Boring Portfolio

Boring Portfolio Report
Thursday, July 3, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (July 3, 1997) -- Government statistics released this morning showed that nonfarm payrolls rose by a less-than-217,000 jobs in June, and the unemployment rate rose two-tenths to 5.0%. These numbers confirmed that the U.S. economy continues in Goldilocks mode, and that sent stock market averages soaring to yet another round of record highs in a shortened pre-holiday trading session.

The Dow gained a neat 100 points (+1.29%) to 7896. The S&P 500 gained 13 (+1.42%) to close at 917 mark, while the Nasdaq grabbed a quick dozen (+0.82%) to end the session at 1468.

Matching the Nasdaq's performance (+0.82%), the Boring Portfolio saw its net asset value increase to $65,201. That's $150 short of the high-water mark established two weeks ago. Boring gainers outnumbered losers six to three.

For the 3.5 -day week, the Borefolio gained 2.30%. That compares with 2.05% for the Nasdaq and 3.34% for the exuberant S&P 500.

Now to the stocks.

CISCO SYSTEMS (CSCO) advanced a dollar to close at a bid of $71 1/2. The O-team of ORACLE (Nasdaq: ORCL) and OXFORD HEALTH PLANS (Nasdaq: OXHP) helped the Borefolio's cause by gaining $1 3/8 and $1 1/8, respectively. The latter move propelled Oxford to an all-time high of $76 3/4.

On Wednesday, FPA MEDICAL MANAGEMENT (Nasdaq: FPAM) announced it will acquire Health Partners Inc. in a stock swap. Oxford is a part-owner of Health Partners, which is the largest physician practice management organization in New York. As part of the deal, Oxford will enter into a 10-year strategic agreement under which FPA will provide physician services to Oxford's members. The new arrangement will also provide a framework to facilitate Oxford's expansion into new market areas.

PRIME MEDICAL SERVICES (Nasdaq: PMSI) picked up $1/8 in light trading. The company announced today that it has acquired the stock of Executive Medical Enterprises Inc., which operates one mobile lithotripter in California and Oregon and one fixed site lithotripter in Washington.

According to the press release, these lithotripters generate approximately $1.0 million in annual revenues. The purchase price for this acquisition was $1,339,000 in cash "and future payments based upon the annual revenues of these operations during the next two years." Prime also has an option to acquire a mobile lithotripter operating in Washington at a later date. Prime currently serves approximately 90 hospitals in California and Washington, and EME serves another 11.

Southeast Michigan experienced a series of major windstorms and tornadoes yesterday evening. Casa Boring escaped relatively unscathed, except for a large silver maple that came crashing down in the back yard.

Speaking of falling trees (slick, huh?), GREEN TREE FINANCIAL (NYSE: GNT) shed $1/8 after losing $7/16 Wednesday. By itself, those losses sound pretty trivial -- and in a way they are.

What irritates one -- which is to say, me -- is that Green Tree's defoliation is occurring as nearly all of its peers are at or near record highs.

MONEY STORE (Nasdaq: MONE), for example, rung up a $2 3/8 gain on Thursday. COUNTRYWIDE CREDIT (NYSE: CCR) picked up $11/16. FANNIE MAE (NYSE: FNM) leaped $1 1/4. HOUSEHOLD INTERNATIONAL (NYSE: HI) up $7/8 ... and so forth.

Take two stocks that are often used as comparables for Green Tree: Money Store and Countrywide. MONE and CCR have risen 18 to 20% in the past month. Green Tree has been absolutely flat.

Now Money Store and Countrywide are two well-run, widely respected companies in the financial services biz, but are they that much better than Green Tree?


Based on statistics from Marketguide, Countrywide's return on equity is 17.9%. Not too shabby. Money Store's ROE is better yet: 22.5%. But Green Tree's is 38.5%.

How about net profit margins? Jim Palmer doesn't front for no slouch outfit. Money Store sports an 11% net margin. And Countrywide's is a Microsoft-like 23%. But Green Tree's is -- get this -- 33%.

Growth in earnings per share? Countrywide is projected to grow EPS by 13% this year and by 8 to 15 percent over the next 3 to 5 years, according to First Call. Analysts expect Money Store's EPS to advance by 29% this year, and 15 to 25 percent over the longer term. Meanwhile, Green Tree is on track to increase its EPS by 37% in 1997, and by 15 to 25 percent after that.

Yet while Money Store -- and Fannie Mae, and Household, and FINOVA (NYSE: FNV) -- sport multiples in the upper teens, based on projected earnings for the current year, Green Tree stands in the shade of a multiple of 11.8. Eleven point eight.


Okay, I think I've got that out of my system now. Thanks for bearing with me. (You are still there, aren't you?)

I have no intention of selling Green Tree. The company will report earnings for the June quarter in a couple of weeks. Maybe things will get back on track then.

Meantime, I'm heading out back to hack away at this maple.

Do have a great holiday weekend. Drive safe. And please leave a bit of room on the shoulder for the bicyclists.

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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  +  1/4   33.00
BGP   +  9/16  24.31
CSL   -  3/8   35.06
CSCO  +1       71.50
GNT   -  1/8   35.75
ORCL  +1 3/8   49.56
OXHP  +1 1/8   76.75
PMSI  +  1/8   10.63
TDW   -  5/16  45.44
                   Day   Month    Year  History
        BORING   +0.82%   1.34%  13.32%  30.40%
        S&P:     +1.42%   3.59%  23.78%  47.50%
        NASDAQ:  +0.82%   1.77%  13.68%  40.99%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     24.31   115.99%
  5/24/96  100 Oxford Hea    48.02     76.75    59.81%
   3/5/97  150 Atlas Air     23.06     33.00    43.12%
  8/13/96  200 Carlisle C    26.32     35.06    33.19%
  6/26/96  100 Cisco Syst    53.90     71.50    32.65%
   2/2/96  200 Green Tree    30.39     35.75    17.65%
   3/8/96  400 Prime Medi    10.07     10.63     5.52%
 11/21/96  100 Oracle Cor    48.65     49.56     1.88%
 12/23/96  100 Tidewater     46.52     45.44    -2.34%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49   9725.00  $5222.51
  5/24/96  100 Oxford Hea  4802.49   7675.00  $2872.51
  6/26/96  100 Cisco Syst  5389.99   7150.00  $1760.01
  8/13/96  200 Carlisle C  5264.99   7012.50  $1747.51
   3/5/97  150 Atlas Air   3458.74   4950.00  $1491.26
   2/2/96  200 Green Tree  6077.49   7150.00  $1072.51
   3/8/96  400 Prime Medi  4027.49   4250.00   $222.51
 11/21/96  100 Oracle Cor  4864.99   4956.25    $91.26
 12/23/96  100 Tidewater   4652.49   4543.75  -$108.74

                             CASH   $7788.54
                            TOTAL  $65201.04