Boring Portfolio

Boring Portfolio Report
Thursday, June 13, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI, June 13, 1996 -- With one day left to redeem itself, I have to say that this hasn't been among my more memorable weeks, stockistically speaking.

The market's been sloppy despite generally benign readings on macroeconomic indicators that monitor inflation. And the Boring Portfolio's been having a dickens of a time getting its footing. All major market averages fell on Thursday, and the Borefolio slid right along with the trend -- shedding 1.29% in net value.

The bulk of that loss was concentrated in Shaw Group, which fell 1 3/8 points (nearly 8%) on unusually heavy volume of 168,100 shares. The stock ended the day at a bid of $16. Needless to say, tonight's Borefolio recap will be devoted to SHAW.

Recall that The Shaw Group is a leading fabricator of piping systems for the electric power, oil refining, and chemical industries. Did I say "leading fabricator"? Heck, Shaw Group has a better than 50% share of the domestic market. The company is also a major player on the international scene, from which it generally derives the majority of its profits.

Among the company's competitive advantages are its advanced computer-aided design and manufacturing processes and its capability to bend even large diameter pipe precisely to specification, thereby eliminating many costly fittings and speeding production. Also, the company's sheer size enables it buy steel pipe directly from the manufacturer at rock-bottom prices.

Back on April 9, the company reported second quarter earnings of $0.21 per share (versus $0.07 in the corresponding quarter last year) on record sales of $49.6 million -- a mere 81% gain over last year. Those numbers exceeded the top end of analysts' estimates, and I decided to buy in.

The stock crossed the $20 mark briefly but since then has slipped back into the high teens ... until today, when it appears that some momentum players decided that this ride was too tame for them and hopped off.

I checked in with the Investor Relations office at Shaw Group during lunch today and was informed in no uncertain terms that there is nothing that they're aware of that might account for the drop in the share price: business is great, bookings are strong, and bidding activity is, well, active.

The two analysts who follow SHAW are Tobias Levkovich at Smith Barney, and Ravi Kamath at Jeffries Group. They have been projecting that SHAW would make $0.23 or $0.24 per share in the quarter that ended May 31. Shaw Group told me today that the company is "comfortable, very comfortable, completely comfortable" with those estimates -- "even the higher one."

Well, then what about insider selling? As you may recall, I reported a while back that CEO and founder James Bernhard (who owns in excess of 20% of the stock) and some other insiders (who control approximately another 12%) were cashing in some of their chips recently: the Shaw Share Redemption.

Was insider selling putting a damper on the stock, I asked? Negatory. The window for such sales begins two days after quarterly earnings are reported and extends for 30 days. There has been no insider selling recently.

Late this afternoon, the company called me back to say that they had decided to move up their report of 3Q earnings from its customary date, around July 9, to Monday, July 1, prior to the market open.

Looking further down the road, SHAW is slated to make EPS of $0.91 to $0.94 for the FY ending in August and $1.35 to $1.40 in FY97. That's on the order of a 49% gain, according to my 15 year-old TI-55. Analyst ratings? Two "strong buys."

Before signing off, let's acknowledge LCSI for gaining $1/8 in today's trading. Clap. Clap. Just eleven more points and we'll be back where we started less than three months ago.... Hey, it's been done. I'm willing to give LCSI a while longer.

Transmitted: 6/13/96


TODAY'S NUMBERS
BGP - 3/8 ...GNT - 3/8 ...LCSI + 1/8 ...OXHP - 5/8 ...
PMSI - 1/4 ...SHAW -1 3/8 ...TXI + 1/8 ...

*Scroll down or expand screen for full portfolio accounting

Day Month Year History

BORING -1.29% -1.73% 4.85% 4.85%

S&P 500 -0.17% -0.18% 7.45% 7.45%

NASDAQ -0.79% -1.43% 17.74% 17.74%

Rec'd # Security In At Now Change

3/8/96 400 Prime Medic 10.07 17.38 72.54%

2/28/96 200 Borders Gro 22.51 36.38 61.59%

1/29/96 100 Texas Indus 54.52 65.50 20.13%

2/2/96 200 Green Tree 30.39 30.50 0.37%

5/24/96 100 Oxford Heal 48.02 44.25 -7.85%

4/12/96 300 The Shaw Gr 18.84 16.00 -15.07%

3/25/96 200 LCS Industr 26.14 15.13 -42.14%

Rec'd # Security Cost Value Change

3/8/96 400 Prime Medic 4027.49 6950.00 $2922.51

2/28/96 200 Borders Gro 4502.49 7275.00 $2772.51

1/29/96 100 Texas Indus 5449.99 6550.00 $1100.01

2/2/96 200 Green Tree 6077.49 6100.00 $22.51

5/24/96 100 Oxford Heal 4802.49 4425.00 -$377.49

4/12/96 300 The Shaw Gr 5652.49 4800.00 -$852.49

3/25/96 200 LCS Industr 5227.49 3025.00 -$2202.49

CASH $13299.52

TOTAL $52424.52


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