Boring Portfolio

Boring Portfolio Report
Monday, May 12, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (May 12, 1997) -- Stocks exhibited good strength ahead of producer and consumer price reports due out later this week. The Dow gained 125 points (+1.7%) to establish a new all-time high at 7295. The S&P 500 rose 1.6% to set its own new high, while the Nasdaq managed to post a 0.7% advance despite some weakness in chip stocks.

The Boring Portfolio tacked on $888 dollars, which works out to a 1.6% gain in the total value of the portfolio and a 1.8% gain on the portion invested in stocks. Seven of nine holdings advanced, while shares of ATLAS AIR (Nasdaq: ATLS) and ORACLE (Nasdaq: ORCL) slipped a quarter-point each.

Monday's Boring winner was GREEN TREE FINANCIAL (NYSE: GNT). Green Tree added $1 5/8 to Friday's $7/8 gain to close at $30 5/8. As has been the case for a while now, volume was exceptionally heavy: 2.25 million shares. Today's move puts Green Tree back into the black for the Borefolio.

Over the week-end, I used the excellent (and free) graphing facilities available at to compare the relative performances of GNT and some peers in the financial services group. The comparison group I selected consisted of BENEFICIAL (NYSE: BNL), COUNTRYWIDE CREDIT (NYSE: CCR), FANNIE MAE (NYSE: FNM), and HOUSEHOLD INTERNATIONAL (NYSE: HI), and I examined year-to-date and trailing 12 month stock performance.

Fannie Mae was the best of the group for the time periods under study, but all the stocks tended to move fairly closely together. GNT began to diverge from the pack (to the down-side) in October, but then the rest of the group dropped ahead of the Fed's interest rate increase in late March, while GNT more or less held its ground. By mid-March, there wasn't really much difference among the stocks (and the S&P 500, for that matter) in terms of net performance since May 1996.

Then things changed. Once the rate hike was digested, the stocks in the comparison group began to rise. Not Green Tree. It continued to head south, and on consistently heavy trading volume, until late last week.

Throughout that entire period of weakness, Green Tree's EPS projections and analyst ratings did not vary appreciably. Calls to the company -- by me and by other investors who discuss the stock at The Motley Fool's AOL site -- consistently confirmed that management was comfortable with analysts' earnings projections and that the business was humming along nicely.

In fact, during the week following Green Tree's earnings report, five company insiders bought a total of 12,600 shares on the open market at an average price of $30.70. No insiders sold. (This information can be found at .)

What do I make of this? Although I have no firm evidence to confirm it, it certainly appears that a large institutional holder (or perhaps more than one) decided to pare back its GNT holdings substantially, resulting in relentless near-term pressure on the share price.

Whatever the reason, we are where we are. The real question is: Where does the stock go from here? Based on EPS projections for the year and the historical performance of GNT relative to its peers, the stock would have to get back to $39 or so merely to get return, on a relative basis, to where the rest of the group is trading. Considering that analysts expect Green Tree to earn $3.01 per share this year, that would require a multiple of 13-times forward earnings -- certainly within the range that the stock has enjoyed in the recent past.

Although Green Tree's stock has been troubled so far this spring, the company continues to blossom. Last week, Green Tree offered $800 million in securities backed by manufactured home loans, through underwriters led by Merrill Lynch. The offering was in ten parts. The first seven (totaling $680 million) were rated AAA by Moody's and S&P. The remaining three parts received ratings of AA-, BBB+, and A- by S&P. Some time in the next two weeks, the company will offer $300 million in securitizations backed by home equity loans.

A couple of quick notes on other Boring holdings:

CARLISLE COMPANIES (NYSE: CSL) added $1/8. While surfing the insider trading data, I discovered that in late April, following Carlisle's report of quarterly earnings, three company insiders purchased a total of 4,500 shares at an average price of $27.74. No insiders sold shares.

Shares of BORDERS GROUP (NYSE: BGP) gained $1/2. The company reports results for its April quarter on Wednesday morning, and The Motley Fool will cover the follow-up conference call.

OXFORD HEALTH PLANS (Nasdaq: OXHP) rose a dollar. Oxford was among 13 HMOs identified today as the nation's best, according to research performed by the Sachs Group. According to the press release from Sachs, the study is "unique because it captures a broad range of consumer attitudes and behavior at the local market level."

The Borefolio's other healthcare-related holding, PRIME MEDICAL SERVICES (NASDAQ: PMSI), edged up $1/8. The stock has been quietly riding since Prime reported its first-quarter results on April 30. Today, the company announced it has finalized its joint venture with EDAP Technomed as part of a plan to offer treatment for benign prostatic hyperplasia using EDAP's Prostatron. Prime is currently developing partnerships with urologists throughout the country, with an eye toward having three mobile Prostatron routes in operation by the end of the year.

(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   29.25
BGP   +  1/2   19.75
CSL   +  1/8   29.75
CSCO  +1 1/4   62.88
GNT   +1 5/8   30.63
ORCL  -  1/4   43.63
OXHP  +1       65.75
PMSI  +  1/8   10.38
TDW   +1 7/8   40.13
                   Day   Month    Year  History
        BORING   +1.57%   3.87%  -0.22%  14.82%
        S&P:     +1.56%   4.53%  13.08%  34.75%
        NASDAQ:  +0.68%   6.62%   4.12%  29.13%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     19.75    75.46%
  5/24/96  100 Oxford Hea    48.02     65.75    36.91%
   3/5/97  150 Atlas Air     23.06     29.25    26.85%
  6/26/96  100 Cisco Syst    53.90     62.88    16.65%
  8/13/96  200 Carlisle C    26.32     29.75    13.01%
   3/8/96  400 Prime Medi    10.07     10.38     3.04%
   2/2/96  200 Green Tree    30.39     30.63     0.78%
 11/21/96  100 Oracle Cor    48.65     43.63   -10.33%
 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   7900.00  $3397.51
  5/24/96  100 Oxford Hea  4802.49   6575.00  $1772.51
   3/5/97  150 Atlas Air   3458.74   4387.50   $928.76
  6/26/96  100 Cisco Syst  5389.99   6287.50   $897.51
  8/13/96  200 Carlisle C  5264.99   5950.00   $685.01
   3/8/96  400 Prime Medi  4027.49   4150.00   $122.51
   2/2/96  200 Green Tree  6077.49   6125.00    $47.51
 11/21/96  100 Oracle Cor  4864.99   4362.50  -$502.49
 12/23/96  100 Tidewater   4652.49   4012.50  -$639.99

                             CASH   $7660.41
                            TOTAL  $57410.41