Boring Portfolio

Boring Portfolio Report
Tuesday, April 29, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (April 29, 1997) -- A government report released Tuesday morning showed that employment costs increased less than expected during the month of March. That news buoyed hopes that the Federal Reserve might not raise interest rates when it meets next month. The bond market celebrated, sending the yield on the long bond below the 7% mark. That, along with continuing good news overall on the earnings front, sent the Dow soaring 179 points, or 2.64% -- its second largest point gain in history. The S&P 500 and Nasdaq joined in the broadly-based rally, gaining 2.73% and 2.11% respectively.

Gains were broadly based in the Boring Portfolio, as well. All nine holdings advanced, for a 2.15% gain in net asset value (including $7660 in cash) and a 2.51% gain on the portion of the portfolio invested in stocks.

Yesterday, GREEN TREE FINANCIAL (NYSE: GNT) lost $1 7/8 on no news -- the latest episode in an aggressive pruning the stock has endured. Today Green Tree managed to recover $3/8 of that. In light of the bond market's rally today, the gain probably would have been greater had not yet another lower-quality financial services stock imploded in the Tree's vicinity.

This time it was AVONDALE FINANCIAL (NASDAQ: AVND). Avondale lost nearly 20% of its market value in the course of a few hours after the company reported an unexpected first-quarter loss of $2.15 a share resulting from excessive credit-card delinquencies. The company had recently launched a private-label card in partnership with a jewelry store and offered interest-free financing as a come-on to attract business.

They attracted it, all right -- but not the kind they were hoping for. According to the report today, more than one account in seven was 60 days or more delinquent at the end of the March quarter. The fraction of Avondale's total portfolio that was delinquent by 60 days or more was reported to be 4.46%. That compares with a rate of less than 1% reported by Green Tree on April 17.

Fresh numbers from First Call show no changes in analysts' summary rating (1.5, or "Strong buy" to "buy") or earnings estimates for Green Tree. Those estimates are $3.01 for 1997 and $3.57 for 1998. At today's closing price of $27 1/4, GNT is trading at nine times projected 1997 earnings.

Yesterday's other big loser was TIDEWATER (NYSE: TDW), which submerged $4 1/8 after two analysts downgraded stocks of marine services companies. The analysts were concerned that orders for construction of perhaps two dozen new vessels might lead to an excess of capacity, thereby driving down rental rates.

Tidewater will own approximately 750 vessels after it completes its pending acquisition of British-owned O.I.L. That easily makes it the largest operator in the business, capable of influencing prevailing dayrates simply by moving its boats strategically around the globe or withdrawing some of them from service entirely if need be. Moreover, many of the new vessels will not even compete in the market segments in which Tidewater focuses.

TDW rose $1/8 Tuesday, despite a downgrade by an analyst at Salomon Brothers. The company reports its quarterly results on Thursday after the close of the market.

ORACLE (Nasdaq: ORCL) gained $1/2. Speaking at the Hambrecht & Quist technology conference in San Francisco this morning, Oracle CFO Jeff Henley said that the company's May-ending fourth quarter "looks good," despite what will be a tough comparison with sales the company racked up a year ago. The consensus estimate of 29 analysts surveyed by First Call is for earnings of $0.53 per share for the quarter, or a 33% gain over 1996.

According to a story on the Dow Jones wire, Henley said that sales are "going well" around the world, including in Europe. He also confirmed that the company remains on track to release Oracle 8 in June.

The Borefolio's other Nasdaq gorilla, CISCO SYSTEMS (Nasdaq: CSCO) climbed $3 1/2 in advance of the company's quarterly earnings report, to be released next week. Cisco's been getting a lot of good press the past few days, including favorable comments in the current issue of Barron's and an upbeat feature story, entitled "Computing's Next Superpower," in the May 12 edition of Fortune.

About a week ago, I offered a radically condensed version of a critical story about Cisco that appeared in Business Week. I thought I'd follow up by offering a similar "Cisco for Short Attention Spans" version of the Fortune article. Here goes:

"Computing's Next Superpower"... projects with Microsoft and Intel... triumvirate of titans... digital revolution... Wintelco... on pace to break $6 billion in sales... 75% market share in routers... 40% share in switches... deftly maneuvering... lightning-quick acquisitions... truly enviable position... so much engineering talent... design new products faster than anyone... power to wage and win price wars... end-to-end network plumbing... voice, cable TV, Internet... Cisco buyouts remarkably smooth... has a small-company mentality... "It's the software, stupid!"... Cisco IOS... QoS... tag switching... beauty... partnering... Compaq... H-P... Microsoft... MCI... $3 billion to rewire the U.S. Postal Service... Cisco a prime contractor... considering a brand-name advertising campaign... "Big gap that Microsoft and Cisco can fill together," says Gates... "Wintelco?"... Could sure evolve that way.


One last thing: Wednesday morning, PRIME MEDICAL SERVICES (Nasdaq: PMSI) will tell us how much money they made busting kidney stones last quarter. Analysts are looking for $0.14 per share. The Motley Fool will cover the follow-up conference call and provide a timely synopsis just for you.

(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       27.00
BGP   +  1/8   21.38
CSL   +  1/8   28.00
CSCO  +3 1/2   49.88
GNT   +  3/8   27.25
ORCL  +  1/2   38.38
OXHP  +3 3/4   62.63
PMSI  +  1/8   9.13
TDW   +  1/8   40.13
                   Day   Month    Year  History
        BORING   +2.15%  -1.46%  -6.04%   8.12%
        S&P:     +2.73%   4.88%   7.20%  27.74%
        NASDAQ:  +2.10%   1.71%  -3.75%  19.37%

     Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     21.38    89.89%
  5/24/96  100 Oxford Hea    48.02     62.63    30.40%
   3/5/97  150 Atlas Air     23.06     27.00    17.09%
  8/13/96  200 Carlisle C    26.32     28.00     6.36%
  6/26/96  100 Cisco Syst    53.90     49.88    -7.47%
   3/8/96  400 Prime Medi    10.07      9.13    -9.37%
   2/2/96  200 Green Tree    30.39     27.25   -10.32%
 11/21/96  100 Oracle Cor    48.65     38.38   -21.12%
 12/23/96  100 Tidewater     46.52     40.13   -13.76%

     Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49   8550.00  $4047.51
  5/24/96  100 Oxford Hea  4802.49   6262.50  $1460.01
   3/5/97  150 Atlas Air   3458.74   4050.00   $591.26
  8/13/96  200 Carlisle C  5264.99   5600.00   $335.01
   3/8/96  400 Prime Medi  4027.49   3650.00  -$377.49
  6/26/96  100 Cisco Syst  5389.99   4987.50  -$402.49
   2/2/96  200 Green Tree  6077.49   5450.00  -$627.49
 11/21/96  100 Oracle Cor  4864.99   3837.50 -$1027.49
 12/23/96  100 Tidewater   4652.49   4012.50  -$639.99
CASH $7660.41 TOTAL $54060.41