 1.6%. The

American Stock Exchange Broker/Dealer Index

was up 0.4% despite some selling in component

Morgan Stanley Dean Witter


, which was off 0.5%.

Paper stocks were rebounding from yesterday's declines, the

Philadelphia Stock Exchange Forest & Paper Product Index

up 2.8%.

Technology indices were showing strength. The

Morgan Stanley High Tech 35

was up 1.3%, while the

Philadelphia Stock Exchange Semiconductor Index

was 2.6% higher.

Market Internals

Breadth was negative on strong volume, though trading was a bit lighter than it has been in recent sessions.

New York Stock Exchange:

1,394 advancers, 1,515 decliners, 527 million shares. 52 new 52-week highs, 212 new lows.

Nasdaq Stock Market:

1,801 advancers, 2,111 decliners, 817 million shares. 166 new highs, 109 new lows.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter


Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.


Mergers, acquisitions and joint ventures

Akamai Technologies

(AKAM) - Get Report

said it entered a strategic alliance with

Road Runner

, which provides high-speed Internet access over cable lines, to speed up their network. Road Runner is a joint venture between

Time Warner



Media One Group




(MSFT) - Get Report




and closely held publisher


. Road Runner will use Akamai servers in its network to improve the speed of its Web sites.

Shares of Akamai Technologies were popping 13 to 300, while Time Warner was losing 13/32 to 65 13/16. MediaOne shares were gaining 7/32 to 78 3/16 and Microsoft was slipping 1 3/16 to 111 5/8, while Compaq was adding 1 1/4 to 26 1/4..

Cell Genesys


was mounting 9/16, or 5%, to 11 7/8 after it said its board withdrew approval of a proposed merger with



saying the proposed deal was not in the best interests of shareholders. Cell Genesys also said the value of its equity ownership of



had increased by about $230 million since its merger agreement with Genzyme was announced in October. Shares of Genzyme were tacking on 2 5/16, or 6%, to 40 7/16 and Abgenix was jumping 5 11/16, or 5.3%, to 112 7/16.

Columbia Energy Group

(CG) - Get Report

, which has been pegged by


(NI) - Get Report

as an acquisition prospect, said other companies are showing interest in it and are willing to make higher bids. According to a

Securities and Exchange Commission

filing, both companies said that interested firms have been invited to participate in a second round of bidding. Two months ago, Columbia rejected an $74-a-share offer from NiSource, which made way for rival bids. Shares of Columbia Energy Group were mounting 4 1/16, or 7%, to 62 1/16, NiSource was adding 3/4 to 17 3/8.


(CBS) - Get Report

and venture capital firm

Benchmark Capital

have teamed up with a cluster of sports stars including

John Elway


Michael Jordan


Wayne Gretzky

to form an online sporting goods store.


, as the venture will be known, expects to start selling sporting goods on the Internet next month, and has plans to go public next year. MVP.com will receive $85 million in advertising from CBS over four years.

Additionally, MVP.com said it will acquire the online retailing business of



, an Internet sports media company and publisher of CBS SportsLine. The companies signed an agreement for a 10-year relationship where SportsLine will receive $120 million in guaranteed cash payments over 10 years and receive an equity interest in MVP.com. Despite the announcement, shares of CBS were down 23/32 to 59. For additional coverage of the MVP.com acquisition, check out a separate

story from the


joint newsroom.

Delta & Pine Land


was lifting 5/16 to 16 1/2 after it said it was disappointed


(MTC) - Get Report

had withdrawn its merger approval filing with the

Justice Department

and said the life sciences group owes Delta & Pine $81 million in termination fees. Shares of Monsanto were sliding 1 7/8, or 5%, to 35 3/8. For additional coverage of Delta's

demands, check out a separate story from the


joint newsroom.



was sliding 1 3/8 to 97 5/8 after it agreed to acquire



for $192 million in a cash tender offer. Shares of Softworks were hopping 7/32 to 9.

General Electric's

(GE) - Get Report


network said it completed a series of new long-term affiliation deals for




that it expects could bring in more than $1.5 billion in subscriber fees over the next 10 years,

The Wall Street Journal

reported. Shares of General Electric were bouncing 1 9/16 to 154 13/16.


(HMC) - Get Report

said it formed a cooperative agreement with

General Motors

(GM) - Get Report

including supplying engines and transmissions to GM and joint cooperation in technology. Honda said the agreement would not involve the automakers taking any equity stake in each other. Shares of General Motors was losing 1 to 71 1/16, while Honda was edging up 5/8 to 75 13/16.


(IBP) - Get Report

was shedding 3/16 to 18 1/8 after it said it agreed to buy privately held meat and poultry processor

Corporate Brand Foods America

for $261 million. IBP said it expects the acquisition to be dilutive to 2000 earnings by 7% to 10% a diluted share. The current seven-analyst estimate calls for earnings of $2.71 a share.

Micro Warehouse


was mounting 2 7/8, or 18.8%, to 18 1/8 after it said it will be acquired by an investor group for $19 a share, or $725 million. Former


(IBM) - Get Report

CFO Jerome York will be the new Micro Warehouse chairman and CEO. Shares of IBM were climbing 9/16 to 109 3/4. For additional coverage of

Micro Warehouse buy, check out a separate story from the


joint newsroom.



said it will sell its Austrian-based plastics extrusion systems unit to

SMS Plastics

for $47 million in cash. Milacron said the deal will result in a gain of 30 cents a share. Milacron was skidding 1/16 to 13 15/16.



was gaining 3 9/16 to 130 after it said it will buy


for $285 million.

Rohm & Haas


added 5/16 to 37 1/2 after it said it plans to sell its Industrial Coatings business to German chemical group


for $175 million.

Earnings/revenue reports and previews

Dean Foods

(DF) - Get Report

was bouncing 7/8 to 36 5/8 after it reported second-quarter earnings of 68 cents a share, beating the 10-analyst estimate of 66 cents and the year-ago 58 cents.

Emmis Communications

(EMMS) - Get Report

was leaping 6 1/4, or 6.4%, to 103 3/4 after it reported third-quarter earnings of 9 cents a share, which include $799,000 in preferred dividends. The four-analyst estimate was for 13 cents a share, while the year-ago earnings were 19 cents a share. Emmis also declared a 2-for-1 stock split.

Great Atlantic & Pacific


was climbing 5/16 to 26 after it reported third-quarter earnings of 47 cents a share, beating the six-analyst estimate of 40 cents. The year-ago result was a loss of 23 cents a share, which included a charge.

National Discount Brokers


reported second-quarter earnings of 25 cents a share, crushing the two-analyst estimate of 4 cents but down from the year-ago 32 cents. Shares of National Discount Brokers were falling 1 3/8 to 33 1/2.


(NCI) - Get Report

was declining 1 1/16, or 10.4%, to 9 1/16 after it warned it sees lower-than-expected fourth-quarter revenue and earnings-per-share, but said it is looking for increased momentum in the second quarter and second half of next year. The company said it expects fourth-quarter earnings to be in the range of 20 cents to 25 cents a share, excluding charges, below the current 11-analyst estimate of 40 cents a share. For additional coverage of Navigant's earnings warning, check out a separate

story from the


joint newsroom.

Offerings and stock actions



was advancing 13, or 6.4%, to 213 7/8 after it announced last night it has set a 2-for-1 stock split.

National Data


was lifting 4 7/8, or 13.2%, to 41 5/8 after it said it will spin off its e-commerce unit to create an e-health company.

Analyst actions

J.P. Morgan

upped its price targets on four telecom equipment stocks. Its target on

Foundry Networks

climbed to 360 from 225, while


(QCOM) - Get Report

target rose to 570 from 460.

Nortel Networks'


price target climbed to 125 from 85, while Motorola's rose to 165 from 120.

Lately, Foundry Networks shares were soaring 15 1/2, or 5.2%, to 310 1/4, while Qualcomm was leaping 16 7/8 to 483 1/4. Shares of Nortel Networks edged up 2 9/16 to 95 3/8 and Motorola shares were bouncing 2 5/8 to 141 5/8.

Merrill Lynch

resumed coverage of


(AAPL) - Get Report

as a near-term and long-term accumulate. Shares of Apple were popping up 2 to 100.

Deutsche Banc Alex. Brown

upped its rating on

Burlington Northern


to buy from market perform. Shares of Burlington Northern were losing 1, or 6.3%, to 24 9/16.

Credit Suisse First Boston

raised its 2000 earnings-per-share estimate on

Cabletron Systems

(CS) - Get Report

to 40 cents a share from 35 cents.

Lehman Brothers

raised its price target to 40 from 36, and upped its 2000 earnings estimates to 37 cents from 35 cents. Shares of Cabletron Systems were adding 1/4 to 28.

PaineWebber raised its rating on



to buy from attractive. Shares of Conoco were edging up 1/2 to 22 3/16.


upped its rating on


(GO) - Get Report

to buy from neutral. Shares of Go.com were lifting 4 5/16, or 19.7%, to 26 3/16.

NBC Internet


was started at a strong buy by Deutsche Banc Alex. Brown. Shares of NBC Internet were climbing 9 7/16, or 11.9%, to 89.

Morgan Stanley Dean Witter rolled out coverage of

Portal Software


with an outperform rating. Shares of Portal Software were moving up 4 3/8 to 114 1/16.


FSI International


was mounting 1/16 to 11 11/16 after it said co-founder Joel Elftmann is retiring as president and CEO but will continue as chairman. Donald Mitchell, a former president of

Air Products Electronic Chemicals

, was named to succeed Elftmann as president and CEO.

Qwest Communications


will move Jan. 3 to the New York Stock Exchange from the Nasdaq. Qwest will trade under the stock symbol Q. Shares of Qwest Communications were gaining 1 7/8 to 42 9/16.

The Heard on the Street column in

The Wall Street Journal

takes a look at a two-sided investment strategy, known as a "paired trade," aimed at profiting from valuation gaps between two related securities. The latest such pairing to pop up is that of

Williams Communications

(WCG) - Get Report



(WMB) - Get Report

. In this case, investors are buying shares of Williams, while shorting, or selling, its telecommunications offshoot. The hope is that Williams' management will unlock the hidden value in its energy assets by potentially spinning off its Williams Communications shares. Shares of Williams Communications were losing 1/16 to 26 3/8, while Williams was falling 3/32 to 28 13/16.

Herb on TheStreet: One Backdoor (Uh, Cheap) Way Into Hot Stocks


Herb Greenberg

Senior Columnist

12/21/99 6:30 AM ET

Note to readers: This is the first part of my last regular column of the year, and millennium, before tomorrow's semiannual report card and my (will it ever come?) holiday break. Couldn't bring myself to leave you on a negative note, so here's something slightly off this column's regularly beaten path.

Talk to hedge fund folks, and you'll find that they're always looking for a smarter way to invest, such as buying into the stock of a company that holds a stake in a hot company rather than buying into the hot company itself.

"These are names everybody loves, and there's a much more sensible way to get more for your money," says John Woodberry of

Minute Man Capital Management

in New York, a former


analyst, whose debut in

this column gave him instant fame with his recommendation of

Satyam Infoway

(SIFY) - Get Report

, which he called the Indian

America Online



Which brings us to Woodberry's list of faves, with this caveat: Woodberry and other sophisticated investors often go long the stock of the larger company -- the one that holds the stake -- and short the highflier as a way to lock in a so-called spread, or profit. Or, as is the case with Woodberry, sometimes he'll go short the higher-priced company without being long the larger one. But he believes each stock could be bought on its own, because each trades at such a discount to its net asset value, including the stake in the highflier. "In this kind of market, you should be looking for stocks that are cheap on a net-asset-value basis," he says. While they may not have the upside of the hot stock, they have less downside risk if the hot stock collapses.

Woodberry's List



, the disk-drive company. "An investment in Seagate provides an investor with exposure to a disk-drive company with a net cash balance sheet and several valuable investment stakes, including a significant stake in


(VRTS) - Get Report

. Each share of Seagate controls 0.44 shares of Veritas. The Veritas stake, based on yesterday's price, is worth almost $12 more than the current price of Seagate, on a per-share basis. (That's 0.44 times Veritas' closing price of 125 3/8, minus the closing price of Seagate, 43 3/4.) "Veritas is up 500% for the year," Woodberrry says. "That is the kind of stock momentum technology investors like to say that they own in their portfolio at the end of a quarter. Seagate is clearly the smarter way to own the theme, even though Seagate is selling shares of Veritas and buying back their own shares." Woodberry is long Seagate and has no position in Veritas.

Herb's Latest: Join the discussion on

TSC message boards.

IPC Holdings

(IPI) - Get Report

, a communication systems company. Each IPC share controls five shares of



, which is in the extranet business. IPC closed yesterday at 59; IXnet finished at 21 3/8. Woodberry considers it the best value of the group because the investment stake is worth almost twice the current stock price. But this warning: IPC is fairly illiquid, thanks to a majority holding by

Citicorp Venture Capital

. Woodberry is long IPC and short IXnet.


(BCE) - Get Report

, a large Canadian communications company. Each BCE shares controls 0.84 shares of

Nortel Networks


. Woodberry says that BCE, which closed yesterday at 79 3/4, has a substantially higher net asset value and has other publicly traded assets, including

Bell Canada

. "BCE is the significantly cheaper way of owning Nortel," says Woodberry. Based on yesterday's closing price of 92 13/16, Nortel implies a value of $77.96 for BCE. Put another way, BCE, at 79 3/4 trades at only a $2 premium to its investment stake in Nortel. Additionally, BCE has a significant ownership stake in Bell Canada. "So," Woodberry says, "if you owned Nortel, you could get more investment value for your dollar through an investment in BCE." He has no investment positions in either BCE or Nortel, because, in his words, BCE/Nortel is a "crowded trade."



, which is an international broadband communications provider of video, voice and data services. Each UnitedGlobal share controls 0.7 shares of

United Pan Europe

. Woodberry says that after subtracting UnitedGlobal's stake in United Pan Europe, the remaining components of UnitedGlobal's net asset value per share are worth approximately $13. In essence, you have a $56 stock that has a $78 per-share investment stake in United Pan Europe, as well as a $91 net asset value. Woodberry is long UnitedGlobal and short United Pan Europe.

The obvious question, of course, is how does an investor in, say, Seagate ever realize the value in a Veritas? Well, they don't get the


value of Veritas. But they also don't have the same level of downside risk as a stock that is up over 500% year to date. But as the value of the asset rises, so should the value of the company's stock. "Management of Seagate is creating significant shareholder value by selling a portion of their stake in Veritas and by buying their own shares," Woodberry says. "Seagate shareholders continue to hold a valuable stake in Veritas, but they also benefit from a significant reduction in shares outstanding." Year to date, Seagate has repurchased almost 20% of outstanding shares. "As an investor in Seagate," he adds, "I have a tremendous net asset value and a management team that is aggressively creating value."

For the rest of today's column, keep an eye on the site this morning.

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

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

Copyright 1999, TheStreet.com