Boring Portfolio

Boring Portfolio Report
Monday, April 29, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI, April 29, 1996 -- The NASDAQ index managed to eke out a gain of 1.31 points today, to extend its string of consecutive record-setting sessions to eight. Meantime, the Boring Portfolio squeaked by for its 16th consecutive session without a loss.

The big Borefolio story today was newcomer Zytec. ZTEC opened for business this morning at $25 3/4 -- up $1 3/4 from where it closed on Friday. I guess I'll think twice before issuing a "buy" alert on a Friday for a stock with as small a "float" as Zytec's. With an entire week-end available for folks to place their ZTEC orders, market-makers had ample time to prepare their usual warm welcome for us.

Innocent that I am, I didn't place my order until a few minutes after the market opened on Monday, so the Borefolio's shares ending up costing $26 3/4 each. ZTEC ended the day at $28, with nearly 400,000 shares crossing the tape. That's 17% of the "float," folks!

Monday also happened to be the occasion of Zytec's annual shareholder's meeting over in Eden Prairie. That meeting commenced just as the market closed for the day. At the meeting, the company released an announcement of a 2-for-1 stock split, to occur on June 3. Oh, my.

Normally, I take a dim view of folks who get all lathered up over stock splits. After all, if you take my Andy Jackson and hand me two sawbucks in return, I'm not any richer on the exchange. In the case of Zytec, however, this split could offer some actual benefits.

Research has shown that the market tends to take the announcement of a split (even in the absence of an accompanying real dividend increase) as an indicator of the company's confidence in its prospects. Beyond that, a stock split for Zytec has the more specific effect of increasing the number of outstanding shares to the point where some investment institutions might now consider adding ZTEC to their holdings. Indeed, this potential advantage of a split was specifically mentioned by one of the analysts who participated in last week's teleconference following the release of Zytec's quarterly earnings report.

I wish I could claim that I had carefully factored this possibility into the reasoning for my Zytec "buy" alert on Friday, but the fact is I had no idea the company would announce a split so soon.

In closing, let's note briefly the two other big moves inside the Borefolio today. After an impressive run-up last week, Lam Research gave back $3 1/4 in Monday's trading. There was no specific news on Lam today, but competitor Novellus had its short-term rating revised downward from "buy" to "accumulate" by Hambrecht & Quist.

Lam's loss was offset by the continued rise of Prime Medical Services following its blockbuster news on Friday that it would be acquiring privately-held Lithotripters, Inc., a deal that will double the size of Prime Medical overnight -- or on Wednesday, actually, which is when it becomes final. PMSI set another new high, closing at $15 1/2 (bid).

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