Boring Portfolio

Boring Portfolio Report
Thursday, January 2, 1997
by Greg Markus (MF Boring)

ANN ARBOR, Mich. (Jan. 2) -- Mamma mia. If this is a sample of the so-called "January effect," I propose we skip the rest of the month and move right on to February.

After a New Year's Eve decline of 101 points, the Dow was down another 87 with a half-hour remaining in today's session. Then a string of computerized "buy" programs kicked in and blue-chip stocks executed a tire-burning, gravel-spitting, one-eighty turn the likes of which I haven't seen since "Smokey and the Bandit, II." Even so, the Dow ended the session down 6. Big Board volume approached a half-billion shares. So much for easin' into '97.

The S&P 500 couldn't quite match the Dow's trick, losing 0.50% after being much lower for most of the day. The Nasdaq lost 0.80% of its value, but it was the Boring Portfolio that drove straight into the ditch, shearing 1.65% off the top. Only some much-appreciated advances by Oracle and Prime Medical Services spared the Borefolio from a more horrendous wreck.

Bonds tumbled and interest rates rose after a report from the National Association of Purchasing Managers revealed a rise in overall manufacturing activity in December, rather than the expected decline. The 30-year Treasury bond fell 1 9/32 basis points, bringing the yield up to 6.74%. At the short end of the curve, three-month bills dropped a full one basis point, bringing their yield to 5.04%. At those rates, the best-performing item in the Borefolio today may well have been its $6,000 in cash.

Suffice it to say, the interest-rate news didn't do much for financial stocks such as Green Tree Financial. Traders took a chain saw to GNT today, lopping off $1 3/4. Heck, it's not as if the company isn't doing it's part. Holiday season or no, Green Tree managed to squeeze in another offering of asset-backed securities for sale. The company's $676 million in manufactured housing (MH) securities were rated AAA by Fitch Investors Services on Dec. 31. Another $64 million are rated AA-; a third set, of $32 million, rated BBB+; and the $28 million class, A. According to Fitch, the ratings are based upon the quality of the MH contracts, the respective levels of credit enhancement, the integrity of the legal and financial structure, and Green Tree's servicing capabilities.

Wait, there's more! Green Tree's $99.9 million home improvement (HI) loan-backed securities are rated AAA by Fitch. The $10.0 million class HI are rated AA; the $6.2 million class HI, A; the $5.9 million class HI, BBB; and the $2.8 million class, A. Additionally, Green Tree's $303.6 million home equity (HE) loan certificates are rated AAA; the $19.4 million class, AA+; the $12.4 million class, AA; the $12.4 million class, A; and the $5.3 million class, A.

Shares of Carlisle Companies suffered a bout of profit-taking today following a nice run-up. CSL dropped $1 3/4 on volume of 25,700 shares. I had expected CSL to split today, but apparently I got that wrong. The press release from late last month said "the record date for the stock split is January 2, 1997." A notice today, however, indicates that the split will occur on Jan 15.

All I can figure is that the Jan. 2 date refers to one of those "to shareholders of record" legalisms. Of course, since the shares of most individual investors is held in "Street" name (i.e., your broker's), it makes no difference whether or not one buys CSL before or after Jan. 2. Your account will reflect the split, regardless. (I tried to reach someone at Carlisle to get clarification but didn't succeed. I'll try again tomorrow.)

Shares of Solectron Corp. also numbered among the casualties today, shedding $1 5/8. I infer that Solectron got caught up in the selling that affected most computer-related stocks following news from CompUSA that its sales in the latest, crucial quarter had risen only 1.5%. Hardware companies like Dell, Compaq, and U.S. Robotics were flattened. Software outfits like Computer Associates and Microsoft got softer.

Interestingly (there's that tip-off word), shares of Sun Micro gained more than a dollar as two brokerage firms made favorable comments about the workstation maker. Sun Micro is, of course, one of Solectron's leading customers. By the way, I received a transcript of Solectron's conference call with analysts following its earnings report of Dec. 17. My summary of that call will be available ASAP in The Motley Fool.

I haven't had much to say about Oxford Health recently -- and I don't have much to say about why it fell $2 3/8 today, either. I can tell you, though, that after the market closed, S&P announced that Oxford Health will be joining the S&P Midcap 400. OXHP will be replacing Healthsouth (another fine company, in my opinion), as Healthsouth moves up to the S&P 500 to replace Boatman's Bankshares, which is being acquired. Since midcap index funds will now be obliged to purchase shares of Oxford for their portfolios, this can only help the stock.

Tonight's recap is getting long, and deadline is approaching, so I'll close on a positive note. After a rocky month, shares of Oracle Corp. managed a quarter-point rise in the face of today's Nasdaq sell-off. PaineWebber analyst Steve Smith today raised his EPS forecast for Oracle's 1997 fiscal year (which ends in May) to $1.25, from $1.19. He also made an initial estimate of $1.70 for 1998, reiterated his "buy" recommendation, and set a 12-month price target of $60 a share.

Smith's $1.19 estimate had previously been at the low-end of analysts' estimates as reported in First Call; his revised estimate is still a couple of pennies below the consensus. On the other hand, his $1.70 is slightly above the consensus for FY98. If one is willing to award ORCL a multiple of 35 -- rich but not out of line with what the stock has carried historically -- Smith's price target is justifiable.

For its part, Oracle announced the completion of the acquisition of Datalogix International, a leading provider of client/server applications for process manufacturing. The transaction closed January 1 and, as previously announced, the purchase price was $94 million. Datalogix applications include the Global Enterprise Manufacturing Management System (GEMMS) and Computer Integrated Manufacturing for Process (CIMPRO) product lines. According to the press release, these products are used in more than 30 countries and at over 1,000 installations that manufacture consumer packaged goods (food, beverages, health and beauty aids) and industrial products (chemical, pharmaceutical, and petroleum).

Today's Numbers

Stock  Change    Bid
BGP   -  3/4   35.13
CSL   -1 5/8   58.88
CSCO  -  7/8   62.75
GNT   -1 3/4   36.88
ORCL  +  1/4   41.88
OXHP  -2 3/8   56.13
PMSI  +  5/8   11.50
SLR   -1 5/8   51.75
TDW  -  3/4    44.50
                   Day   Month    Year  History
        BORING   -1.65%  -1.65%  -1.65%  13.17%
        S&P 500  -0.50%  -0.50%  -0.50%  18.56%
        NASDAQ   -0.80%  -0.80%  -0.80%  23.03%

    Rec'd   #  Security     In At       Now    Change

  2/28/96  200 Borders Gr    22.51     35.13    56.02%
   2/2/96  200 Green Tree    30.39     36.88    21.35%
  5/24/96  100 Oxford Hea    48.02     56.13    16.87%
  6/26/96  100 Cisco Syst    53.90     62.75    16.42%
   3/8/96  400 Prime Medi    10.07     11.50    14.22%
  8/13/96  100 Carlisle C    52.65     58.88    11.82%
 12/23/96  100 Tidewater     46.52     44.50    -4.35%
 10/15/96  100 Solectron     54.52     51.75    -5.09%
 11/21/96  100 Oracle Cor    48.65     41.88   -13.93%

    Rec'd   #  Security     In At     Value    Change

  2/28/96  200 Borders Gr  4502.49   7025.00  $2522.51
   2/2/96  200 Green Tree  6077.49   7375.00  $1297.51
  6/26/96  100 Cisco Syst  5389.99   6275.00   $885.01
  5/24/96  100 Oxford Hea  4802.49   5612.50   $810.01
  8/13/96  100 Carlisle C  5264.99   5887.50   $622.51
   3/8/96  400 Prime Medi  4027.49   4600.00   $572.51
 12/23/96  100 Tidewater   4652.49   4450.00  -$202.49
 10/15/96  100 Solectron   5452.49   5175.00  -$277.49
 11/21/96  100 Oracle Cor  4864.99   4187.50  -$677.49

                             CASH   $5999.08
                            TOTAL  $56586.58

Transmitted: 1/2/97