Boring Portfolio

Boring Portfolio Report
Friday, December 12, 1997
by Greg Markus (TMFBoring@aol.com)


ANN ARBOR, Mich. (Dec. 12, 1997) -- Producer prices fell 0.2% in November according to a government report issued this morning. The bond market reacted by sending the rate on the benchmark 30-year Treasury under the 6% mark.

Typically, such news would have sent U.S. stocks soaring, but not today. End-of-quarter earnings warnings coupled with worries about the contagiousness of the financial Asian flu hit stocks yet again. The S&P 500 fell 0.16%, while the Nasdaq -- home to many technology issues with direct exposure to Asian markets -- slumped 1.41%.

The Boring Portfolio lost 1.05% Friday, hurt by a $6 1/8 skid in shares of Cisco Systems (Nasdaq: CSCO). I saw no news from the Kid because there wasn't any except for breaking, "underground" news that the Evening News caught. Please read about it there. Add to this news the rush for the exits that investors are showing any company with Asian exposure, like Cisco, and you have a rough day. More on that in a moment.

For the week, the Borefolio tumbled 6.37% -- much of that the result of Oracle's (Nasdaq: ORCL) implosion following that company's release of disappointing quarterly earnings and, more importantly, a disappointing survey of near-term prospects by Oracle executives. CEO Larry Ellison's blase' -- some might say out-of-touch -- presentation at a major trade show in New York added insult to injury. The massive -- and sustained -- selloff in Oracle stock can only be interpreted as a vote of no confidence in Oracle's NC-oriented business strategy.

As awful as the Borefolio's performance was, it was only slightly less miserable than the Nasdaq's 5.95% weekly loss. Even the nifty S&P 500 lost 3.09%.

In our recent recaps, Mark Weaver and I have offered some initial thoughts regarding the Borefolio's underperformance, along the lines of "lessons learned." Surely the most dramatically demonstrated lesson of this challenging autumn is to rely far less upon "analysts'" opinions and far more upon our own homework and gut instincts -- and also the commentaries provided by knowledgeable contributors in The Motley Fool stock boards. Had we done more of the latter, it would probably have saved us from the Oxford Health Plans (Nasdaq: OXHP) disaster.

"Lessons learned" will be a continuing focus of our recaps -- as will discussion of how we intend to work our way back to respectable performance. In that regard, prudence dictates that we start by carefully reviewing each of our current holdings, critically examining each one's strengths and vulnerabilities.

Over the past few days, Mark and I have talked directly with management at a number of the Boring companies, and we'll contact the remainder next week. We've also been scouring trade and business journals for related news and -- as noted above -- considering carefully the posts of Motley Fool participants (i.e., you).

If we conclude that the risks outweigh the rewards on a current holding, out it goes. At the same time, however, if we conclude that near-term turbulence is but a brief interruption of longer-term solid performance, the stock stays.

Now back to Cisco. In last month's conference call, Cisco executives pointed out that Asia constituted 12% of the company's total business in Cisco's fiscal second quarter, versus the usual 12-16 percent. They also cautioned that Asia continues to be challenging, with sequential bookings increasing in the low single-digits. So Cisco does indeed have exposure to Asia, but it is limited exposure.

Turning elsewhere, Tidewater (NYSE: TDW) continued to sink Friday, falling $2 1/2. The drop in the PPI was in part the result of falling energy prices, and with falling prices have come falling stock prices for oil services companies such as Tidewater. As mentioned above, we'll review Tidewater's situation next week.

On the other hand, Borders Group (NYSE: BGP) hit an all-time high today. Carlisle Companies (NYSE: CSL) and Atlas Air (NYSE: CGO) contributed solid gains to the Borefolio, also.

Finally, permit me to note that the Borefolio has not been alone in getting horses shot out from under it. Prudential analyst Alex Henderson is widely regarded as being among the most knowledgeable folks anywhere when it comes to following stocks of office equipment and services companies. Yet he found himself in the same boat with others today when Electronic for Imaging (Nasdaq: EFII) warned about its sluggish Asian sales ... and saw 62% of its market cap evaporate in a matter of hours.

It happens to all of us. But with diligence and patience, we recover. As the great philosopher Dr. Seuss wrote:

I'm sorry to say so, but sadly it's true.
Bang-Ups and Hang-ups can happen to you.

But on you will go, though the weather be foul.
On you will go, though the Hakken-Kraks howl.
Onward up many a frightening creek,
Though your arm may get sore and your sneakers may leak.

So be sure where you step. Step with care and great tact ...
And remember that Life's a Great Balancing Act.
Just never forget to be dexterous and deft.
And never mix up your right foot with your left.

And will you succeed?
Yes! You will, indeed.
(98 and 3/4 percent guaranteed.)


TODAY'S NUMBERS
Stock  Change    Bid
CGO   +  11/16 25.69
BGP   +  1/2   31.94
CSL   +1 3/16  44.81
CSCO  -6 1/8   76.56
FCH   -  1/4   37.50
GNT   -1 7/16  22.50
PMSI    ---    13.13
TDW   -2 1/2   55.06

                   Day   Month    Year  History
        BORING   -1.05%  -4.07%   8.32%  24.64%
        S&P:     -0.16%  -2.19%  28.71%  53.37%
        NASDAQ:  -1.41%  -5.77%  19.02%  47.61%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     31.94   183.73%
  8/13/96  200 Carlisle C    26.32     44.81    70.23%
  6/26/96  100 Cisco Syst    53.90     76.56    42.05%
   3/8/96  400 Prime Medi    10.07     13.13    30.35%
 12/23/96  100 Tidewater     46.52     55.06    18.35%
   3/5/97  150 Atlas Air     23.06     25.69    11.40%
  11/6/97  200 FelCor Sui    37.59     37.50    -0.24%
   2/2/96  200 Green Tree    30.39     22.50   -25.96%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  12775.00  $8272.51
  8/13/96  200 Carlisle C  5264.99   8962.50  $3697.51
  6/26/96  100 Cisco Syst  5389.99   7656.25  $2266.26
   3/8/96  400 Prime Medi  4027.49   5250.00  $1222.51
 12/23/96  100 Tidewater   4652.49   5506.25   $853.76
   3/5/97  150 Atlas Air   3458.74   3853.13   $394.39
  11/6/97  200 FelCor Sui  7518.00   7500.00   -$18.00
   2/2/96  200 Green Tree  6077.49   4500.00 -$1577.49

                             CASH   $6318.47
                            TOTAL  $62321.60