Boring Portfolio

Boring Portfolio Report
Friday, June 13, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (June 13, 1997) -- Friday the 13th was anything but unlucky for stocks, as the benchmark indices pushed higher into uncharted territory.

A report from the Bureau of Labor Statistics helped fuel the day's action. That report revealed that wholesale prices declined unexpectedly by 0.3% in May. Producer prices have now fallen five months in a row, the first time that has happened since 1952. So far in 1997, wholesale prices have declined -- declined! -- 3.9%. Yet unemployment is at historic lows and wages are solid, thus keeping consumer sentiment high according to a report today from (where else?) the University of Michigan.

Not being one to show off, the Boring Portfolio posted a discreet 0.18% gain Friday. On Wednesday, the Borefolio established a new high-water mark of $64,089. For the week, the little port rose 2.68% -- more than double the Nasdaq's gain but nowhere near the 4.11% sprint performed by the S&P 500.

ATLAS AIR (Nasdaq: ATLS) dipped $1/8 on the bid Friday. For the week, though, Atlas ascended 21.4% as investors (and at least one analyst) responded favorably to news that the company would purchase 10 new BOEING (NYSE: BA) 747-400 freighters, with an option to purchase 10 more. The prevailing view is that the cost of the new aircraft will be more than offset by the new markets and longer routes they will enable Atlas to serve.

After setting a new high Wednesday, shares of BORDERS GROUP (NYSE: BGP) lost a dollar Friday to end the week exactly where they began, at $23 apiece. Not so for CARLISLE (NYSE: CSL), however. Although CSL slipped $1/8 Friday, to $33 7/8, the stock rose more than 11% for the week.

The Borefolio tech-team of CISCO SYSTEMS (Nasdaq: CSCO) and ORACLE (Nasdaq: ORCL) paired up for gains of $2 15/16 and $2 3/8, respectively, on Friday. The stocks advanced for the week, as well.

Oracle reports is fiscal third quarter results after the end of trading on Tuesday, June 17 (and not Thursday, as mentioned here last night). According to First Call, the consensus forecast is for earnings of $0.54 per share, with a range running from $0.52 to $0.57. That compares with year-ago EPS of $0.40. As is our custom, The Motley Fool will cover Oracle's follow-up conference call.

OXFORD HEALTH PLANS (Nasdaq: OXHP) was unchanged on the bid Friday, to end the week exactly where it began: $70 3/4. On Wednesday, Prudential Securities initiated coverage of Oxford with a "buy" rating and a 12 month price target of $83 a share. The Borefolio's other healthcare stock, PRIME MEDICAL SERVICES (Nasdaq: PMSI) slipped $1/8 on the bid, to $11 1/2.

Perhaps reflecting the personality of its manager, a goodly chunk of the recent Borefolio recaps has been devoted to the two holdings that lost ground this past week: GREEN TREE FINANCIAL (NYSE: GNT) and TIDEWATER (NYSE: TDW). On Monday I plan to delve into Tidewater one more time. So tonight I offer a few closing words about Green Tree.

Green Tree Financial has been recovering gradually from what was been a less than hospitable early spring. First investors worried about slowing sales of manufactured homes (MH). Then came rumors that FANNIE MAE (NYSE: FNM) would enter the MH market, with the arguable inference that such a move, should it occur, would necessarily work against Green Tree. Now comes a short-seller offering in a monthly investor's magazine his unsubstantiated rationale for why GNT should be selling for $15 -- a price the stock hasn't seen since 1994.

Folks looking for a less breathless (and more well-documented) exposition on Green Tree might cruise over to their public library to check out the latest weekly supplement to Value Line, which arrived in my mailbox a few hours ago. In it (Value Line, not my mailbox), analyst Terrence Emde points out that: (a) "Green Tree Financial's loan originations are soaring," (b) "Long-term profit prospects look bright," and (c) "Green Tree's strategy of diversifying its loan portfolio should support ... strong earnings growth."

Value Line is hardly alone in this view. According to First Call, the 15 analysts who watch Green Tree expect that S&P 500 company to increase earnings by 37% this year, to $3.02 per share. As for 1998, the consensus forecast is for EPS to rise to $3.58, or up 19%.

At less than 12-times 1997 earnings, GNT is trading at a p/e below its average over the past few years, and it is also trading at approximately a 25% discount to the multiple of the financial services sub-group. In my opinion, the market will eventually come around and correct this temporary undervaluation.

That's it from here. As the sky darkens and lightning commences crackling, I fire this recap off into the ether, just for you.

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(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   34.75
BGP   -1       23.00
CSL   -  1/8   33.88
CSCO  +215/16  66.69
GNT   ---      35.13
ORCL  +2 3/8   51.94
OXHP  -  1/8   70.75
PMSI  -  1/8   11.50
TDW   +  7/8   40.63
                   Day   Month    Year  History
        BORING   +0.18%   4.24%  10.54%  27.20%
        S&P:     +1.11%   5.30%  20.59%  43.70%
        NASDAQ:  +0.83%   1.62%  10.22%  36.70%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     23.00   104.33%
   3/5/97  150 Atlas Air     23.06     34.75    50.71%
  5/24/96  100 Oxford Hea    48.02     70.75    47.32%
  8/13/96  200 Carlisle C    26.32     33.88    28.68%
  6/26/96  100 Cisco Syst    53.90     66.69    23.72%
   2/2/96  200 Green Tree    30.39     35.13    15.59%
   3/8/96  400 Prime Medi    10.07     11.50    14.22%
 11/21/96  100 Oracle Cor    48.65     51.94     6.76%
 12/23/96  100 Tidewater     46.52     40.63   -12.68%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49   9200.00  $4697.51
  5/24/96  100 Oxford Hea  4802.49   7075.00  $2272.51
   3/5/97  150 Atlas Air   3458.74   5212.50  $1753.76
  8/13/96  200 Carlisle C  5264.99   6775.00  $1510.01
  6/26/96  100 Cisco Syst  5389.99   6668.75  $1278.76
   2/2/96  200 Green Tree  6077.49   7025.00   $947.51
   3/8/96  400 Prime Medi  4027.49   4600.00   $572.51
 11/21/96  100 Oracle Cor  4864.99   5193.75   $328.76
 12/23/96  100 Tidewater   4652.49   4062.50  -$589.99

                             CASH   $7788.54
                            TOTAL  $63601.04