Boring Portfolio

Boring Portfolio Report
Friday, July 18, 1997
by Greg Markus (TMFBoring)

ANN ARBOR, Mich. (July 18, 1997) -- A merely adequate quarterly earnings report from MICROSOFT (Nasdaq: MSFT) -- the company that put the "Bill" in "Billionaire" -- combined with profit-taking on an options-expiration Friday to send major market averages tumbling.

The S&P 500 gave back all of its gains from recent sessions, ending lower by 1.75% for the day and -0.15% for the week. The Nasdaq fell 1.33% Friday but still managed to end the week higher by 3.02%. The Boring Portfolio scored somewhat better by comparison, off 1.30% for the day but up 3.76% for the week.

A $1/16 gain by GREEN TREE FINANCIAL (NYSE: GNT) was all that saved the Borefolio from an across-the-board whiff on Friday. The week-to-week story was decidedly brighter, however: eight of nine holdings rose for the week ending July 18, led by Green Tree, which shot up nearly 14%. Friday's $3/8 dip by PRIME MEDICAL SERVICES (Nasdaq: PMSI) put that stock down a quarter-point for the week.

Prime Medical reports its quarterly results next Thursday (July 24), in the morning. According to First Call, the consensus estimate of six analysts is for earnings of $0.19 per share. That would represent a 12% nominal gain over the year-ago quarter's $0.17.

The internal growth in Prime's business is much greater than 12%, however. The company's effective tax rate was lower last year due to credits on previous net operating losses. On a fully-taxed, apples-to-apples basis, Prime made $0.11 in the second quarter of 1996. Prime is still benefiting from those NOL carryforwards, but to a lesser degree. Should the company achieve EPS of $0.19 for the June quarter, that would translate into $0.15, fully taxed -- or around a 36% gain over last year's $0.11.

That's a look at next week. As for the week just ended, it was highlighted by blowout quarterly earnings news from Green Tree and CARLISLE COMPANIES (NYSE: CSL).

Green Tree announced earnings of $0.78 per share, up 44% over last year. That beat analysts' consensus by three cents and the top-end forecast by two cents. Finance volume totaled $3.96 billion in the quarter, up a stunning 41%.

Green Tree's results demonstrated how successfully the company has transformed itself from one that was overwhelmingly dependent upon financing purchases of manufactured housing into one that now operates across a broad line of consumer and commercial lending. Finance volume from the newer business lines -- including home improvement and home equity loans, co-branded secured credit cards, and commercial leasing and financing -- totaled $2.46 billion for the quarter, or fully 62% of total volume.

Worries about credit quality have weighed on stocks of financial services companies following recent bankruptcies of a number of inexperienced subprime lenders. In stark contrast, Green Tree's 30-day and 60-day delinquency rates actually declined relative to where they stood at the end of last year, and annual credit losses remain under 1%.

As for Carlisle Companies, it reported quarterly earnings of $0.68 per share, up 28% over last year and easily surpassing analysts' forecasts ranging from $0.60 to $0.62.

Sales and earnings rose in all business segments -- due both to acquisitions and to solid internal growth. Business was particularly good in Carlisle's largest division (in terms of revenues): transportation products. That division saw sales grow 55% to $139.4 million and operating earnings rise 54% to $12.2 million.

But whether it was making lawn mower wheels, roofing materials, airplane wiring, boat trailers, cheese-making equipment, or (whew!) ceramic dinnerware, all of Carlisle's many facets gleamed brightly this past quarter -- and are expected to continue doing so for a good while yet.

If that weren't enough, Carlisle also announced yet another acquisition: Conestoga and Wheeltech, from Electra, a Canadian company. This latest acquisition offers Carlisle access to the Canadian lawn and garden, trailer, and agricultural original equipment markets, thus complementing Carlisle's U.S. operations nicely.

That's Boring Carlisle Companies for you: quarterly earnings growth on a par with Microsoft. A track record of successful acquisitions rivaling CISCO's (Nasdaq: CSCO). And unlike INTEL (Nasdaq: INTC), Carlisle beat even the most optimistic analysts' forecast by 10%. Plus, Carlisle stock pays a decent dividend.

But I guess it's just our little secret.

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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  -  5/8   22.38
BGP   -  1/2   26.13
CSL   -  1/16  37.38
CSCO  -2 5/16  76.38
GNT   +  1/16  41.19
ORCL  -  1/16  55.75
OXHP  -  3/8   86.00
PMSI  -  3/8   11.56
TDW   -1 13/16  47.63
                   Day   Month    Year  History
        BORING   -1.30%   6.48%  19.07%  37.01%
        S&P:     -1.75%   3.41%  23.57%  47.24%
        NASDAQ:  -1.33%   7.34%  19.90%  48.71%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     26.13   132.09%
  5/24/96  100 Oxford Hea    48.02     86.00    79.07%
  8/13/96  200 Carlisle C    26.32     37.38    41.98%
  6/26/96  100 Cisco Syst    53.90     76.38    41.70%
   2/2/96  200 Green Tree    30.39     41.19    35.54%
   3/8/96  400 Prime Medi    10.07     11.56    14.84%
 11/21/96  100 Oracle Cor    48.65     55.75    14.59%
 12/23/96  100 Tidewater     46.52     47.63     2.36%
   3/5/97  150 Atlas Air     23.06     22.38    -2.96%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  10450.00  $5947.51
  5/24/96  100 Oxford Hea  4802.49   8600.00  $3797.51
  6/26/96  100 Cisco Syst  5389.99   7637.50  $2247.51
  8/13/96  200 Carlisle C  5264.99   7475.00  $2210.01
   2/2/96  200 Green Tree  6077.49   8237.50  $2160.01
 11/21/96  100 Oracle Cor  4864.99   5575.00   $710.01
   3/8/96  400 Prime Medi  4027.49   4625.00   $597.51
 12/23/96  100 Tidewater   4652.49   4762.50   $110.01
   3/5/97  150 Atlas Air   3458.74   3356.25  -$102.49

                             CASH   $7788.54
                            TOTAL  $68507.29