Boring Portfolio

Boring Portfolio Report
Friday, April 4, 1997
by Greg Markus (MF Boring)

ANN ARBOR, Mich. (April 4, 1997) -- The Boring Portfolio advanced for the third straight session on Friday, gaining 0.58% in net value. Even that fine move failed to keep pace with the benchmark market indices, though, as the Nasdaq extended its rally on Thursday by 1.89% and the Dow and S&P 500 staged sharp intraday reversals on good volume to close higher by 0.75% and 1.01%, respectively.

I want to offer a comment or three on the much-anticipated March employment statistics that were released this morning, but first let's recap how Boring stocks fared Friday.

Losses were small. ATLAS AIR (Nasdaq: ATLS), CARLISLE COMPANIES (NYSE: CSL), and PRIME MEDICAL SERVICES (Nasdaq: PMSI) each lost $1/8. (Actually, Prime close up $1/4, but the bid price was off an eighth.) TIDEWATER (NYSE: TDW) slipped $3/8.

Among gainers, BORDERS GROUP (NYSE: BGP) booked its third consecutive increase, up $1/2. GREEN TREE FINANCIAL (NYSE: GNT) rose a half-buck, as well. The stock appears to be recovering from the sharp sell-off of financial services stocks incited by interest-rate jitters.

Green Tree was mentioned in passing in Friday's Wall Street Journal. In a story about fund managers who are sitting on piles of cash and searching for bargains, Robert Rodriguez of the FPA Capital Fund said he had begun buying Green Tree stock for some of his privately-managed accounts. Rodriguez's fund, the fifth-best equity fund performer over the past decade, is already maxed out with 5% of its portfolio in Green Tree and cannot buy more according to its charter.

The Borefolio's two computer technology holdings headed higher. CISCO SYSTEMS (Nasdaq: CSCO) gained $2 3/8 to close at a bid of $50 3/4 and ORACLE CORP. (Nasdaq: ORCL) rose $1/4 to $38 3/4.

Oracle announced the first round of winners in its Cartridge Development Award Program, a contest aimed at spurring development of application cartridges for Oracle's Web Application Server. The application cartridges, in turn, are intended to encourage adoption of Oracle's Network Computing Architecture in such areas as education, multimedia, and electronic commerce. The winners are: Bien Logic, LanMinds, SAQQARA Systems, Sirrus and WayFarer. Each was awarded an engineering prize for developing a unique design of an application cartridge.

Now about those employment stats....

Nonfarm payrolls grew by a less-than-expected 175,000 in March, but that was sufficient to trim the unemployment rate by a tenth of a percentage point to 5.2%, its lowest level in five months. A separate report showed average hourly earnings rising by five cents to $12.15, which translated into an annualized gain of 4%.

Bond yields rose and the S&P 500 fell initially in reaction to the report, but stocks recovered nicely later in the day -- appropriately so, in my opinion. Here's why.

First, the large jump in February payrolls reported last month -- a reading that probably helped prompt the Fed to raise interest rates last week -- was revised downward today, from 339,000 to 293,000. Hey, what's a 14% error among friends, right?

Second, if you poke beneath today's headlines and look where most of the job growth is, it's in retail, data processing, and temps. It's a fair bet that the nation's economy will not overheat anytime soon in a conflagration fueled by the discretionary dollars of sales clerks, data-entry drones and receptionists.

Third, while zillionaire Jimmy Rogers was fretting this morning on CNBC about the extra nickel an hour that working stiffs purportedly made last month, no one bothered to ask him whether perhaps the workers were worth it -- in terms of their increased productive output. It's a fair question, especially since signs of systematic price inflation remain awfully well hidden.

Later in the day on CNBC, former Fed Governor and current chair of the White House Council of Economic Advisers, Janet Yellen, said the monthly increase in average hourly earnings is "fully justifiable given the progress that we've seen" in productivity. Fed Vice Chair Alice Rivlin concurred.

I'm with them.

While I still have the floor, let me close this lecture by reiterating that since last fall I've been saying (along with not a few other folks) that many mega-cap "growth" stocks were looking a tad expensive -- and two or three tads expensive in some instances (Coke, Microsoft). An adjustment was entirely in order. As the market tends to do, however, the move upward by the Dow and S&P late last year and early this year has been overcompensated for in this bout of fretting about non-existent inflation. As for small-cap stocks, they're cheaper now than they've been in almost a year.

At least that's how I see it. Consequently, I intend to move the Borefolio from its present position of being 86% invested in stocks to as close to 100% as I can get it -- and soon.

First, though, I'm going to make good use of a week-end of fine spring weather. I hope you have a good one, too.

(c) Copyright 1997, 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.

Stock  Change    Bid
ATLS  -  1/8   25.38
BGP   +  1/2   20.63
CSL   -  1/8   29.13
CSCO  +2 3/8   50.75
GNT   +  1/2   32.88
ORCL  +  1/4   38.75
OXHP  +  1/8   58.00
PMSI  -  1/8   10.00
TDW   -  3/8   44.50
                   Day   Month    Year  History
        BORING   +0.81%   0.83%  -3.86%  10.63%
        S&P:     +1.01%   0.10%   2.32%  21.92%
        NASDAQ:  +1.89%   1.23%  -4.21%  18.81%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     20.63    83.23%
  5/24/96  100 Oxford Hea    48.02     58.00    20.77%
  8/13/96  200 Carlisle C    26.32     29.13    10.64%
   3/5/97  150 Atlas Air     23.06     25.38    10.05%
   2/2/96  200 Green Tree    30.39     32.88     8.19%
   3/8/96  400 Prime Medi    10.07     10.00    -0.68%
  6/26/96  100 Cisco Syst    53.90     50.75    -5.84%
 11/21/96  100 Oracle Cor    48.65     38.75   -20.35%
 12/23/96  100 Tidewater     46.52     44.50    -4.35%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49   8250.00  $3747.51
  5/24/96  100 Oxford Hea  4802.49   5800.00   $997.51
  8/13/96  200 Carlisle C  5264.99   5825.00   $560.01
   2/2/96  200 Green Tree  6077.49   6575.00   $497.51
   3/5/97  150 Atlas Air   3458.74   3806.25   $347.51
   3/8/96  400 Prime Medi  4027.49   4000.00   -$27.49
  6/26/96  100 Cisco Syst  5389.99   5075.00  -$314.99
 11/21/96  100 Oracle Cor  4864.99   3875.00  -$989.99
 12/23/96  100 Tidewater   4652.49   4450.00  -$202.49
                             CASH   $7660.41
                            TOTAL  $55316.66