Boring Portfolio

Boring Portfolio Report
Tuesday, May 7, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI, May 7, 1996 -- And so the streak ends at 21. The Borefolio belly-flopped a whopping 5.59% today, the consequence of double-digit losses incurred by Zytec and LCS Industries.

The Zytec loss is reckoned as the difference between yesterday's closing bid of $46.50 and the $39 price at which I sold 200 ZTEC at the market open this morning, in keeping with my intentions as stated in yesterday's recap.

As you may recall, I issued my original review of Zytec on Friday evening, April 27, stating my intention to add the company's shares to the Borefolio on the following Monday. Since ZTEC is a relatively thinly-traded stock, I did not rule out the possibility that our online discussion here in Fooldom might boost the share price a bit. I was unprepared for the tremendous run-up that ensued, however. A largely unfollowed little company based in Eden Prairie, MN, became an overnight sensation; and the stock that I had expected to hold for perhaps six months in anticipation of a gradual rise to the upper forty dollar range hit that target in five days.

Not Boring. So last night, I reported that I'd be selling the Borefolio's 0.004% of Zytec's outstanding shares on Tuesday (today), based purely on the price run-up. I pointed out that this was only my reading of the situation, that the company was still terrific in my opinion, and that holders of the remaining 99.996% of ZTEC shares should, as always, make their own decisions.

Apparently, a lot of other folks decided to sell, too. The stock opened at $39, down $7 1/2. From there on, it was an, uh, interesting day.

I learned from the Dow-Jones news wire that Zytec "was reined in as a financial on-line bulletin board issued a sell recommendation overnight." The story goes on to note that "Motley Fool issued a sell report from Greg Markus, one of its portfolio managers."

Well, not exactly.

First, we of course never issue "recommendations" about anything. The two portfolios here in Fooldom are intended as real-time learning projects -- for all of us. The idea is to learn from watching a portfolio in action (or inaction, as the case may be), to share information and ideas, and to have some fun while doing it. That's not just boiler-plate or hype. That's the real deal.

Second, I'm not a "portfolio manager" except in the same humble sense that you are: I have a private portfolio, and I manage it. There's no outside money involved in it. It's also smaller than the personal holdings of lots of folks reading this update tonight. That's intentional. It's a model of a typical individual investor's portfolio. Again: a *learning* tool. Why is that so difficult the Wise to grasp?

Later in the day, the boyz on C-NBC thought they'd entertain themselves by chuckling about how some online Boring guy talks up stocks he owns and then dumps them later, leaving innocent readers holding the bag, presumably after Boring has made his millions -- like with Zytec, for example.

C-NBC wants to talk about accountability? Fine. Let's talk accountability.

Here's C-NBC accountability: no phone call to Fool HQ to check the story. (Believe me. After the Iomega incident, they know the number.) No e-mail or IM either to me or MotleyFool (C-NBC is right here in AOL: No bothering even to click in here and *read* the one-page sell report, or request a fax of it.

Eventually, after Fool HQ called the folks in Fort Lee and, uh, educated them (again) about what we're about, they retracted and apologized. Sort of. Or at least so I'm told. I missed all of this, thanks.

Here is accountability at The Motley Fool: we tell you BEFORE we buy a stock. We tell you WHY we are buying it. We then proceed to share our ideas and information for ALL to see. When either the Borefolio of the Foolfolio decides to sell a stock, we then alert you to that fact BEFORE we sell it and, again, lay out the reasoning for all to see. The running performance of the ports are there for the whole world to inspect, 24-7-365. The numbers are figured Foolishly, with broker's commish tallied in and at real bid and ask prices, the same ones you have to confront. Apparently the Wise just can't grasp this concept, either.

If the Zytec deal weren't sufficient excitement for one day, LCSI proceeded to implode after reporting disappointing 2Q earnings at mid-day, costing the Borefolio $1,150 in the span of about four hours. These numbers are all right there, folks -- cast in pixels at the bottom of your screen. So where's the news item about how that cagey MF Boring made a mint on LCSI?

LCSI's revenues were up 22% over the year-ago quarter (to $22.3 million), which isn't bad. And earnings were up 17% -- not outstanding, but hardly dreadful. But with the increased number of outstanding shares, fully-diluted EPS came in at $.34, compared with the year-ago $.33.

Miss a quarter in this momentum-investing world, and it's off with your head (although it's not clear what constituted a "miss," since there really weren't any generally agreed-upon estimates floating around).

I spoke with company CFO Pat Frustaci late this afternoon. As I've noted here before (and others, in the LCSI folder here in Fooldom, have confirmed) LCSI is not the most forthcoming outfit around. I learned a few things, certainly nothing profound. But we can talk about that tomorrow.

Transmitted: 5/7/96

Today's Numbers

BGP - 1/2 ...GNT + 1/8 ...LRCX - 1/2 ...LCSI -5 3/4 

...PMSI - 1/4 ...SHAW - 1/2 ...TXI - 7/8 ...

*Scroll down or expand screen for full portfolio accounting

Day Month Year History

BORING -5.59% 0.29% 6.16% 6.16%

S&P 500 -0.40% -2.44% 2.68% 2.68%

NASDAQ -0.30% -0.66% 13.61% 13.61%

Rec'd # Security In At Now Change

3/8/96 400 Prime Medic 10.07 16.00 58.89%

2/28/96 200 Borders Gro 22.51 32.88 46.05%

1/29/96 100 Texas Indus 54.52 61.13 12.11%

2/2/96 200 Green Tree 30.39 31.00 2.02%

4/12/96 300 The Shaw Gr 18.84 18.88 0.19%

2/23/96 100 Lam Researc 48.02 44.00 -8.37%

3/25/96 200 LCS Industr 26.14 17.75 -32.10%

Rec'd # Security Cost Value Change

3/8/96 400 Prime Medic 4027.49 6400.00 $2372.51

2/28/96 200 Borders Gro 4502.49 6575.00 $2072.51

1/29/96 100 Texas Indus 5449.99 6112.50 $662.51

2/2/96 200 Green Tree 6077.49 6200.00 $122.51

4/12/96 300 The Shaw Gr 5652.49 5662.50 $10.01

2/23/96 100 Lam Researc 4802.49 4400.00 -$402.49

3/25/96 200 LCS Industr 5227.49 3550.00 -$1677.49

CASH $14179.50

TOTAL $53079.50