The Boring Portfolio was founded on January 22, 1996 by Greg Markus (TMF Boring). The impetus behind the port's creation was to offer an investment strategy that was the antithesis of the high-risk, high-reward excitement of the Fool Portfolio (later to become the Rule Breaker Port). Hence, a boring strategy was born.
The Boring Portfolio's stated philosophy was to purchase good-to-great quality companies at low-to-medium valuations. Greg purchased some truly boring businesses, such as Texas Industries (NYSE: TXI), maker of concrete and steel. Later, the portfolio purchased some businesses that really weren't that boring at all, such as Oracle (Nasdaq: ORCL) and Cisco Systems (Nasdaq: CSCO). In between, a fair amount of trading took place.
On October 1, 1998, new management -- Dale Wettlaufer (TMF Ralegh) and Alex Schay (TMF Nexus6) -- took over the portfolio and brought a renewed focus to both business quality and valuation. The portfolio sold a number of low-quality businesses -- such as Borders Group (NYSE: BGP) -- despite their low price-to-earnings ratios, seeking instead genuinely high-quality companies selling at or below their intrinsic value. A few months later, Alex Schay left the Fool and the Bore Port remained solely in Dale's hands.
Little over a year later, on October 22, 1999, Bore Port manager Dale Wettlaufer departed the Fool to pursue new challenges in life, leaving the Bore without an active manager. For the next year, the portfolio went "on vacation." Longtime Fool Whitney Tilson wrote a weekly guest column, but there was no one tending to the portfolio's holdings, which included a sizable amount of cash (approximately 15% of the port's assets).
It was finally concluded on October 12, 2000, after a long search for a new portfolio manager, that the Bore Port should no longer be a regular feature for lack of a suitable full-time Fool to manage the portfolio and actively expand the Bore's educational service.
For those of you who followed the Bore Port during the days of Dale's tenure, you know that Dale was in the process of crystallizing his investment strategy. But when he left, the work was incomplete, like a partially painted picture. Finding the right artist to pick up the brush is no easy task, as I'm sure you can imagine -- especially when you're trying to replace a guy like Dale.
So, the Bore Port now lies dormant. From now on, Whitney Tilson will continue to offer value-oriented investment opinions in every Tuesday's Fool on the Hill column -- but the real-money portfolio itself is not being closed.
Tom Gardner is owner of the Boring Portfolio assets, and he's moving the money to an index fund. For any long-underperforming portfolio or mutual fund, an index is the way to go -- if you can't beat 'em, join 'em. From here on, the Boring Portfolio's returns will track the Total Stock Market Index, an ultra-simple way to invest in the growth of the entire U.S. stock market.
What went wrong
Despite a good initial philosophy and a savvy purchase of Cisco in mid-1996, the Borefolio gained only 7.7% during Markus' tenure, versus 63.6% for the S&P 500. Too-frequent trading was largely to blame. Further, in the midst of purchasing companies ranging from Atlas Air (NYSE: CGO) to Lam Research (Nasdaq: LRCX) to Oracle, no consistent investing framework emerged. Many of the companies purchased were quality companies. But there were an equal number of duds, such as Greentree Financial (acquired by Conseco (NYSE: CNC) in 1998) and Oxford Health Plans (Nasdaq: OXHP).
Most importantly, the strategy lacked a well-articulated set of specific investing principles, otherwise known as an "investing framework." Much like the U.S. Constitution governs the administration of our law, an investing framework governs your selection of stocks, helping you to discern whether to buy or sell. The Bore Port lacked a clear-cut set of principles to guide its decisions, and thus was prone to wander. And so it did, making numerous mistakes, buying poor investments, and selling good ones.
Any investment strategy must be defined to such an extent that it has a clear, specific set of principles -- an investing framework. This is now true of all the Fool's living investment strategies. The Rule Maker Portfolio has its 11 criteria; the Rule Breaker, its 6 criteria; and the Drip Port, its 8 criteria. Having an investing framework -- that you stick to -- is the foundation of a disciplined, successful investing career.