Today we should revisit one of the two stocks I wrote about last week, both of which I own, and which I believe offer interesting possibilities.

The one we'll talk about today is Novell (NOVL). The timing on this is somewhat pressing, as they will report their earnings for the 2nd quarter ended April 30, 1998, after the market close on Thursday May 21, 1998. The 21st is the earliest they ever report, and I expected their range of reporting dates to be from the 21st to the 26th (Tuesday), which is the latest they report.

Earlier reporting is generally considered to be a positive sign. The logic says that companies with good news are eager to report them as soon as possible, while bad earnings are reported later as management scrambles to fine tune the bad numbers to put the best face on them. Anyway, I phoned Novell for the precise time of their earnings release, which you always should do when you're timing a buy close to earnings release. It also may help you in reading the market action tea leaves as release date approaches.

When we wrote about Novell on May 13, we suggested you consider buying on weakness after it closed at 11, up 7/16 on volume of 12.7 million shares. The stock had traded between 10 1/4 and 11 1/4. On the 14th it closed down 3/16, and on the 15th it closed down 5/16 at 10 ½, the low for the day. Volume was deceptively lower, at 3.5 million Thursday and 2.2 million Friday, giving one second thoughts about how good the earnings would really be

Hindsight, with its unfailing vision, would say that when you decide to buy on weakness, don't be a total pig and pray for a big drop. A one-half point saving on a potentially hot small stock is pretty good. In any event, today saw Novell close at 10 7/8 up 3/8, on 4.8 million shares; the stock traded between 10 ½ and 11 1/4. All this was in a stinko market.

I think the tea leaves are predicting a good earnings report, which is consistent with the company's recent results. If you want in, you have just a few days left. Even if you do buy and the stock drifts down, it would be in the context of an improving situation. You're on your own, but so what, you always are. Even if you have a full service broker and pay fat commissions, you may get sincere hand-holding, but if a stock goes down, the gas is all yours. Bon appetit! Stay tuned.

The Market Pro - May 18, 1998