Boring Portfolio

Boring Portfolio Report
Monday, December 15, 1997
by Greg Markus (TMFBoring@aol.com)


ANN ARBOR, Mich. (Dec. 15, 1997) -- The Boring Portfolio started the week by losing another 1.88%. Slides in shares of Borefolio leaders Borders Group (NYSE: BGP) and Carlisle Companies (NYSE: CSL) were part of the problem. Getting another 10% sliced off Green Tree Financial (NYSE: GNT) didn't exactly help, nor did Tidewater's (NYSE: TDW) $1 3/8 ebb.

The Borders and Carlisle losses were on tiny trading volume, and I see no reason to be concerned about either one. Regarding Borders, a story in current issue of The Economist suggests that the bookseller's foray into the international marketplace by way of Singapore is making quite a splash.

According to the article, "Singaporeans have responded in a sort of collective bibliomania" to Borders's unrivaled selection of books, magazines, CDs -- not to mention cafe', "cosy armchairs and well-informed staff." The "revolutionary" idea of actually encouraging shoppers to hang out and browse is reportedly creating a national sensation.

Mark McClure, a Motley Fool reader and participant living in Japan, confirmed all this in an email to me today. Mark wrote that he was in Singapore last week "and witnessed first-hand the throngs of students, businesspeople, children, mothers, etc. jamming the store until closing at 11pm."

"I was also privy to the more conventional Singaporean bookstore -- lots of 'Don't Sit Down and Read' notices (and nowhere to sit anyway)," he continued. Mark wrote that he felt "like a kid in a candy store" at the Singapore Borders and ended up spending US$150 there.

Which is just about what I spent this weekend at Borders #001 here in Ann Arbor.

As for Carlisle, late this afternoon the company announced that its Sparta Brush subsidiary has acquired Zimmerman Brush Co. of Chicago. According to the press release, "Zimmerman is a leading manufacturer and supplier of industrial brushes to the janitorial and sanitation markets." Carlisle says that the acquisition provides Sparta with access to "an attractive new customer base and complements Sparta's line of superior quality brushes supplied to the foodservice, food processing and other institutional markets."

I just love news like that.

I spoke with Robert Ryan, Carlisle's chief financial officer, late last week as part of our review of all current Borefolio holdings. In particular, I wanted to find out whether the company was suffering any ill effects from the "Asian flu."

"The good news is that our exposure to Asia is very limited. The bad news is that our exposure to Asia is very limited," Ryan replied.

He elaborated that what he meant by that was that although the current financial turbulence in Asia affects Carlisle very little, Asia represents an important untapped market for the companies products, and it has begun to ramp up its presence there by opening an office in Hong Kong.

We also talked about Carlisle's highly successful strategy of acquiring small -- and sometimes not so small -- companies and increasing their profitability by providing managerial expertise, access to capital, and selling synergies -- just as this latest acquisition exemplifies.

I'm delighted that I discovered Carlisle, and it will always have a home in the Borefolio.

Poor Green Tree Financial. It once towered over the Borefolio, brushing its top branches at the $50 mark. Now it resembles Charlie Brown's scraggly little Christmas tree.

Today, Green Tree stock dipped momentarily into the teens, and closed down $2 at $20 1/2, on news that Standard & Poor's had affirmed its BBB+ senior debt rating and BBB subordinate debt rating on Green Tree and had revised its outlook to "negative" from "stable."

On the plus side, S&P noted Green Tree's "excellent franchise name and market position in the manufactured housing sector," its "long track record at successfully implementing and managing a securitization strategy," the growing diversity with regard to offered products," and the company's "strong profitability."

On the other side of the ledger, however, S&P pointed to the "debatable level of earnings and capital that exists at any company with a high reliance on securitization," and the fact that "specialty finance lenders have been adversely impacted by the intensely competitive environment in the industry, particularly through write-downs of excess servicing receivables."

Is this the end of the bad news for Green Tree? I have no way of knowing. My judgment right now, however, is that once the spate of year-end tax-loss selling has abated, the Tree will once again begin to bloom.

Speaking of blooming, shares of Cisco Systems (Nasdaq: CSCO) recovered $15/16 on Monday, and FelCor Suite Hotels (NYSE: FCH) rose $5/16 on news that the REIT had set its quarterly dividend at $0.55 per share.

--TMF Boring

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TODAY'S NUMBERS
Stock  Change    Bid
CGO     ---    25.69
BGP   -1 5/8   30.31
CSL   -  11/16 44.13
CSCO  +  15/16 77.50
FCH   +  5/16  37.81
GNT   -2       20.50
PMSI    ---    13.13
TDW   -1 3/8   53.69

                   Day   Month    Year  History
        BORING   -1.88%  -5.87%   6.29%  22.31%
        S&P:     +1.05%  -1.17%  30.06%  54.98%
        NASDAQ:  -0.00%  -5.77%  19.02%  47.61%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     30.31   169.30%
  8/13/96  200 Carlisle C    26.32     44.13    67.62%
  6/26/96  100 Cisco Syst    53.90     77.50    43.79%
   3/8/96  400 Prime Medi    10.07     13.13    30.35%
 12/23/96  100 Tidewater     46.52     53.69    15.40%
   3/5/97  150 Atlas Air     23.06     25.69    11.40%
  11/6/97  200 FelCor Sui    37.59     37.81     0.59%
   2/2/96  200 Green Tree    30.39     20.50   -32.54%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  12125.00  $7622.51
  8/13/96  200 Carlisle C  5264.99   8825.00  $3560.01
  6/26/96  100 Cisco Syst  5389.99   7750.00  $2360.01
   3/8/96  400 Prime Medi  4027.49   5250.00  $1222.51
 12/23/96  100 Tidewater   4652.49   5368.75   $716.26
   3/5/97  150 Atlas Air   3458.74   3853.13   $394.39
  11/6/97  200 FelCor Sui  7518.00   7562.50    $44.50
   2/2/96  200 Green Tree  6077.49   4100.00 -$1977.49

                             CASH   $6318.47
                            TOTAL  $61152.85