Boring Portfolio

Boring Portfolio Report
Monday, August 26, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI (August 26) -- What if they held a stock market and nobody came? Apparently, you'd have a session pretty much like today's.

The DJIA was up a bit, then down a bit, then down some more, before recovering somewhat in the late afternoon to close beneath the 5700 mark and lower by 29 points, or half a percentage-point. Other major market indices also slipped, with the S&P 500 off 3 points (-0.47%) and the Nasdaq lower by 4 (-0.34%). Big board volume of 281.4 million shares just missed establishing a new record for the slowest full session of 1996.

The Boring Portfolio moved basically in line with the snoozy market on Monday, losing $205, or -0.37% in n.a.v. Only three Boring stocks rose on the session (Carlisle, Oxford Health, and Shaw Group), while six fell and one (Prime Medical) was unchanged.

In the opening speech of his whistlestop train trip to the Democratic National Convention in Chicago, President Bill Clinton told a crowd in Huntington, WV, today that if he were re-elected in November, every classroom in America would be hooked up to the information superhighway.

Cisco Systems, along with many other networking stocks, promptly sold off. Sheer coincidence, or another example of the super-efficient discounting capacity of the "rational" market? You make the call.

By the way, Cisco also announced today a new stackable switch, the Catalyst 3200, that will combine LAN switching with integrated WAN capabilities "to give branch offices Internet connectivity and easy access to centrally located corporate resources." According to the press release, the switch supports all leading high-speed switching technologies, "including Ethernet, Fast Ethernet, 100VG-AnyLAN and asynchronous transfer mode (ATM)."

Cisco says the Catalyst 3200 LAN switch will be available in October, with the WAN module coming in November. The Catalyst 3200 Switch Chassis with "Supv, Enh. SW, 8MB, 10K addresses" will set you back $4,995. Optional modules, connectors, dual airbags, antilock brakes, and such cost extra.

Green Tree got clipped for $ 3/4 today as weakness in the bond market sent the yield on the 30-year bond north to seven percent. TXI, which as a construction-industry stock tends to be sensitive to interest rate moves, also slipped a bit. Meantime, our whacky-wallwalker Spiders crept down in tandem with the S&P 500 index.

As mentioned above, PMSI was "unch" today. PMSI may be providing a textbook example of what George Soros has called the "reflexive" relationship between stock market prices and a company's fundamentals. Lemme explain.

Here in Fooldom, we take pains to point out that, in the long-run (and, usually, in the shorter-term, too), a company's stock price moves in line with the market's assessment of the company's ability to generate sustained per-share earnings (or cash-flow). Soros was among the first to point out that changes in a company's share price can also have a nontrivial impact upon the company's ability to grow -- i.e., the relationship has a feedback loop.

The feedback loop can be particularly crucial at certain points in the life of a company that owes its growth largely to a strategy of acquisitions, as Prime Medical does.

As you may recall, PMSI wanted to float a secondary offering earlier this summer in order to pay down the costs of its "David buys Goliath" acquisition of Lithotripters, Inc. A sudden weakness among small-cap stocks in general and healthcare stocks in particular eventually compelled the company to cancel the offering. As it stands, PMSI has the cash flow to handle interest payments on the debt; but its strategy of additional acquisitions has certainly been cramped by the cancellation of the secondary. Thus, weakness in the share price -- much of it attributable to overall market conditions rather than to PMSI specifically -- has affected the company's "fundamentals."

Is the condition a temporary one? I continue to think so. As far as I can tell, virtually all the analysts who follow PMSI put a near-term price target on the stock at $18 to $19, based on what looks to be a steady stream of revenues from its stone-busting biz. Eventually, PMSI will be able to float the offering; and in the meantime, it still has sufficient cash to buy up a few mom-and-pop lithotripter operations. But for now, the operative word appears to be "patience."

How 'about some upside stocks? Carlisle added $ 3/8 today, in its stealth climb up the Boring chart. Oxford Health Plans continues to show great relative strength, too.

Finally, Shaw Group hit *another* 52-week high today, closing at $31 5/8 (bid) on above-average volume of 255,000 shares -- very impressive on a sleepy session like today's.

Upon return from a gathering of Fools in rural Virginia this past week-end, I arrived back home to find a copy of Shaw Group's company newsletter in my mailbox. It's called "Piping Hot News" and it features fascinating stories about Shaw's new PB-1200 pipe-bending machine *and* the Fronek hydraulic snubber that's been recently added to the line of a Shaw subsidiary.

I bet that if you called Laurie Schultz at 504-296-1140, she'd mail you a copy. But you better call soon. I expect these babies will go like hotcakes.

(c) Copyright 1996, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.

Transmitted: 8/26/96

BGP - 1/8 ...CSL + 3/8 ...CSCO -1 3/4 ...GNT - 3/4 ...OXHP + 3/8 
...PMSI ---...SHAW +1 1/4 ...SPY -19/64...TXI - 1/4 ...

*Scroll down or expand screen for full portfolio accounting

Day Month Year History

BORING -0.37% 5.26% 10.27% 10.27%

S&P 500 -0.47% 3.74% 6.80% 6.80%

NASDAQ -0.34% 5.43% 9.43% 9.43%

Rec'd # Security In At Now Change

4/12/96 100 The Shaw Gr 18.84 31.63 67.85%

2/28/96 200 Borders Gro 22.51 33.25 47.70%

1/29/96 100 Texas Indus 54.50 66.25 21.56%

2/2/96 200 Green Tree 30.39 36.63 20.53%

3/8/96 400 Prime Medic 10.07 11.63 15.46%

8/13/96 100 Carlisle Co 52.65 54.75 3.99%

7/23/96 100 S&P Deposit 64.15 66.56 3.76%

6/26/96 100 Cisco Syste 53.90 55.13 2.27%

5/24/96 100 Oxford Heal 48.02 46.50 -3.18%

Rec'd # Security Cost Value Change

2/28/96 200 Borders Gro 4502.49 6650.00 $2147.51

4/12/96 100 The Shaw Gr 1884.16 3162.50 $1278.34

2/2/96 200 Green Tree 6077.49 7325.00 $1247.51

1/29/96 100 Texas Indus 5449.99 6625.00 $1175.01

3/8/96 400 Prime Medic 4027.49 4650.00 $622.51

7/23/96 100 S&P Deposit 6414.99 6656.25 $241.26

8/13/96 100 Carlisle Co 5264.99 5475.00 $210.01

6/26/96 100 Cisco Syste 5389.99 5512.50 $122.51

5/24/96 100 Oxford Heal 4802.49 4650.00 -$152.49

CASH $4428.44

TOTAL $55134.69