Boring Portfolio

Boring Portfolio Report
Friday, July 11, 1997
by Greg Markus (TMF Boring)

ANN ARBOR, Mich. (July 11, 1997) -- News that producer prices declined in June for a record sixth month in a row pushed bond yields down and stock prices up on Friday. The S&P 500 rose a third of a percentage point, while the Nasdaq and Boring portfolio each gained a bit more than three-quarters of a percent.

The Nasdaq broke through the 1500 mark, establishing an all-time high at 1503. And the Borefolio broke through the $66,000 mark, setting its own record at $66,026.

Six Boring stocks advanced. PRIME MEDICAL (Nasdaq: PMSI) held fast at a bid of $11 13/16, and two holdings declined: CISCO SYSTEMS (Nasdaq: CSCO) by $13/16 and ATLAS AIR (Nasdaq: ATLS) by $3/8.

BORDERS GROUP (NYSE: BGP) picked up $1/16 -- not a lot, but enough to rate a Boring hurrah for setting a new high. Borders booked better than a 7% gain for the week.

And even though it failed to gain ground on Friday, Prime Medical quietly advanced 11% this week.

In fact, every Boring stock advanced for the week... except one.

Atlas Air plummeted $11 3/8 this week -- one-third of its market value -- after the company slipped a note under the door during the Fourth of July break to mention that they had decided to write off all the money they'd sunk into five 747-200s leased from FEDERAL EXPRESS (NYSE: FDX) and send those winged lemons back from whence they came when the leases are up early next year. And by the way, Atlas added, the costs of keeping those freighters airborne is such that the company won't make analysts' numbers for the June quarter -- nor, it now appears, for the balance of the year, either.

Analysts at Merrill-Lynch and Morgan Stanley have chopped their 1997 estimates virtually in half. Merrill's estimate for this year now stands at $1.15, down from $2.15. Over at Morgan, Jordon Sherman cut his 1997 earnings estimate to $0.90 cents a share from $1.75 a share.

The bottom line, as this investor sees it, is that 1997 will go down in Atlas's books as one of those speed bumps that nearly every fast-growing, young company encounters along the way.

Borefolio holding ORACLE (Nasdaq: ORCL) certainly hit one in its youth. In late 1989 and 1990 -- three years after Larry Ellison's startup went public -- Oracle stock cratered, losing 80% of its value on questions about creative bookkeeping and vaporware products.

Oracle got its house back in order, and the rest is ... let's just say that if you picked up some Oracle stock at $1 1/4 (split-adjusted) when everyone else was selling back then, you'd be quite comfortable today.

Indeed, many of the folks who bought Oracle in the early 1990s are quite comfortable today.

Will Atlas Air follow the Oracle's route? Doubtful. After all, we're not exactly at the dawn of the air cargo age. On the other hand, air freight is not exactly a mature business, either -- particularly in terms of the long-haul international routes that are Atlas's specialty.

Also, it's not as if Atlas's game plan for next year is entirely mysterious. The company has signed to take delivery of 10 brand new BOEING (NYSE: BA) 747-400 freighters beginning next May. And three 747-200s are slated to join the lineup between now and the end of this year. That should help both the near-term and longer-term situation.

So far, the only news of a revised earnings forecast for 1998 that I've seen is from Merrill. That firm has trimmed its estimate all the way back from $3.20 a share to $2.70. Take note, however, that Merrill's former estimate was well above the consensus. Even after the haircut, the $2.70 forecast is only a nickel below the old consensus.

If Atlas can achieve anything near $2.70, then an industry-average multiple of 12-ish area would put the stock back into the mid-$30s within a year.

Looking to the coming week, both CARLISLE (NYSE: CSL) and GREEN TREE FINANCIAL (NYSE: GNT) are slated to report quarterly results toward the end of the week. The Motley Fool will cover the follow-up conference calls.

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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  -  3/8   21.63
BGP   +  1/16  26.06
CSL   +  5/8   35.75
CSCO  - 13/16  75.50
GNT   +  3/4   36.25
ORCL  +  1/8   52.13
OXHP  +2       81.25
PMSI  ---      11.81
TDW   +1 5/16  45.56
                   Day   Month    Year  History
        BORING   +0.77%   2.63%  14.75%  32.05%
        S&P:     +0.32%   3.56%  23.75%  47.47%
        NASDAQ:  +0.78%   4.20%  16.39%  44.35%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     26.06   131.54%
  5/24/96  100 Oxford Hea    48.02     81.25    69.18%
  6/26/96  100 Cisco Syst    53.90     75.50    40.07%
  8/13/96  200 Carlisle C    26.32     35.75    35.80%
   2/2/96  200 Green Tree    30.39     36.25    19.29%
   3/8/96  400 Prime Medi    10.07     11.81    17.32%
 11/21/96  100 Oracle Cor    48.65     52.13     7.14%
 12/23/96  100 Tidewater     46.52     45.56    -2.07%
   3/5/97  150 Atlas Air     23.06     21.63    -6.22%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  10425.00  $5922.51
  5/24/96  100 Oxford Hea  4802.49   8125.00  $3322.51
  6/26/96  100 Cisco Syst  5389.99   7550.00  $2160.01
  8/13/96  200 Carlisle C  5264.99   7150.00  $1885.01
   2/2/96  200 Green Tree  6077.49   7250.00  $1172.51
   3/8/96  400 Prime Medi  4027.49   4725.00   $697.51
 11/21/96  100 Oracle Cor  4864.99   5212.50   $347.51
 12/23/96  100 Tidewater   4652.49   4556.25   -$96.24
   3/5/97  150 Atlas Air   3458.74   3243.75  -$214.99

                             CASH   $7788.54
                            TOTAL  $66026.04