*AV*--Newsletter
Radar Trader Newsletter
High Tech Commentary-- Scan List
September 8, 1998
OPENING COMMENTARY FOR SEPTEMBER 8, 1998 - Andrew Vance
On Thursday of last week, I was asked my impressions for the market for both Friday and Today. My response was very negative for Friday and somewhat positive for today. Friday had the makings of a terrible day but apparently made a slight comeback to finish just slightly down. The tech sector was looking to be a nightmare but, it too was able to recover some of the earlier losses and close down slightly. My opinion for Friday was more along the lines of being a spectator or a very cautious and careful trader. Today has the makings of a nice positive day, fueled with some nice numbers on Monday and with some positive news expected out of the Fed. I think we may have a nice day today which might lead to a rally of sorts. By no means should anyone construe this as the turn in the market and the start of another BULL run. There are quire a few more travesties ahead of us that need to be dealt with. We may have a slight reprieve here and an opportunity to make some conservative profits as the short sellers start covering and the post Labor charge into the market takes place.
There is a considerable amount of money going to and sitting on the side lines in the form of money markets over the past month. Last week we saw the flight to these money funds drop off which might signal that all the funds (cash) may have been removed from the markets. "Investors pulled a net $1.94 billion out of stock funds in the week ended Wednesday and headed en masse for money market funds, according to AMG Data Services. The latest week marks the first back-to-back weekly outflows for stock funds in 1998. Last week, investors took a net $2.22 billion out of stock funds. The outflows are hardly seasonal, as stock funds pulled in a net $5.31 billion in the same week last year. Meanwhile, the sideline was a favorite destination for investors in the latest week as money market funds reeled in a net $13.16 billion in the latest week in one of their largest weekly inflows of the year. It's also the fifth straight week of heavy inflows into money market funds. Last week was the lightest in the last five, but money funds still took in a net $4.75 billion. In the corresponding week a year ago, money market funds took in just $1.08 billion." Tidbit provided by my savvy broker buddy.
This would signal the follow up activity where "bargain hunting" making prompt a return to some undervalued equities. There may be some good opportunities presenting themselves for the mid to long term as the week progresses. A search for quality, whether perceived or, in fact, a reality, will cause some undiscovered gems to surface. With this said, the prudent positional trader will be cautious.
09/07/98 Afternoon-MEXICO STOCKS SOAR ON ASIA REBOUND, US RATE HOPES
(Reuters) - Mexican stocks shook off a weak peso and renewed fears over Russia to post sharp gains on Monday, bolstered by an overnight rebound in Asian equities and speculation over lower U.S. interest rates.
STOCKS IN FITTING END TO WILD WEEK - cbs.marketwatch.com
TIMELY TOPICS AND STOCKS
Friday September 4, 6:14 pm EDT - DYCOM INDUSTRIES, INC. FILES REGISTRATION STATEMENT FOR PUBLIC OFFERING OF 3,000,063 SHARES OF COMMON STOCK
DY(32-1/8, +1/8)--Filed a Registration Statement with the SEC for a public offering of 3,000,063 shares of common stock, of which 1,500,000 shares will be sold by the Company and 1,500,063 shares will be sold by certain selling stockholders. The net proceeds from the offering will be used to fund the Company's growth strategy, including acquisitions, working capital and capital expenditures, and for other general corporate purposes. DY intends to use a portion of the net proceeds to reduce certain indebtedness. After the offering, the number of outstanding common shares will total 16,282,366 shares.
DY is a leading provider of engineering, construction, and maintenance services to telecommunications providers throughout the United States and derives most of its contract revenues in this regard. They also provide similar services related to the installation of integrated voice, data, and video local and wide area networks within office buildings, in addition to performing underground utility locating and electric utility contracting services.
A preliminary prospectus relating to these securities may be obtained from NationsBanc Montgomery Securities LLC, 600 Montgomery Street, San Francisco, CA 94111; Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, NY 10036; EVEREN Securities, 77 W. Wacker Drive, Chicago, IL 60601; Morgan Keegan & Company, Inc., Morgan Keegan Tower, 50 North Front Street, Memphis, TN 38103; and The Robinson-Humphrey Company, LLC, 3333 Peachtree Road NE, Atlanta, GA 30326.
The Company currently performs work for more than 25 local exchange carriers, cable television multiple system operators, long distance carriers, competitive access providers, and electric utilities throughout the United States.
DY provides services to its customers pursuant to multi-year master service agreements and long- and short-term contracts for particular projects. Under master service agreements, DY agrees to provide, for a period of several years, all specified service requirements to its customer within a given geographical territory. Under the terms of such agreements, the customer can typically terminate the agreement with 90 days prior written notice. The customer, with certain exceptions, agrees to purchase such requirements from DY. Materials to be used in these jobs are generally provided by the customer. Master service agreements generally provide that DY will furnish a specified unit of service for a specified unit price (e.g., fiber optic cable will be installed underground for a specified rate of dollars per foot). The Company recognizes revenue under master service agreements as the related work is performed.
DY is currently a party to 32 master service agreements, which may be either bid or negotiated. Master service agreements are typically bid initially and may be extended by negotiation. The remainder of DY services are provided pursuant to contracts for particular jobs. Long-term contracts relating to specific projects have terms in excess of one year from the contract date. Short-term contracts are generally from three to four months in duration from the contract date, depending upon the size of the project. Contract revenues from multi-year master service agreements and other long-term agreements represented 72% of total contract revenues in fiscal 1998, of which contract revenues from multi-year master service agreements represented 49% of total contract revenues.
Future growth in contract revenues will be earned by:
(1) Increasing the volume of services provided to the existing customer base
(2) Expanding the scope of services to existing customers
(3) Expanding beyond the existing customer base as well as geographically expanding its service area.
Growth is also expected to result from internal sources and through strategic and tactical acquisitions. DY has already completed the acquisition of CCG in 1997 and CCI and ITI in 1998. CCG and CCI provide construction services to cable television multiple system operators, and ITI provides construction and engineering services to local and long distance telephone companies.
DY - founded in 1969, witnessed significant growth during the 1980's as the result of increasing competitive growth in the long distance telephone market and the needs of the long distance carriers to replace their copper cabling with fiber optic cable. Through 1990, DY acquired nine operating subsidiaries. As long distance carriers completed most of their long haul lines in the late 1980's, the Company shifted its focus to the local exchange carrier market.
DY has reviewed its computer systems for Year 2000 compliance and identified those areas that could be adversely affected by software failures. The Company has converted approximately 85% of its information systems to be Year 2000 compliant. The Company has incurred approximately $1.0 million through July 31, 1998 and approximately $0.5 million will be incurred in fiscal 1999 to complete the information system conversions. biz.yahoo.com biz.yahoo.com
sec.yahoo.com
Friday 09/04/98 REPRINT of TIMELY TOPIC on ETEC which is on Today's List.
ETEC(27-3/8, -1 5/8) - reported fourth-quarter earnings of $18.2 million, or 80 cents a share, compared with $12.3 million , or 54 cents, a year earlier. This beat analyst expectations by 3 cents. Revenue for the quarter was $87.8 million compared to $72.6 million for the same quarter in 1997. This was just a refresher of what was talked about in yesterday's newsletter. However, today I received 3-4 inputs from different organizations that have become interested in this stock. Therefore, for better or worse, I think this stock is "in play". I would be watching this closely. Their were 2 noteworthy inputs.
ABN-AMRO, yesterday morning called ETEC "The best looking company in a depressed industry" and backed it up with a nice 2 page research update.
CS First Boston which has a "HOLD" on ETEC reported "Q4 Tops Estimates as a shift to advanced mask-writers drives Quarter to Quarter revenues up 25%" They are still cautious but believe ETEC is poised for a pickup in business in 1999. They find ETEC interesting due to its FY99 EPS of $3.00 which gives this a 10:1 P/E ratio. They also released a 2-page report for general consumption.
Thursday September 3, 6:00 pm EDT(Businesswire) - MILBERG WEISS FILES CLASS ACTION SUIT AGAINST CYMER INC. AND ITS OFFICERS AND DIRECTORS ALLEGING MISREPRESENTATIONS AND INSIDER TRADING
The complaint charges Cymer and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Cymer manufactures lasers utilizing deep ultraviolet (''DUV'') technology which are incorporated into stepper machines used to manufacture semiconductor chips.
The complaint alleges that defendants' false and misleading statements about rapid acceptance of DUV technology by semiconductor chip manufacturers, strong demand and orders for Cymer's Series 5000 KrF excimer DUV lasers, its strong backlog of shippable/deliverable orders for these lasers and the lack of technical problems with and defects in its lasers, which would result in 40%-50% EPS growth for Cymer over the next several years and 98 EPS of $1.15-$1.20, artificially inflated Cymer's stock to a Class Period high of $49-1/4 on Aug. 25, 1997.
Cymer, its top insiders and controlling shareholders sold or disposed of 1,869,086 shares of their Cymer stock between April 1997 and August 1997, at as high as $45-1/2, generating $48.5 million in proceeds, while Cymer itself completed a very large $173 million convertible debenture offering in August 1997.
On Sept. 5, 1997, just a few weeks after Cymer's stock hit its all-time high of $49-1/4, and Cymer completed its convertible debenture offering and its top insiders completed their insider selling, Cymer's stock began to drop as rumors circulated and some analysts reported that there were quality problems with Cymer's Series 5000 excimer DUV lasers and that Cymer's customers were pushing out or cancelling earlier orders for Cymer's lasers, which would hurt Cymer's 98-99 results.
While Cymer repeatedly denied that these rumors were true, Cymer stock dropped to $28-1/8 on Sept. 12, 1997 and to $24-7/8 in late September 1997 and to just $16-1/2 in mid-November 1997, as and after Cymer was forced to admit that acceptance of DUV photolithography technology by semiconductor manufacturers was slowing, its Series 5000 lasers were encountering extraordinary reliability and performance problems, demand and orders for its lasers had declined and its 98 revenues and EPS would be much lower than earlier forecast.
Friday September 4, 1:30pm EDT - CYMER ANNOUNCES SHAREHOLDER LAWSUIT
SAN DIEGO, Sept. 4 /PRNewswire/ -- Cymer, Inc. (Nasdaq: CYMI - news), announced today that a shareholder has filed a lawsuit against the Company and certain of its officers and directors in the United States District Court for the Southern District of California. The lawsuit alleges violations of the federal securities laws, and purports to seek damages on behalf of a class of shareholders who purchased Cymer, Inc. common stock during class period.
The Company believes that the lawsuit is without merit and intends to defend against it vigorously. biz.yahoo.com
Cymer, Inc. is the world's leading supplier of excimer laser illumination sources, the essential light source for deep ultraviolet (DUV) photolithography systems. DUV lithography is a key enabling technology which has allowed the semiconductor industry to meet the exact specifications and manufacturing requirements for volume production of today's advanced semiconductor chips.
Friday September 4, 8:46 pm EDT (PRNewswire) Network Associates Extends Offer for CyberMedia; HSR Early Termination Granted
Network Associates (NETA) and CyberMedia, Inc. (CYBR) announced that the U.S. Department of Justice and the Federal Trade Commission granted their request for early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 with respect to the pending $9.50 per share cash tender offer by a Network Associates subsidiary for all outstanding shares of CyberMedia. NETA has extended the expiration date, for the tender offer until 8:00 p.m., Eastern Daylight Time, on September 9, 1998. As of 3:00 p.m. EDT on September 4, 1998, approximately 86% of the CyberMedia shares outstanding had been tendered.
Friday September 4, 4:30 pm Eastern Time (PRNewswire)- CYBERGUARD CORP. NAMED IN A LAWSUIT FOR ALLEGEDLY OVERSTATING ITS INCOME AND INFLATING ITS STOCK PRICE
A class action against CyberGuard Corporation (CYBG) and its recently suspended officers was initiated pursuant to the federal securities laws. In an August 21 company press release, CyberGuard admitted that its reported income for the first three quarters of its 1998 fiscal year was materially overstated. In the same press release CyberGuard announced that it had suspended its two highest officers, and it also reported that its outside accounting firm had resigned. These shocking revelations sent CyberGuard's stock price plummeting, losing 70% of its value in one trading day. The stock has continued to decline in value since then.
Bloomberg Personal Finance October 1998 issue highlights the following companies as "10 Cheap Tech Stocks": ACTL-ADPT-APM-ASPX-CUBE-CY-GEN-IDTI-KLIC-SIII, some of which are members of our RST Scan List
RST SCAN LIST COMMENTARY FOR SEPTEMBER 8, 1998
We had 12 stocks make the cross indexed list today many of them repeat performers from the last few weeks. Just an observation but it appears there is a heavier weighting of Biotech-Health related stocks appearing on the full RST Scan List recently. We may have a sector that is really in play. I will leave this to more knowledgeable pundits.
DBRSY(13-1/2, +7/8) - see previous commentaries for discussion, but Friday provided a very nice 7% rise in price for the positional trader. Well worth waiting for.
ETEC(29-1/4, +1 7/8) - apparently we experienced a one day delay on all the positive comments made on this company. In the past few days, ETEC has been getting some favorable comments from analysts and was the subject of a special set of comments by this newsletter. We are roughly back to the starting point for this stock, given the negative reception it was given when the good stuff was first presented.
NTAP(47-3/4, +1) - no recent news to report but a nice gain given the market sentiment on Friday.
AVNT(13-7/8, +2 1/16) - first time being talked about here and really a peripheral stock. Based on a good deal of bad press and lawsuits concerning allegations of industrial espionage, AVNT went into a dramatic free-fall last year, only to recapture and lose some of its past price performance. Long memories are required for this one since certain investors took a real beating on this stock when the dastardly news unfolded. I am still waiting to take a shot at this stock but am not completely convinced. AVNT traded close to 4X average daily volume on Friday which always raises an eyebrow with me.
Shares of AVNT, an electronic design automation (EDA) tools developer more than likely rose on news that rival Cadence Design Systems (CDN) is going to buy privately held Ambit Design Systems, a system-on-a-chip design tool maker for $260 million in cash. I am sure we will see speculation that Avant! Could be the next potential merger target in the aggressively consolidating EDA sector which is positioned to take advantage of the advent of system-on-a-chip.
Some of the positive things to take notice of are:
Fri Sept. 4, 1998 Avant! Adopts Stockholder Rights Plan - PR Newswire
biz.yahoo.com
Sat Sept. 5, 1998 Avant!'s Multi-Foundry Libra-Passport Libraries Now Certified for Use With Polaris Verilog Simulator
Libra-Passport foundation intellectual property (IP) libraries have been certified for use with its Polaris high-performance Verilog simulator. The certified libraries for use in .35 micron and .25 micron designs are available now. biz.yahoo.com
ICST(9-13/16, +1/4) - no additional news to report but ICST is holding its own still.
ORCL(20-11/16, +1 5/8) - been on the list a few times over the past weeks and there are some of us (myself included), looking at this 8.5% positive action as the beginning of ORCL's comeback to the $30 price range. We have been disappointed in the past. This stock will become a member of the "Now From The Radar Room" below, as we start to see more progress toward the $30 price range. ORCL is worth keeping on your monitor screen as a candidate for a positional trade down the road. Volume seems to be picking up on this stock recently. Oracle is teaming up with Big Six consulting firm Ernst & Young to offer manufacturers software and consulting services for "flow or just in time(JIT)" manufacturing techniques.
APCC(31-1/4, +1 3/16) - traded close to 1.5X average daily volume but I am not energized about these guys just yet. This was a $34 stock in Mid-August and took some wild rides both up and down, 3of the last 6 trading sessions for roughly $3 or more intra-day. This is the type of volatility the daytraders thrive on. However, we still have some ground to make up for relative to positional trading. Might not be such a bad entry point at $31, if you are disciplined enough to take a 10%+ profit when it is presented and then go to the sidelines.
SLVN(23-1/8, +1 1/8) - a frequent member of this list recently with positive comments by this editor related to a pick up in business for its Learning Centers, now that school is back in session. I will go on record as stating that I believe we bottomed out at $20 on Aug 31st and have been making a comeback over the past 4 trading sessions. Of the stocks presented today, this is one of my favorites for the next few weeks and months. SLVN deserves to be monitored on a daily basis.
BGEN(50, +1 _) - really doesn't deserved to be discussed by me other than it is one of a handful of Biotech stocks that I have actually profited on. Unfortunately, it looks as if it is trending downward and that Friday's positive movement might not be sustainable.
SUNW(42-11/16, +2 ¬) - my favorite workstation company. Today, they will face off in court with MSFT concerning Sun's efforts to assert control over its very popular Java programming language. This will be a very closely watched set of hearings and an important lawsuit. Way back when, it was thought that control over the Java programming language could end MSFT's dominance in certain sectors. This hearing and lawsuit comes concurrent with MSFT's battle with 20 states and the Justice Dept. in an antitrust lawsuit. biz.yahoo.com
QNTM(13-1/2, +1/4) - one look at this chart and you might agree that +1/4 is nothing to be proud of considering the negative trend to this stock. I follow the disk drive sector real close and do not believe we have hit bottom yet. We are close but still not at bottom. I am still waiting for some consolidation and some plain old cessation of operations by certain segments of this sector. I do not think there is hope for both APM(4-3/16,0) and RDRT(6-1/4, -1/16) to both remain independent nor do I think as good as WDC(8-15/16, +3/16) is, that it can put up a good fight against QNTM and SEG(18-1/4, -1/4). You never know though.
DDIM(9-5/8, +1/4) - personally, I wish I never heard of the YR2K issue and that I was as ignorant of this problem as a majority of the companies that will be affected by it. This has been nothing but a massive losing proposition for investors here since October of 1997, when the stock was at close to $40 per share. Late August saw this stock, along with others plummet to levels no one ever expected. Two weeks ago this was a $14 stock and now it looks as if it is trying to make up the losses it incurred over the course of 4 trading sessions. Very speculative play but one that has a 33%+ upside potential if things start going well.
AND NOW A WORD FROM THE RADAR ROOM:
BANKING SECTOR - we had some prior discussions on this subject especially when the Banking stocks were "rewarded" for announcing upcoming quarterly issues. Things got a little worse for the struggling banking sector Friday after another analyst cut ratings on a number of banks and brokerages, citing concerns over exposure in emerging markets and U.S. equities.
CIBC Oppenheimer lowered 1998 and 1999 earnings per share estimates by 10 to 20 percent across the board. The banking sector as a whole has been battered in the past six weeks as many investors feared institutional vulnerabilities to emerging markets, particularly Latin America, and declines in U.S. equity markets.
Warburg Dillon Read cut bank estimates across the board even though they feel market fears are more psychological than actual. S&P Equity Group also cut banking estimates by as much as 30 percent and thinks the sector will start a comeback after companies begin quantifying third-quarter losses and their exposures to Latin America.
The hit to earnings on American banks due to Russia will be ~$1 billion to American banks, whereas the hit to the market capitalization of the banking sector has been close to $70 billion in the last six weeks. It may be an emotional environment right now and it may take time to settle down. The sector's recovery may depend on how much pressure the U.S. can apply to Japan to stabilize its flailing banking sector.
Fri. September 4, 11:11 am EDT - OPPENHEIMER CUTS BANK EPS ESTIMATES
CIBC Oppenheimer lowered its earnings estimates on a number of banks and brokerages, and cut its rating on J.P. Morgan & Co. Inc. (JPM) to hold from a strong buy and also reduced the earnings estimates for the remainder of 1998 and for 1999. They do not expect any major write-offs at the investment banks but believes earnings will be lower because the equity underwriting environment is weak and fixed-income client trading flows are lower.
Company Symbol 1998 Present EPS 1998 Revised EPS 1999 Est. EPS 1999 Revised EPS
JPM $7.77 $6.27 $9.00 $7.20
BT $8.32 $3.70 $9.50 $7.60
BSC $5.04 (1999) $4.20 (1999) $5.70 (2000) $4.75
CMB $4.88 $4.55 $5.60 $5.05
LEH $6.90 $6.25 $7.25 $5.80
MER $5.19 $4.88 $6.00 $5.40
MWD $5.07 $4.62 $5.70 $5.10
PWJ $3.20 $3.00 $3.50 $3.25
TRV/CCI $3.54 $3.18 $4.24 $3.85
Chase Manhattan (CMB) About 40 percent of its bottom line comes from its global trading and investment banking arm. CMB has loan exposure to both Asia and Latin America,. After the recently announced write-offs, CMB has lower exposure to Russia.
Travelers Group (TRV)/Citicorp (CCI) may have lending exposure to Latin America and Asia
BT and JPM have the worst of it since they both have exposure to a declining equity underwriting environment, a more difficult trading environment, and they have exposure in Asia and Latin America. As wholesale firms, neither company have the stability of earnings from either a large asset management division, retail commission or consumer lending franchise.
American Express (AXP) faced with a real tough economic environment since ~10% of its company's credit card purchase volume comes from Asia.
**************************************************
Prosearch 5.0* Top Stock Report 09/07/98
**************************************************
2> DBRSY - DE BEERS CONSOL MINES LTD A D
Price= 13.5 ( 61) AvgVl= 809.8 ( 97) 1-Dy = 106.9 ( 96)
2-Dy = 108.0 ( 95) 3-Dy = 107.4 ( 92) 4-Dy = 117.3 ( 96)
7> ETEC - ETEC SYSTEMS INC COM .DSO
Price= 29.3 ( 89) AvgVl= 358.6 ( 94) 1-Dy = 106.8 ( 96)
2-Dy = 100.8 ( 84) 3-Dy = 106.8 ( 92) 4-Dy = 121.2 ( 97)
14> NTAP - NETWORK APPLIANCE CORP COM .DPE
Price= 47.8 ( 95) AvgVl= 209.4 ( 91) 1-Dy = 102.1 ( 88)
2-Dy = 102.4 ( 89) 3-Dy = 105.5 ( 90) 4-Dy = 114.5 ( 94)
17> AVNT - AVANT CORP COM .DSO
Price= 13.9 ( 63) AvgVl= 343.6 ( 94) 1-Dy = 117.4 ( 99)
2-Dy = 108.0 ( 95) 3-Dy = 106.7 ( 92) 4-Dy = 107.7 ( 89)
22> ICST - INTEGRATED CIRCUIT SYS COM .ESE
Price= 9.8 ( 35) AvgVl= 278.1 ( 93) 1-Dy = 102.6 ( 89)
2-Dy = 103.2 ( 91) 3-Dy = 111.3 ( 95) 4-Dy = 150.9 ( 99)
29> ORCL - ORACLE CORP COM .DSO
Price= 20.7 ( 81) AvgVl= 6942.5 ( 99) 1-Dy = 108.5 ( 97)
2-Dy = 101.8 ( 88) 3-Dy = 100.6 ( 75) 4-Dy = 103.7 ( 80)
34> APCC - AMERICAN PWR CONVRSN CORP COM .ELE
Price= 31.3 ( 90) AvgVl= 836.5 ( 97) 1-Dy = 103.9 ( 92)
2-Dy = 103.9 ( 92) 3-Dy = 104.3 ( 88) 4-Dy = 115.7 ( 95)
35> SLVN - SYLVAN LEARNING SYS INC COM .EDU
Price= 23.1 ( 84) AvgVl= 684.3 ( 97) 1-Dy = 105.1 ( 94)
2-Dy = 102.2 ( 89) 3-Dy = 107.2 ( 92) 4-Dy = 108.1 ( 89)
38> BGEN - BIOGEN INC COM .DBI
Price= 50.0 ( 95) AvgVl= 1165.4 ( 98) 1-Dy = 103.6 ( 92)
2-Dy = 102.8 ( 90) 3-Dy = 105.2 ( 90) 4-Dy = 108.1 ( 89)
39> SUNW - SUN MICROSYSTEMS INC COM .DCS
Price= 42.7 ( 94) AvgVl= 5120.2 ( 99) 1-Dy = 105.5 ( 94)
2-Dy = 102.2 ( 89) 3-Dy = 105.0 ( 89) 4-Dy = 107.7 ( 89)
42> QNTM - QUANTUM CORP COM .DPE
Price= 13.5 ( 61) AvgVl= 3663.4 ( 99) 1-Dy = 101.8 ( 87)
2-Dy = 106.4 ( 94) 3-Dy = 108.5 ( 93) 4-Dy = 118.0 ( 96)
59> DDIM - DATA DIMENSIONS INC COM .SER
Price= 9.6 ( 34) AvgVl= 237.9 ( 92) 1-Dy = 102.6 ( 89)
2-Dy = 100.0 ( 75) 3-Dy = 110.0 ( 94) 4-Dy = 115.7 ( 95)
|
