The Boring Portfolio

Boring Portfolio Report
Monday, February 12, 1996

Hi. I flew back home from Florida today, and just got in the door about 10 minutes ago. So what do I see when I sign on? Same thing you did: chip book-to-bill of 0.93. Bummer.

In times like these, it pays to have a portfolio well-ballasted with sacks of cement and fertilizer.

Fine, but what about our exposure to the semiconductor industry, in the form of wire-bonding ace Kulicke & Soffa? For the past few minutes, I've been trading instant-mail messages with various MFs on precisely that question. Should I sell KLIC? Hold? Buy more?

Let's consider some facts. First, even this surprisingly pallid b-to-b indicates that chip sales in January were up 15% as compared with January 1995. Fifteen percent growth not exactly the end of the world.

Second (and more specific to our KLIC holding), it's pretty clear that the book-to-bill surprise is simply the latest installment in the continuing saga of "How Intel Bought Too Many Chips for its Low-End Motherboards and Ended Up Disrupting the DRAM Market for Everybody"--which is to say it has very little to do with Kulicke & Soffa. After all, K&S sells equipment for making the extremely fine wiring connections to all those little pins on a chip. DRAMs are low pin-count stuff. DRAM makers are simply not a big part of K&S's overall business.

Fine and dandy, but have we not seen on multiple occasions recently that when a piece of "bad" tech-related news arrives, the market sells off indiscriminately? You betcha. So should we sell KLIC, possibly to buy it back later at a better price?

The rules of this portfolio (rules I support completely) preclude any quickie trades. Besides, I really do believe that the downside on KLIC is fairly limited (although I certainly expect the stock to lose ground tomorrow). I have no intention of going down with the ship on KLIC; but for me, at this moment, a sell tomorrow does not seem warranted. So I'm holding. You, naturally, will do whatever you think you need to do.

In closing, I should at least acknowledge the three other stocks occupying the Borefolio. Texas Industries finally took a breather, the bid price sagging 7/8 today, to 60 3/4. Green Tree Financial picked up a quarter, to 31 1/8 (bid). And following a favorable story in yesterdays NY Times, Potash moved higher today to surpass by 1/8 the $76 price at which I bought 100 shares yesterday.

Oh, yes: KLIC was up nicely today, gaining 3/4 point on the bid side, to 22 1/2.

See you tomorrow. Buckle up.

--Greg Markus (MF Boring)

Today's Moves

GNT   +   1/4
KLIC  +   3/4
POT   +1     
TXI   -1  1/8