Boring Portfolio

Boring Portfolio Report
Monday, May 20, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI, May 20, 1996 -- The Dow Jones industrial average closed above 5,700 points Monday for the first time ever, and other major market indexes also set new highs as Wall Street bet the Fed will not touch interest rates at its policy-setting meeting tomorrow.

The NASDAQ set its 27th record of the year, gaining just over one-half percent in value, to close at 1,248.11. The S&P index of 500 stocks rose 0.63% to 673.15, also a new high. Meanwhile, the Boring Portfolio rose 0.91% in net value.

The Borefolio managed to accomplish this despite losses on three stocks today. Borders Group and Green Tree Financial each lost two-bits, while Lam Research dropped $1 1/4, after rising to touch $45 earlier in the day.

Let's take Lam first. After the market closed this afternoon, the World Semiconductor Trade Statistics project announced that they had revised their estimate of global semiconductor sales growth for 1996 to 6.7%, down from their previous estimate of 26%. The old estimate dates from last fall.

I won't tax your patience by attempting to put a positive spin on this report or its possible short-term consequences for Lam. I do think it's fair to say, however, that the revised estimate is basically in line with what most folks have been expecting, particularly now that 1996 is nearly half over. Also, bear in mind that, as a semiconductor equipment manufacturer, Lam's fate depends most directly on the *number* of chips that are produced ("unit growth") rather than the price at which they are sold.

WSTS projects that chip sales will exceed $154.0 billion this year. The press release notes that the forecast, "while lower than previous industry estimates, is significant because global chip sales actually declined by 4.6 percent during the first quarter. The lion's share of this year's positive growth will surface in the third and fourth quarters."

For you stats mavens, chip sales are projected to climb another 10.3% in 1997 to $169.8 billion, then increase 16% in 1998 and 19.1% in 1999, according to the report. World chip revenues increased by 41.7% in 1995, following 31.8% growth in 1994 and 29.1% growth in 1993. The three preceding years, from 1990 to 1992, showed modest growth rates of 1.7, 8.1 and 8.6 percent, respectively. A copy of the WSTS World Semiconductor Forecast may be obtained by calling the SIA at 408-436-6600.

As for Borders, that company announced today it signed a lease to open a 24,000 sq.-foot superstore later this year in Eau Claire, Wisconsin. The new store will be the second Borders store in Wisconsin, with the other located in Madison (Go Badgers!).

The press release notes that, as in all the Borders superstores, "the new Eau Claire store will host many special events including author appearances and book signings, live music performances, children's events and other activities. Each Borders store employs a local community relations coordinator whose sole responsibility is to assure that the store reflects the interests of the community."

So with three stocks down (and LCSI unchanged on the day), how did the Borefolio manage to beat the market averages today? To answer that, look at Texas Industries, Prime Medical, and The Shaw Group.

PMSI advanced $ 7/8 on Monday, while TXI picked up $ 3/4. No news on either stock. The big winner of the day was SHAW, which gained an even one buck and moved squarely into the black once again for the Borefolio. There was no new news on SHAW, but I suspect the stock is recovering after it sold off in a knee-jerk reaction to some recent insider selling (as detailed in recent Borefolio nightly reports).

With per-share earnings expected to grow at an 86% annual rate for the fiscal year ending in August (to $.93) and another 48% in FY97 (to $1.38), SHAW is a steal at its current price under $20, in my opinion. The two analysts who follow the company apparently agree, since both of them rate the stock as a "strong buy," according to First Call.

Transmitted: 5/20/96

BGP - 1/4 ...GNT - 1/4 ...LRCX -1 1/4 ...LCSI --- ...PMSI + 7/8
 ...SHAW +1 ...TXI + 3/4 ...

*Scroll down or expand screen for full portfolio accounting

Day Month Year History

BORING +0.91% 4.52% 10.63% 10.63%

S&P 500 +0.63% 2.90% 8.29% 8.29%

NASDAQ +0.51% 4.84% 19.90% 19.90%

Rec'd # Security In At Now Change

3/8/96 400 Prime Medic 10.07 17.00 68.82%

2/28/96 200 Borders Gro 22.51 37.13 64.93%

1/29/96 100 Texas Indus 54.52 64.75 18.76%

2/2/96 200 Green Tree 30.39 33.00 8.60%

4/12/96 300 The Shaw Gr 18.84 19.88 5.49%

2/23/96 100 Lam Researc 48.02 42.75 -10.97%

3/25/96 200 LCS Industr 26.14 18.00 -31.14%

Rec'd # Security Cost Value Change

2/28/96 200 Borders Gro 4502.49 7425.00 $2922.51

3/8/96 400 Prime Medic 4027.49 6800.00 $2772.51

2/2/96 200 Green Tree 6077.49 6600.00 $522.51

4/12/96 300 The Shaw Gr 5652.49 5962.50 $310.01

2/23/96 100 Lam Researc 4802.49 4275.00 -$527.49

3/25/96 200 LCS Industr 5227.49 3600.00 -$1627.49

1/29/96 100 Texas Indus 5449.99 6475.00 $1025.01

CASH $14179.50

TOTAL $55317.00