Boring Portfolio

Boring Portfolio Report
Monday, June 30, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (June 30, 1997) -- The final day of the second quarter brought the sort of volatility we've come to expect as fund managers dump losers and buy winners in an effort to make their lists of current holdings look good to their clients. The Dow ended the session off 15 points (-0.19%), and the S&P 500 closed lower, as well -- off 2, or -0.24%. The Nasdaq managed to post a modest gain, however, of 4 points, or +0.27%.

The Boring Portfolio had a good day, rising 0.94%, helped by a $2 1/4 gain in ATLAS AIR (Nasdaq: ATLS), a dollar advance in GREEN TREE FINANCIAL, and $5/8 increases in BORDERS GROUP (NYSE: BGP) and TIDEWATER (NYSE: TDW).

"Even as the Dow approaches 7,800, you can still find cheap stocks," says fund manager Ronald Muhlenkamp in the July 7 issue of Forbes. By way of example, Muhlenkamp cites Green Tree Financial, "selling for 12 times 1997 estimated earnings."

The healthcare duo of OXFORD HEALTH (Nasdaq: OXHP) and PRIME MEDICAL (Nasdaq: PMSI) fell $1 3/16 and $1/4, respectively. CARLISLE (NYSE: CSL) was also fractionally lower, while ORACLE (NASDAQ: ORCL) closed unchanged at a bid of $50 5/16.

I saw no major news on any of these issues.

Being at the halfway mark of 1997 inspired me to engage in a bit of Borefolio retrospection this past weekend. The situation for the nine current holdings is tracked daily. But what about the nine issues that formerly occupied the Borefolio? Where are they now?

In order of purchase date, the nine Borefolio expatriates are listed below. I've also provided (1) the stock prices at the time of purchase (adjusting for splits, as needed) and (2) as of the close of business last Friday, along with (3) the annualized rate of change (AOL users, please maximize the window).

29 Jan 96, KULICKE & SOFFA   $23.75    $32.00    +23.4%
29 Jan 96, TEXAS INDUSTRIES  $27.13    $26.63    -1.3%
02 Feb 96, POTASH OF SASK.   $76.00    $74.56    -1.3%
23 Feb 96, LAM RESEARCH      $47.75    $36.50    -18.3%
25 Mar 96, LCS INDUSTRIES    $26.00    $14.63    -36.9%
12 Apr 96, SHAW GROUP        $18.75    $16.38    -10.3%
29 Apr 96, ZYTEC             $13.38    $18.38    +31.2%
23 Jul 96, S&P DEPOSIT RCPT  $63.88    $88.91    +43.2%
15 Oct 96, SOLECTRON         $54.25    $69.00    +43.2%

Five of these nine issues are still below my original purchase price, while four (including the last three sales) are above -- and nicely so.

Kulicke & Soffa and Lam Research were my attempts to buy into what I thought was the low point in the semiconductor infrastructure cycle. The bottom turned out to be a false one, however, and the two stocks drifted lower along with the entire group, with very little "visibility" (as they say in the trade) for when product orders might finally begin to pick up.

So I sold. K&S, king of the gold ball bonders and brunt of merciless teasing by a rag-tag band of self-anointed "Klunkers" at The Motley Fool's AOL site, recovered nicely as the chip cycle headed up, but Lam -- a fine company -- is still having trouble getting its footing.

In retrospect, the chip equipment business is probably both too esoteric and too cyclical for the Borefolio, even if it may well be fertile ground for investors willing to learn about the industry and accept the risks of the up-and-down business.

Speaking of fertile ground, Canadian-based Potash was and is a plausible stock for the Borefolio. Although the company is squarely in the business of producing a low-margin commodity, the global "growth" story for fertilizer is a compelling one. As an individual investor, however, I found it very difficult to pry much information from Potash's investor relations office. And my personal need to know what I'm investing in -- especially when I'm presumably trying to "show and tell" what I'm doing to others -- led me to decide to pull the trigger.

Shaw Group's share price may be below where I bought it, but the Borefolio made a nice profit from the stock of this New Orleans-based designer and fabricator of piping for chemistry, energy and power industries. The stock got hit recently on news of some slowing orders, but I still follow the company and it would not surprise me to see the stock back in the Borefolio someday.

Zytec's stock is well up from where the Borefolio purchased it but still a bit below the price at which I pulled the trigger late last spring. Zytec makes power supply modules for computer, telecommunications and medical electronics companies. This small Minnesota-based outfit is a Baldrige prize winner, and I confess to liking it a lot.

The stock ran way beyond fair value soon after I acquired it, however -- in part, perhaps due to that demon "online chat hype" (as opposed to the "off-line chat hype" that goes on in various paper-and-ink magazines and on Wall Street daily) -- and so I felt obliged to liquidate. I still follow the company, however, and Zytec's another one that might see the inside of the Borefolio again someday. If you're looking for a kind of "mini-Solectron" as a small-cap component in a portfolio, Zytec merits study.

On the other hand, one can purchase an equity interest in Solectron itself. I did, for the Boring Portfolio. Sold it, too -- for a small loss -- not long afterward. I've flailed myself in this column publicly for that that mistake, so I won't rehash the "woulda, coulda, shoulda."

But I woulda, coulda, shoulda.

That leaves three other issues to say a word about: TXI, the Spiders, and the Borefolio's own version of the Foolfolio's ATC COMMUNICATIONS (Nasdaq: ATCT) fiasco, LCS Industries (Nasdaq: LCSI). I'll offer a few thoughts on them tomorrow, space permitting.

Fool Message Boards -- what are Fools saying?
Evening News -- Big movers, up and down.
Daily Double
-- How can you find the next double?
Daily Trouble -- Is there value in this beaten down stock?
The Fool Portfolio -- AOL, Iomega, 3Com... and more.
Fool Four -- Trying to catch the market.

(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  +2 1/4   34.50
BGP   +  5/8   24.13
CSL   -  1/2   34.88
CSCO  + 11/16  67.13
GNT   +1       35.63
ORCL  ---      50.31
OXHP  -1 3/16  71.75
PMSI  -  1/4   10.75
TDW   +  5/8   44.00
                   Day   Month    Year  History
        BORING   +0.94%   5.44%  11.81%  28.66%
        S&P:     -0.24%   4.35%  19.50%  42.39%
        NASDAQ:  +0.27%   2.98%  11.70%  38.53%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     24.13   114.33%
   3/5/97  150 Atlas Air     23.06     34.50    49.62%
  5/24/96  100 Oxford Hea    48.02     71.75    49.40%
  8/13/96  200 Carlisle C    26.32     34.88    32.48%
  6/26/96  100 Cisco Syst    53.90     67.13    24.54%
   2/2/96  200 Green Tree    30.39     35.63    17.24%
   3/8/96  400 Prime Medi    10.07     10.75     6.77%
 11/21/96  100 Oracle Cor    48.65     50.31     3.42%
 12/23/96  100 Tidewater     46.52     44.00    -5.43%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49   9650.00  $5147.51
  5/24/96  100 Oxford Hea  4802.49   7175.00  $2372.51
   3/5/97  150 Atlas Air   3458.74   5175.00  $1716.26
  8/13/96  200 Carlisle C  5264.99   6975.00  $1710.01
  6/26/96  100 Cisco Syst  5389.99   6712.50  $1322.51
   2/2/96  200 Green Tree  6077.49   7125.00  $1047.51
   3/8/96  400 Prime Medi  4027.49   4300.00   $272.51
 11/21/96  100 Oracle Cor  4864.99   5031.25   $166.26
 12/23/96  100 Tidewater   4652.49   4400.00  -$252.49

                             CASH   $7788.54
                            TOTAL  $64332.29