Boring Portfolio

Boring Portfolio Report
Friday, May 9, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (May 9, 1997) -- Market indices closed moderately higher Friday after a see-saw session that reflected alternating interpretations of what Fed Chairman Alan Greenspan "really meant" when he addressed an audience at NYU the night before. The Fed meets on May 20 to consider whether or not to hike interest rates.

The Dow and S&P 500 each rose about half a percentage point Friday, while the Nasdaq gained about a third of a percentage point.

The Boring Portfolio gained a modest 0.1%, despite winning holdings outnumbering losers seven to two. For the week, the Borefolio was down slightly (-0.7%), due mostly to some softness in shares of BORDERS GROUP (NYSE: BGP) and profit-taking in stock of OXFORD HEALTH PLANS (Nasdaq: OXHP).

Those two stocks were also Friday's Borefolio losers. Borders dropped $5/8, or about 3%, to $19 1/4, while Oxford slipped a dollar (1.5%) to a bid of $64 3/4.

Earlier in the week, I checked with folks at Borders HQ (which I can see from my office). They said they knew of no reason for the stock to dip. As for myself, I think it might have something to do with the hoopla surrounding the pending IPO of online bookseller In addition, April retail sales figures came out on Wednesday and were somewhat mixed. Stats for Borders weren't among those reported, because the company doesn't provide month-by-month figures.

In any event, Borders will release results for its April quarter on May 14, in the morning. Analysts are expecting a two-penny loss, which would be half of last year's loss. If you follow specialty retailers, you're probably aware that many of those companies make all or nearly all of their profits in the holiday season -- although the pig-in-the-python profile of profits (say that five times, fast) is gradually becoming less pronounced.

As is our custom, The Motley Fool will be covering Borders' follow-up conference call and reporting back to you.

GREEN TREE FINANCIAL (NYSE: GNT) grew $7/8 on Friday, to $29. Despite that gain, GNT lost $1 7/8 in a week characterized by exceptionally heavy trading in the stock. Friday was no exception: volume was 3.3 million shares.

Part of the explanation for Green Tree's weakness is the prevailing dither about consumers' ability (or lack thereof) to manage their debts. The other wild-card, of course, is interest rates.

That delinquency rates among Green Tree's customers are as little as one-fourth the size of those afflicting other financial services companies seems not to have registered on the market. Nor for that matter has the fact that Green Tree has consistently made money in years in which the interest-rate environment was far less benign than what we're likely to enjoy in 1997, Fed action or not.

Another consideration possibly weighing on the stock are rumors that Fannie Mae (NYSE: FNM) may decide to expand its presence in the manufactured housing market.

According to a post from Motley Fool participant "KingMemo," little is known about the specifics of the supposed expansion, but it could possibly affect Green Tree due to the effect Fannie Mae's presence could have on loan spreads.

Motley Fool participant "SkiWstLA" followed up by writing that he had spoken with Green Tree's Director of Investor Relations and was informed that "Fannie Mae has been exploring getting into the manufactured housing market for the past eight years" and that if they ever were to get into the business, they would need Green Tree's help. There is some speculation that the rumor is being aired now "because of 'political considerations.'"

"SkiWstLA" continued that Green Tree's spokesperson said the company is on its way to record earnings, and business has never been better."

Finally, few of you will be surprised to learn that the Borefolio's "Winner of the Week" was CISCO SYSTEMS (NASDAQ: CSCO). Cisco gained 7.9%. But would you care to guess what stock came in second?

It was PRIME MEDICAL SERVICES (NASDAQ: PMSI). Prime gained 5.1% on the week, after posting upside surprise earnings of $0.15 per share on April 30.

(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  +  1/4   29.50
BGP   -  5/8   19.25
CSL   +  1/4   29.63
CSCO  +  1/4   61.63
GNT   +  7/8   29.00
ORCL  +  1/8   43.88
OXHP  -1       64.75
PMSI  +  1/8   10.25
TDW   +  5/8   38.88
                   Day   Month    Year  History
        BORING   +0.11%   2.26%  -1.76%  13.05%
        S&P:     +0.55%   2.93%  11.35%  32.68%
        NASDAQ:  +0.32%   5.89%   3.41%  28.25%

     Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     19.25    71.02%
  5/24/96  100 Oxford Hea    48.02     64.75    34.83%
   3/5/97  150 Atlas Air     23.06     29.50    27.94%
  6/26/96  100 Cisco Syst    53.90     61.63    14.33%
  8/13/96  200 Carlisle C    26.32     29.63    12.54%
   3/8/96  400 Prime Medi    10.07     10.25     1.80%
   2/2/96  200 Green Tree    30.39     29.00    -4.57%
 11/21/96  100 Oracle Cor    48.65     43.88    -9.81%
           100 Tidewater     46.52     38.88   -16.44%

     Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49   7700.00  $3197.51
  5/24/96  100 Oxford Hea  4802.49   6475.00  $1672.51
   3/5/97  150 Atlas Air   3458.74   4425.00   $966.26
  6/26/96  100 Cisco Syst  5389.99   6162.50   $772.51
  8/13/96  200 Carlisle C  5264.99   5925.00   $660.01
   3/8/96  400 Prime Medi  4027.49   4100.00    $72.51
   2/2/96  200 Green Tree  6077.49   5800.00  -$277.49
 11/21/96  100 Oracle Cor  4864.99   4387.50  -$477.49
 12/23/96  100 Tidewater   4652.49   3887.50  -$764.99
CASH $7660.41 TOTAL $56522.91