Boring Portfolio

Boring Portfolio Report
Wednesday, April 17, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI, April 17, 1996 -- Both the NYSE and NASDAQ experienced rough sessions today as cautions from IBM sent it and related stocks (i.e., almost anything that uses electricity, it appears) downward. Sub-par earnings reports from a few other major companies -- Coca Cola, for one -- together with concerns about a strengthening dollar (which would make U.S. exports more expensive abroad) added to "investor worries," as they say in the financial pages.

As for the Boring Portfolio, our worries were few: four stocks up, two unchanged, and one down a fraction. Don't look now, but after a slow start, the Borefolio has gained 3.6% for the month of April (so far), easily outperforming the major market averages. Moreover, those numbers do not include dividends and interest on the Borefolio's cash balance, which have yet to be figured in.

Here's a quick run-down on relevant news and information I gathered today:

First, Green Tree Financial. GNT rebounded sharply from yesterday's post-earnings dip, gaining $1 3/8. Last night in a Motley Fool chat, I characterized yesterday's sellers as "stupid" -- a bit strong a term, perhaps, but after a day's reflection on the matter, I think I'll let it stand. Merrill Lynch's analyst, Livia Asher, was the only one who had forecasted EPS above the $.48 posted by Green Tree, and today even she maintained her "buy" rating and favorable earnings projections for 1996 and '97, in a report entitled: "Green Tree Financial: Keeps doing it." Exactly.

Analysts rejiggered their estimates for Lam Research following yesterday's report and teleconference, also. Although most of the revisions were downward (slightly), at least one was upward: Smith Barney's Erika Klauer raised her FY96 estimate from $4.70 to $4.85 -- although her FY97 projection remains at a fairly gloomy five bucks.

Based on the information available to me, something on the order of $4.75 and $5.50 for fiscal years '96 and '97 (which end in June) look plausible. That's quite a bit below Lam's recent performance, to be sure, but it would still represent a solid 16% gain. If that scenario plays out, then even with its currently depressed valuation, LRCX should be back above $40 by June. Apparently I'm not alone in suggesting that the future for Lam is not all that awful: LRCX actually gained $1 1/8 today, while most other chip-related stocks took it in the ear.

Next, LCS Industries. I spoke (again) with the company's CFO, Pat Frustaci, to get his response to the recent "sell" report issued by a analyst at Select Equities Group -- the sole person who follows the stock "officially" at present. That report stated, in part: "LCSI should trade at a discount to its peers given its exposure to a single catalog fulfillment customer."

Frustaci pointed out a few things -- vehemently, I might add. First, LCSI does have one relatively large customer in its catalog fulfillment division, but it also has a least a dozen other customers. Second, that situation is unchanged from what it was when the analyst originally issued a "buy" review. Third, it's not clear who the "peers" are, since there are no outfits that currently offer the range of services that LCSI does (although Axciom comes close in a number of respects).

Frustaci reiterated to me that the SEG analyst had never talked to him, never passed his review by him, and as far as Frustaci knew, had never talked to anyone in the company. "We have 200,000 square feet over there in Dover [Delaware]," Frustaci said. "What does that guy think we're doing over there all day?"

The LCSI quarterly earnings report is scheduled for release sometime during the week of May 6. Since there are no analysts following the company, there will be no teleconference. You can be sure that I'll be conferring with Mr. Frustaci at that time, however.

Lastly, one quick note on TXI. I'd like to say that I knew why the stock leaped $2 1/8 today, but I don't -- other than that in the low $60 range, TXI is a steel-melting, concrete- busting bargain, in my opinion.

Transmitted: 4/17/96 7:29 PM

BGP - 1/2...GNT +1 3/8...LRCX +1 1/8...LCSI ---
...PMSI + 3/8...SHAW ---...TXI +2 1/8...
*Scroll down or expand screen for full portfolio accounting
                   Day   Month    Year  History
        BORING   +1.29%   3.60%   2.01%   2.01%
        S&P 500  -0.53%  -0.60%   3.22%   3.22%
        NASDAQ   -0.36%   1.77%   7.68%   7.68%
    Rec'd  #   Security     In At       Now    Change
  2/28/96 200 Borders Gro    22.51     32.00    42.16%
   3/8/96 400 Prime Medic    10.07     14.25    41.51%
  1/29/96 100 Texas Indus    54.52     64.25    17.84%
   2/2/96 200 Green Tree     30.39     33.88    11.48%
  4/12/96 300 The Shaw Gr    18.84     19.88     5.49%
  3/25/96 200 LCS Industr    26.14     23.00   -12.01%
  2/23/96 100 Lam Researc    48.02     36.75   -23.47%
    Rec'd  #   Security      Cost     Value    Change
  2/28/96 200 Borders Gro  4502.49   6400.00  $1897.51
   3/8/96 400 Prime Medic  4027.49   5700.00  $1672.51
   2/2/96 200 Green Tree   6077.49   6775.00   $697.51
  4/12/96 300 The Shaw Gr  5652.49   5962.50   $310.01
  3/25/96 200 LCS Industr  5227.49   4600.00  -$627.49
  2/23/96 100 Lam Researc  4802.49   3675.00 -$1127.49
  1/29/96 100 Texas Indus  5449.99   6425.00   $975.01
                             CASH  $11465.11
                            TOTAL  $51002.61