Boring Portfolio

Boring Portfolio Report
Thursday, July 17, 1997
by Greg Markus (TMFBoring)

ANN ARBOR, Mich. (July 17, 1997) -- The Boring Portfolio managed to buck the trend to set another new high as major market averages gave back a chunk of yesterday's gains.

Altogether, the Borefolio rose 1.36% in net asset value, with gainers edging losers five to four. Blowout quarterly earnings reports from GREEN TREE FINANCIAL (NYSE: GNT) in the morning and CARLISLE COMPANIES (NYSE: CSL) in the afternoon propelled stocks of those companies sharply higher in exceptionally active trading.

Upbeat earnings news from offshore drillers buoyed TIDEWATER (NYSE: TDW), which surged $1 3/16. OXFORD HEALTH PLANS (Nasdaq: OXHP) continued its breathtaking advance into record territory, gaining $2 1/4 on no specific news that I could locate, although it could well be related to recent reports that Governor Pataki and the Clinton administration have come to terms on a plan that could move virtually all New York state Medicaid recipients into managed care plans.

On to the two earnings reports.

This morning, Green Tree announced earnings for the June quarter of $0.78 per share, up 44% over the year-ago period. The earnings beat analysts' consensus by three cents and the top-end forecast by two cents, as based on data from First Call. Finance volume totaled $3.96 billion in the quarter, up a stunning 41% over the second quarter of 1996.

The manufactured housing (MH) loan portion of that volume was $1.5 billion -- an 11% gain over last year. That's significant, because it was achieved despite relatively flat production in the MH industry in the past few quarters.

Part of the reason why Green Tree continues to do so well is because retail sales of MH don't follow trends in home production perfectly: retailers have drawn down inventory and have yet to replenish it fully. Beyond that, the average size of loans is increasing as buyers move up to multi-section homes from single-wides.

And Green Tree isn't merely surfing on the general trend. It continues to solidify its leadership position in MH financing, maintaining or even increasing its market share by offering retailers a broad line of financing products, from retail loans all the way through financing inventory and development of manufactured home communities.

As nicely as the MH business is growing for Green Tree, its newer business lines are growing even faster. Home equity and home improvement volume was up 135%, to $835 million. Consumer retail lending (including Green Tree's new co-branded, secured credit cards) rose 61%. Commercial and equipment loan volume was up 44%.

The net effect was that the MH business that until 1995 constituted three-quarters of Green Tree's business constituted just 38% of total loan volume for the June quarter. Any skeptics who doubted whether Green Tree would succeed in moving into new lines of business may now have to reconsider their arguments.

Fine, the skeptics might say. But what about credit quality? Is Green Tree making a bunch of risky loans in order to plump up the volume?

To the contrary. Thirty-day and 60-day delinquency rates declined relative to where they stood at the end of last year, and annual credit losses remain under 1%. Under one percent.

One other thing: the Board upped the dividend by 17%, to $0.35 per share, on an annualized basis.

Oops. I see now that my enthusiasm got the best of me. Get me going on Green Tree and it's hard to shut me up.

For now, let me simply direct you to the press release that Carlisle Companies issued this afternoon and point out that in reporting quarterly earnings of $0.68 per share (up 28% over last year) Carlisle blew away the estimates of the three analysts who follow the company. They were looking for $0.60, $0.60, and $0.62, respectively.

Sales and earnings were up in all business segments -- due both to acquisitions and to solid internal growth. Today Carlisle announced yet another set of acquisitions, as well.

I'll offer more on Carlisle tomorrow, and we'll have conference call synopses for both Green Tree and Carlisle available shortly.

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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   23.00
BGP   -  5/16  26.63
CSL   +115/16  37.44
CSCO  -  9/16  78.69
GNT   +2 3/4   41.13
ORCL  -1 9/16  55.81
OXHP  +2 1/4   86.38
PMSI  +  1/16  11.94
TDW   +1 3/16  49.44
                   Day   Month    Year  History
        BORING   +1.36%   7.88%  20.63%  38.81%
        S&P:     -0.53%   5.25%  25.77%  49.87%
        NASDAQ:  -0.75%   8.79%  21.51%  50.71%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     26.63   136.54%
  5/24/96  100 Oxford Hea    48.02     86.38    79.85%
  6/26/96  100 Cisco Syst    53.90     78.69    45.99%
  8/13/96  200 Carlisle C    26.32     37.44    42.21%
   2/2/96  200 Green Tree    30.39     41.13    35.34%
   3/8/96  400 Prime Medi    10.07     11.94    18.56%
 11/21/96  100 Oracle Cor    48.65     55.81    14.72%
 12/23/96  100 Tidewater     46.52     49.44     6.26%
   3/5/97  150 Atlas Air     23.06     23.00    -0.25%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  10650.00  $6147.51
  5/24/96  100 Oxford Hea  4802.49   8637.50  $3835.01
  6/26/96  100 Cisco Syst  5389.99   7868.75  $2478.76
  8/13/96  200 Carlisle C  5264.99   7487.50  $2222.51
   2/2/96  200 Green Tree  6077.49   8225.00  $2147.51
   3/8/96  400 Prime Medi  4027.49   4775.00   $747.51
 11/21/96  100 Oracle Cor  4864.99   5581.25   $716.26
 12/23/96  100 Tidewater   4652.49   4943.75   $291.26
   3/5/97  150 Atlas Air   3458.74   3450.00    -$8.74

                             CASH   $7788.54
                            TOTAL  $69407.29