Today was not particularly eventful, being the day before Thanksgiving. Volume was light as you would expect, with market indices generally higher, and advancing issues modestly ahead of decliners. The 30 year Treasury bond's yield dropped to 5.18%, which is the lowest since Friday, October 30, when it jumped to 5.15%. Of course, lower bond rates will cause some investors to switch from bonds to stocks, in search of higher returns.

The importance of brokerage house sponsorship was very evident. A major broker initiated coverage of C-Cube Microsystems with a buy recommendation, and the stock was up 2 9/16 at 26 1/16. I own a few shares and have always liked this stock, which is a leader in the digital video chip industry. That business should take off next year, and I've been looking for price weakness for an opportunity to buy more.

Another major broker inspired stock move involved Nework Associates. Coverage was initiated with a Buy rating, and the stock was up 4 at 49. I have been interested in this company as it is a major factor in anti-virus and security software. This firm was formed by the merger in December, 1997 of Network General and McAfee Associates and the acquisition in August, 1998 of Dr. Solomon's Group PLC. This is another stock on my shopping list, if it ever encounters price weakness.

I was glad to see Novell come in with a big earnings percentage gain, even if only pennies are involved. In our May 13, 1998 column, we recommended Novell at 11; it did go a little lower a day or two later. I liked the new CEO Eric Schmidt, who came from Sun Microsystems where he was Chief Technology Officer. He was reducing head count, getting rid of all non-core businesses, and reducing the pipeline of unsold and aging product. He then focused on creating leading edge products, culminating with the release of NetWare 5 on September 9, 1998.

That September 9 release was ahead of schedule, in contrast to Microsoft, whose competing offering is due maybe in mid-1999. For the quarter ended October 31, 1998, Novell's per-share earnings were $.12 vs $.09 consensus estimate and $.02 in October, 1997. The stock was up 3/4 at 18 1/8, after reaching a high of 18 7/8 on over 19 million shares! That's around 5% of the outstanding stock!

Novell was up in the 30's some years ago, and this price action is indicative of not only traders selling on good news, but even more importantly, many investors who bought in at these levels in the past, taking this opportunity to get their money out at last. Bottom line is the stock was up significantly on enormous volume, which is very positive. The buying forces were even more enormous than the sellers'. I look forward to Novell working to even higher prices, and I certainly hope so as I am loaded with this stock.

I am still wary of this market. I bought two small Biotech/Genomic issues today, as the technology available at these low prices was compelling. Maybe we'll talk about them later. In the meantime I'll probably buy a little more if their prices drift downward over the weeks ahead. I would just interpret that as a lack of investor interest, as long as the volume is low. If a stock has a big percentage drop, or if it's going down even slightly but on big volume, I stand aside. I'm not looking for killer bargains. Because the guy getting killed might be me. Remember the old poker player's saying - "If you're in a poker game with people you don't know, and after 15 minutes you don't know who the Patsy is, get up and go - because the Patsy is you."

In the meantime, barring a very compelling idea, stay in a hold position. With patience and a little luck, we should get a decent buying opportunity before year-end. We have had a terrific rise since early October, and we could retrace up to one-half of that move and still be in a bullish environment. Just be patient, and watch, and hold on to your cash. Because cash is king! Stay tuned.

The Market Pro - November 25, 1998