Boring Portfolio

Boring Portfolio Report
Tuesday, February 4, 1997
by Greg Markus (MF Boring)

ANN ARBOR, MICH. (Feb. 4, 1997) -- The Dow and S&P were up a bit. The Nasdaq was down a bit.

The Boring Portfolio gave back yesterday’s gains as Cisco Systems (Nasdaq: CSCO) and Solectron (NYSE: SLR) traded lower, perhaps owing to sub-par performances by lesser members of their respective industries -- Xylan for Cisco and Smartflex for Solectron.

And I’m smiling from ear to ear.

After the market closed today, Cisco reported results for its second fiscal quarter, ending Jan. 25. Excluding extraordinary items associated with the Netsys acquisition and one-time gains from the sale of stock in another company, Cisco earned $0.51 per share on revenues of $1.6 billion. That was a penny ahead of the consensus estimate of 34 analysts as reported by First Call.

Cisco's follow-up conference call ended just a few minutes ago. As is our custom, The Motley Fool covered the call, and our summary will be available pronto. Cisco’s report is available at its website.

I have no idea how analysts or traders will spin this tomorrow, but my instant analysis -- worth precisely what you paid for it -- is that Cisco’s results were simply spectacular. Margins were, surprisingly, up slightly. This huge company is growing EPS in the mid-60% range year over year, and steadily, as revenues grew 73% this quarter over the same quarter last year. The integration of StrataCom into the company -- a featured topic of the conference call -- is going exceptionally smoothly.

The nit-pickers will focus on an increase in DSO due to glitches in January arising from a parts shortage. And there's the slow "cultural" acceptance of this networking fad in France, Italy, Germany.

But this was an awesome performance. Just awesome.

For those of you in the Washington, DC area, Cisco’s President and CEO John Chambers give the keynote address at the ComNet '97 Conference on Thursday, Feb. 6. His address, entitled "Networking for Business Scalability," is scheduled for 9:30 to 10:30 a.m. in the Grand Ballroom of the Renaissance Hotel, 999 9th Street N.W.

The Cisco news is certainly important. But let's not forget that the other eight Borefolio holdings. Here's a quick rundown on what's happening with some of them.

Carlisle Companies (NYSE: CSL) closed at $30 1/2, up $3/4. The company is slated to report fourth quarter and fiscal 1996 results tomorrow after the market closes. According to First Call, the two listed analysts who follow the company are looking for quarterly earnings per share of $0.40, which would bring the fiscal year to $1.78. As of its Dec. 13 report, Value Line was forecasting $0.42 and $1.80. The post-report conference call will take place on Thursday, and The Motley Fool will be covering it.

Shares of Tidewater (NYSE: TDW) receded $7/8 today and have slipped below the price at which we initiated a position in late December.

Recall that Tidewater's primary business is ferrying crews, supplies, and equipment to offshore rigs and supporting offshore research activities. Stocks of many drillers and oilfield service companies have been soft of late. Yesterday, one of the major offshore drillers, Transocean Offshore Inc. (NYSE: RIG), announced that its fourth-quarter earnings would come in below analysts' expectations. Not surprisingly, RIG sold off on the news, and the negative vibes rippled through other stocks in the group.

Transocean Offshore said its problems included higher than anticipated levels of repair and replacement activity on some of its North Sea rigs and non-recurring startup costs associated with moving two jack-up rigs to the Arab Gulf and India. Now I claim no deep expertise on these matters, but I fail to see what Transocean's problems have to do with Tidewater. I touched base with Tidewater today and was told that there has been no change in their business situation and that prospects for the year continue to look very strong.

Oracle Corp. (Nasdaq: ORCL) today announced that its board had approved an expansion the company's stock buyback program to allow the repurchase of up to 10 million shares of Oracle stock on the open market. The purpose of the repurchase program is to minimize dilution of existing stock as a result of Oracle's employee stock plans. ORCL gained $5/8 to close at a bid of $39 7/8.

Green Tree Financial's (NYSE: GNT) share price continues to grow. Today, Green Tree sprouted $1 1/4 to close at $411/4. Volume was in excesss of one million shares.

Fresh numbers from First Call offer $3.00 as the consensus EPS forecast for Green Tree in 1997. That which would constitute a 36% gain over the $2.20 for 1996 the company recently reported. The provisional EPS estimate for 1998 is $3.61, consistent with prevailing estimates of approximately 19% compounded annual growth in per-share earnings for Green Tree over the next five years. Pop a 19 multiple onto that $3.00 forecast and you'll see why analysts are posting near-term price targets in the mid- to upper-$50s for GNT.

That’s it for now. I’m pooped.

But happy.

Today's Numbers

Stock  Change    Bid
BGP   -1       43.63
CSL   +  3/4   30.50
CSCO  -1 3/8   66.88
GNT   +1 1/4   41.25
ORCL  +  5/8   39.88
OXHP  -1 1/2   52.25
PMSI  ---      12.00
SLR   -2 5/8   58.13
TDW   -  7/8   45.50

                   Day   Month    Year  History
        BORING   -0.58%   4.52%   4.52%  20.27%
        S&P:     +0.32%   6.55%   6.55%  26.97%
        NASDAQ:  -0.17%   6.41%   6.41%  31.97%

    Rec'd   #  Security     In At       Now    Change

  2/28/96  200 Borders Gr    22.51     43.63    93.78%
   2/2/96  200 Green Tree    30.39     41.25    35.75%
  6/26/96  100 Cisco Syst    53.90     66.88    24.07%
   3/8/96  400 Prime Medi    10.07     12.00    19.18%
  8/13/96  200 Carlisle C    26.32     30.50    15.86%
  5/24/96  100 Oxford Hea    48.02     52.25     8.80%
 10/15/96  100 Solectron     54.52     58.13     6.60%
 12/23/96  100 Tidewater     46.52     45.50    -2.20%
 11/21/96  100 Oracle Cor    48.65     39.88   -18.04%

    Rec'd   #  Security     In At     Value    Change

  2/28/96  200 Borders Gr  4502.49   8725.00  $4222.51
   2/2/96  200 Green Tree  6077.49   8250.00  $2172.51
  6/26/96  100 Cisco Syst  5389.99   6687.50  $1297.51
  8/13/96  200 Carlisle C  5264.99   6100.00   $835.01
   3/8/96  400 Prime Medi  4027.49   4800.00   $772.51
  5/24/96  100 Oxford Hea  4802.49   5225.00   $422.51
 10/15/96  100 Solectron   5452.49   5812.50   $360.01
 12/23/96  100 Tidewater   4652.49   4550.00  -$102.49
 11/21/96  100 Oracle Cor  4864.99   3987.50  -$877.49

                             CASH   $5999.08
                            TOTAL  $60136.58

Transmitted: 2/04/97