The Boring Portfolio

Boring Portfolio Report
Tuesday, November 26, 1996

By Dale Wettlaufer (MF Raleigh)

ALEXANDRIA, VA, November 26, 1996 -- And now for the most Boring Port re-cap of all time: Nothing of real substance happened today that would force out a long-term investor from these positions. As such, I wish you all a Foolish and Boring Goodnight.

OK, so I'm a hambone. I can't take advantage of the Boring concept to the degree where I can slide by with a quick "nothing happened today." I do believe, however, that such an attitude is the best way to deal with the day-to-day movements in a personal portfolio. I mean, yeah, the Port was down two one-hundredths of a percent today. So what's to worry about? Market crashes? Credit quality meltdowns? The Masons exerting too much influence on decision making in our democracy? Wow, sorry. The absolute non-event of the change in the portfolio led my mind to wander -- I was thinking about Jacksonian-era problems, when East Coast bigwigs of every political stripe or foreign investors controlled many corporations. The average person's retirement policy consisted of producing as many kids as possible to work the farm.

In this day and age, however, anyone can invest effectively without fear that their investment is being controlled or manipulated by some sharpy. How does one goes about effecting this disestablishmentarianist change? Harness the power of collaborative analysis found on the Motley Fool message boards; review the quarterly conference call synopses; check in on the conference call recordings that more and more corporations are providing to investors; and learn how to pull all that together by valuing a company. Finally, having accomplished those, buy great companies at values where you could genuinely say, "I would buy this whole company if I had the resources."

I happen to think that Boring has bought some great companies, and notwithstanding my indifference to one-day returns of an individual portfolio, let's check in on some of the news items generated by the companies that Greg owns.

Prime Medical expanded their investments in two South Carolina lithotripsy partnerships with which they have had long involvements. In both of these deals, though, the company maintains a shared interest with the doctors who actually perform these procedures. Along with another boring company I know, Columbia/HCA (NYSE: COL), this has proven to be a great business plan. The doctors work harder to see to it that the patient has received the best care possible, the patient comes away feeling like they've received the best treatment, the patient says good things about the care and recommends it to others, and the shareholders (among them, Boring and the doctor) do well. Works for me. Judging by the five-year performance of Prime Medical, during which time the stock has returned about 50% per year, my assessment is validated. The shareholders have done extremely well, but that can't happen without the customers -- the patients -- having done well.

Elsewhere on this most Boring of days in this most Boring of portfolios, Cisco announced enhanced software support for IBM's (NYSE: IBM) mainframe networks. Though I don't have the ability to bore you to death with a comprehensive discussion of the multiprotocol/SNA network control software, I can boil down the press release to the following explanation: Cisco is making it easier and cheaper for IBM mainframe network managers to troubleshoot problems and fix them. Hey, maybe Cisco needs a copywriter. The software is the name of the game with Cisco, too. It's not the boxes and it's not magic -- it's about a company that provides solutions and support to customers.

Detect a theme here? I share Boring's outlook on selecting companies -- the goal is to find companies that are excellent at what they do, and have the business models, finances, and managements to become the classes of their industries and the economy at large.

In other Port news, Solectron completed its acquisition of Force Computer. Looking at the valuation Solectron put on this company, one could guess that Force's revenues are somewhere around $200-400 million. As Solectron manages their operating margins better than almost anyone else in this industry, one would expect that they can pull off at least a $0.25 per share in earnings accretion from Force's operations. Given their description as an embedded systems company, I assume that Force is a higher-margin operation than Solectron. An additional $0.25 in EPS equates to a more than 10 percent increase over current trailing earnings of about $2.28. On a share expansion of only about 7% (the 3.5 million shares issued in the merger, as mentioned in the press release) the company's done a nice job if they can expand per share earnings 10% or more.

Speaking of share counts, Borders Group announced that it will buy back up to $50 million in stock to offset dilution associated with employee options exercises. Cool. Reward the employees and keep the shareholders whole. On top of that, they run a great retail operation. What more can one ask for?

That's about it for the Borefolio tonight. I didn't see anything else that happened, except that I noticed a neat happening outside of the Port today. Oneida Ltd. (NYSE: OCQ), which is located right down the road from Port holding Carlisle Companies, decided that they would focus on their boring old flatware and china business. They also paid their 244th straight quarterly dividend. Boring enough to look into? I think I will be.

Have a great Thanksgiving, everybody.

Stock  Change    Bid
--------------------
BGP   +  3/4   36.38
CSL   +  1/2   57.38
CSCO  -  1/8   67.13
GNT   +  1/8   41.38
ORCL  -  1/8   49.50
OXHP  -1 3/8   57.13
PMSI  ---      11.38
SLR   -  3/4   58.38

                   Day   Month    Year  History
        BORING   -0.02%   6.20%  19.24%  19.24%
        S&P 500  -0.14%   7.19%  21.61%  21.61%
        NASDAQ   +0.06%   4.89%  23.08%  23.08%

    Rec'd   #  Security     In At       Now    Change

  2/28/96  200 Borders Gr    22.51     36.38    61.58%
   2/2/96  200 Green Tree    30.39     41.38    36.16%
  6/26/96  100 Cisco Syst    53.90     67.13    24.54%
  5/24/96  100 Oxford Hea    48.02     57.13    18.95%
   3/8/96  400 Prime Medi    10.07     11.38    12.97%
  8/13/96  100 Carlisle C    52.65     57.38     8.97%
 10/15/96  100 Solectron     54.52     58.38     7.06%
 11/21/96  100 Oracle Cor    48.65     49.50     1.75%


    Rec'd   #  Security     In At     Value    Change

  2/28/96  200 Borders Gr  4502.49   7275.00  $2772.51
   2/2/96  200 Green Tree  6077.49   8275.00  $2197.51
  6/26/96  100 Cisco Syst  5389.99   6712.50  $1322.51
  5/24/96  100 Oxford Hea  4802.49   5712.50   $910.01
   3/8/96  400 Prime Medi  4027.49   4550.00   $522.51
  8/13/96  100 Carlisle C  5264.99   5737.50   $472.51
 10/15/96  100 Solectron   5452.49   5837.50   $385.01
 11/21/96  100 Oracle Cor  4864.99   4950.00    $85.01

                             CASH  $10570.94
                            TOTAL  $59620.94



Transmitted: 11/26/96