Boring Portfolio

Boring Portfolio Report
Tuesday, October 8, 1996

by Greg Markus (MF Boring)

ANN ARBOR, Mich. (Oct. 8) Once again, the Dow made a run at 6000 only to end the day lower, this time the victim of, ahem, "profit-taking."

Last night's disappointing quarterly report from Motorola didn't exactly get the day off on the right foot. A ratings downgrade of Intel (on a price basis) further contributed to concern that at least some sectors of the market had gotten ahead of themselves as a result of the impressive September run-up. Then late this afternoon, market forecaster Elaine Garzarelli, appeared on CNBC to reiterate her belief that stocks are poised for a correction "of 15% to 25%" owing to slowing corporate earnings.

I happened to catch the Garz's performance on the tube, and it was fascinating to watch the real-time Dow plummet as she spun her tale: from up two to down thirteen in a matter of minutes. Fascinating.

Just so you don't get the wrong impression, following the last employment and payroll report, I went on record here, stating that I was more concerned about slowing earnings in the next couple of quarters than I was about any spectre of inflation. But Garzarelli's "15% to 25%" crash prediction seems just a tad melodramatic to me.

In any event, the Boring Portfolio slid right along with the market averages on Tuesday, to the tune of -0.78% in net value. That was worse than the S&P 500's -0.38% but marginally better than the Nasdaq's -0.85%. Five Borefolio holdings lost ground, two (Carlisle and Prime Medical) were unchanged, and only one -- Green Tree Financial -- rose.

I spotted three bits of news on Green Tree. Chicago Corp. initiated coverage of GNT with a "buy" rating, citing the company's "aggressive diversification" into new market niches. The analyst is expecting Green Tree to report EPS of $0.61 when it reports 3Q results on October 22. That estimate is right in line with the consensus.

Speaking of "aggressive diversification," a second item on the wires noted that Green Tree had reached agreement with Hardware Wholesalers Inc. (HWI) to provide a new private brand credit card for use by HWI's 3,400-plus retail-members. The new program will be introduced to HWI members at the October Market in Indianapolis on October 17-22.

This move builds on Green Tree's strategy to supplement its mortgage and home improvement finance business with a credit card operation that can be used by building contractors and home owners in building supply and hardware stores. Green Tree launched this strategy earlier this year with an agreement with Menard's, a large regional building supply chain.

Finally, an item in the back of this morning's Wall Street Journal reported that "Wall Street investment banks were scrambling to meet large orders for an odd brand of Green Tree financial Corp. securities yesterday." The story goes on to say that "at least two large investors" are accumulating certain securities that Green Tree is issuing that "are backed by excess cash flows left over from outstanding housing loan deals."

As the story says, these are an "odd brand" of security, and I don't pretend to understand all the ins and outs. But apparently Green Tree has found yet another way to securitize the fruits of its financial operations and make money from it. GNT established another record high today, closing at $41 5/8. That move pushed it past Prime Medical Services to take second place in the Borefolio list of percentage price gainers.

I could find no significant news on any other Boring stocks today, other than that Oxford Health officially unveiled its alternative medicine program, which was discussed in the Borefolio recap yesterday. The new program will be offered to Oxford members "through a credentialed network of top-quality providers" beginning January 1, 1997.

The plan is nothing if not innovative, and I'm interested in learning more about it and will share with you whatever I find out. As for today, OXHP slipped $ 3/8 to close at a bid of $47 5/8.

Transmitted: 10/8/96