This was a tough day, with the market administering multiple spankings, including two of my favorite babies. By now you know them well as Novell and Pfizer, and we will review Novell today for its instructive or non-instructive aspects. On Monday we'll do Pfizer.

On Wednesday, Novell closed at 11 7/16 down 1/16, having traded between a low of 11 5/16 and a 12 month high of 11 3/4, on 6.4 million shares. This was a classic slugfest, with the bulls (like me) looking for a good second quarter earnings report after the close Thursday, and the bears taking profits after the stock made its new high; the bears won by a whisker.

Thursday saw Novell opening at 11 9/16, making a new 12 month high of 11 7/8, then going to the days' low of 11 1/4 before closing at 11 3/8, down 1/16 on 4.0 million shares. Right after the close, they announced their earnings of $.05 vs. Street estimates of $.04. Although that's only a measly $.01 more, it is 25% more. And God save you if you're a penny under estimates, as your stock would get a real butt-kicking. Anyway, that $.05 was vs. $.04 the first quarter this year (another sequential victory!) and vs.a loss of $.04 in last year's second quarter.

Today Novell opened at 11 7/16, ticked up to 11 ½, and went down to 10 5/8 before closing at 10 15/16 down 7/16, on 4.4 million shares.

What the hell is going on? If stocks go down on good news and bad news, how can you figure it? Well, let's try to interpret the action. First of all, I hate it when some market theorists say that the market's price movements are random. But you know, sometimes it looks that way. In the short run, stocks may wander around like drunks, but in the long run, it's growth in earnings, sales, profit margins, and market share that kicks butts!

I guess that when Novell didn't take off early, traders (not investors like us of course) knew the pre-holiday volume would be light, and figured that the stock wouldn't go anywhere today. They were right of course, and worse yet, Novell was down almost 1/2. You can't second guess this activity, or you will go mad. There is no way to estimate the buying and selling pressure besides judging the price and volume activity as it takes place. Never criticize yourself for not having hindsight before the fact, as that is the sole province of the Almighty.

The main thing is that Novell appears to be on the right track. This is their third sequential quarter of earnings growth, and their second of revenue growth. If you are in Novell, I would hope you are in for the long-term. As such you shouldn't be concerned over small setbacks. The stock is still less than 1 point away from it's 12 month high, and with any luck at all, there could be big bucks in our future. Stay tuned.

The Market Pro - May 22, 1998