The market freight train roars on at full speed, with the Dow Industrials closing at a record high of 11031. It was a fairly broad market with the ratio of advancing to declining issues being 16 to 13 on the Dow, and 7 to 6 on the Nasdaq.

Greenspan has been scaring the troops who are looking for ways to be scared, with any veiled hint of a future hike in interest rates; however, the pundits differed on the interpretation of his remarks. But there was no differing on the strength of new economic data, which the Bulls found encouraging. Interest rates have been increasing without any help from the Fed, with the 30 year Treasury Bond rate closing with a yield of 5.81%, the highest in months. In spite of that, the Bulls ran up stock prices, showing no mercy to the Bears.

The market could be vulnerable here, as the earnings reporting season is about over, so there won't be the benefit of positive earnings surprises. Of course, the frequent company take-overs always excites investors, and cash deals can further fuel the market higher. Speaking of earnings surprises, I am still loaded in Novell, and I am hopeful of just such a surprise when they report their earnings on Tuesday, May 25, after the close. The consensus earnings estimates among 10 analysts is $.10 per share.

If Novell achieves the estimates, it probably will take gas, as there is no market reward for that. Not only do you have to beat the estimate in order for the stock to go up, but you also must make the "whisper" number that analysts say is achievable. I don't know if there is such a number, but if there is, it's probably around $.10 - .11. You may recall that I was recommending this stock around $11, and I think it should still be bought on weakness.

They are regaining the title of the king of networking software (I was thoughtful enough to create that title for them), as Microsoft's roll-out of their competing product keeps being pushed out into the future. Anyway, I think Novell's C.E.O. Eric Schmidt has handled the company's recovery masterfully. He seems to be partnering with all manner of software and hardware companies, as he strives to make his software the universal standard.

Your success in the stock market is largely dependent upon your understanding of a company's product, market, and plan, and then being a tough judge of their execution of that plan. My nastiest losses have come when I have tolerated poor execution, and bought into the company's excuses beyond one quarter. Many successful investors dump a stock on their first poor earnings report. There are always some good investment opportunities around, so why fool around with a loser? More often than not, management's assessment of their problems and solutions imply a faster turnaround than actually materializes. So do your homework and be a tough judge, and you will do well over time. Stay tuned.

The Market Pro - May 7, 1999