Boring Portfolio

Boring Portfolio Report
Thursday, April 11, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI, April 11, 1996 -- After two days in which the Boring portfolio easily outperformed the market averages, its overall value dropped 1.81%, largely as a function of two (or two and a half) news items.

The first bit of news was a strong Producer Price Index number, which added new fuel to concerns about rising inflation -- and hence rising interest rates and, by extension, tougher times for companies in the financial industry, such as our Green Tree Financial, which dropped $ 1 3/4 today.

As I noted in my update the other night, Green Tree's niche in manufactured home lending, as well as its procedure of securitizing and selling its debt on a monthly basis, largely (but not completely) insulates it from some of those pressures. I have seen no revisions of earnings estimates or ratings by analysts who follow GNT. Quarterly earnings for the company will be reported next week, so I'm waiting to hear what the news is then.

The other half-item I refer to above also related to Green Tree, and this is the story reported yesterday (and still making the rounds today) that Green Tree's CEO, Lawrence Coss, earned over $65 million last year. Over $59 million of that amount was in stock, a result of his performance-related compensation plan that was instituted back in 1991. GNT shares have enjoyed compound annual growth of 44% since that time, which has made Mr. Coss (and other Green Tree execs) very wealthy folks. What some readers may have missed is that this compensation plan expires at the end of this year, which should help earnings directed toward other shareholders (i.e., us) after that.

The other big news today had to do with Lam Research. Lam and a number of other chip equipment makers suffered earnings revisions and, in some instances, ratings downgrades, largely as a result of cautionary statements from Altera and (to a lesser degree) Motorola.

Dow Jones reports that Goldman Sachs analyst Joe Moore removed Lam from the firm's recommended list. Separately, PaineWebber analyst Gunnar Miller reiterated his neutral rating on the industry group and, while leaving his 1996 earnings estimates intact, reduced some of his 1997 estimates for front-end chip-equipment providers by about 10%. Miller cut his 1997 earnings outlook for Lam Research to $5.35 from $5.55. Miller cited a stream of disappointing semiconductor earnings reports, more moderate capital-spending forecasts, order push-outs, reschedulings and outright cancellations as reasons for his reduced profit views.

Cowen & Co. analyst Elliott Rogers revised his EPS estimate for Lam to $5.60 from $5.75. He maintained his 1996 estimate ($4.75) and left his rating unchanged at "strong buy." Rogers said capital spending on equipment used to make chips may simply get shifted into 1997. Current equipment stock prices indicate negative growth in 1997, Rogers said. "But if they're wrong and earnings estimates are even in the ballpark, then (these issues are) screaming buys."

David Ringler of Lam and I have been playing phone tag all day. There's a chance we'll make contact yet tonight. If so, I'll post an addendum in the Lam folder. Otherwise, click back in here tomorrow.

Oh, one last piece of news! Tomorrow, the Borefolio will be buying 300 shares of The Shaw Group (NASDAQ: SHAW), a big-time pipeline fabricator that just posted terrific earnings and has equally bright prospects. My report will be in a new folder here in the Boring Portfolio area by approximately 7:30 PM tonight.

Transmitted: 4/11/96

BGP +   7/8 ...GNT -1  3/4 ...LRCX -1  3/8
...LCSI -   1/2 ...PMSI -   7/8 ...TXI -1  3/8 ...
                   Day   Month    Year  History
        BORING   -1.81%  -0.94%  -2.46%  -2.46%
        S&P 500  -0.36%  -2.22%   1.54%   1.54%
        NASDAQ   -0.74%  -0.38%   5.40%   5.40%
    Rec'd  #   Security     In At       Now    Change
   3/8/96 400 Prime Medic    10.07     13.25    31.58%
  2/28/96 200 Borders Gro    22.51     29.50    31.05%
  1/29/96 100 Texas Indus    54.52     63.88    17.15%
   2/2/96 200 Green Tree     30.39     30.88     1.61%
  3/25/96 200 LCS Industr    26.14     21.75   -16.79%
  2/23/96 100 Lam Researc    48.02     35.38   -26.33%
    Rec'd  #   Security      Cost     Value    Change
  2/28/96 200 Borders Gro  4502.49   5900.00  $1397.51
   2/2/96 200 Green Tree   6077.49   6175.00    $97.51
  3/25/96 200 LCS Industr  5227.49   4350.00  -$877.49
  2/23/96 100 Lam Researc  4802.49   3537.50 -$1264.99
   3/8/96 400 Prime Medic  4027.49   5300.00  $1272.51
  1/29/96 100 Texas Indus  5449.99   6387.50   $937.51
                             CASH  $17117.60
                            TOTAL  $48767.60