Boring Portfolio

Boring Portfolio Report
Friday, February 7, 1997
by Greg Markus (MF Boring)

ANN ARBOR, Mich. (Feb. 6, 1997) -- The Dow Jones Industrial Average and the S&P 500 each rose 1.2% on Friday, with the S&P establishing a new closing high. The Nasdaq Composite gained 0.84%. A benign report from the government on payrolls and unemployment data for the month of January set the mood.

For the week, the S&P advanced 0.43%, but even with today's gains the Nasdaq fell 1.60%, hurt by a selloff in networking stocks, and some semiconductor and software issues. Oh, and healthcare-related stocks. Other than that, it was fine.

That was pretty much the story for the Boring Portfolio this week, as well. The Borefolio managed a 0.34% gain on Friday but ended lower by almost 3% for the week. Friday's score was five Boring stocks up, four down.

CISCO SYSTEMS (Nasdaq: CSCO) ended the day off $3/4, after being quite a bit weaker earlier in the session. A downgrade of neighbor 3COM by analysts at two investment houses probably didn't help. In addition, a story in Friday's Investor's Business Daily raised questions the entire industry.

"In recent weeks, concern has surfaced that networkers' earnings and sales growth rates may be slowing," wrote reporters Walter Hamilton and C. Kinou Treiser. "Investors in networking stocks have come to think of ever-expanding growth rates as a birthright," they continued. "So the prospect of anything less sets off alarms."

Excuse me for beating a dead horse, but where exactly has this concern "surfaced"? Not among anyone I know of who follows the networking industry. They're not concerned because they know that growth rates are slowing. And they've known that for years.

So if there are any investors out there who had "come to think of ever-expanding growth rates" in this industry as their "birthright," well, it ain't. Of course, that's no reason to despair.

To the contrary, as the IBD story also notes, the networking industry "remains one of the fastest-growing around, and no deep structural problems have emerged." Moreover, slowing (but still excellent) sales and revenue growth are priced into the stocks of most networking companies for some time -- and that's unquestionably the case for Cisco.

Even before its recent correction, Cisco stock was priced at around 35-times projected EPS for the company's fiscal year, which ends this July. Yet revenues and earnings are projected to grow for at least the next few years within the range of 30 to 50 percent -- and probably toward the higher end of that range. Where else can one get that kind of growth -- and from a company with leading technology, top management, billions in cash, and zero debt -- at that fair a price?

If you know, please email me, pronto?

Shares of GREEN TREE FINANCIAL (NYSE: GNT) got pruned today, losing $1 1/4. Since there is absolutely no news on Green Tree, I infer that the loss is connected with the multi-vehicle pile-up occurring among stocks of "subprime" auto finance companies, such as JAYHAWK ACCEPTANCE CORP. (Nasdaq: JACC) and, earlier, MERCURY FINANCE (NYSE: MFN).

If so, then once again, I fail to comprehend. Yes, Green Tree does lend to folks who want to buy manufactured homes or take out equity loans on ones they already own. And although the vast majority of these folks resemble not at all the "trailer trash" stereotype that still persists in some minds, it do tend to be of relatively modest means.

But while some of the fly-by-night Jayhawks are happy to lend to just about anyone, regardless of credit history, Green Tree certainly is not. As the company's recent filing of 1996 results attests, Green Tree is unrivaled in lending prudently and managing its loan portfolio responsibly.

Shares of TIDEWATER INC. (NYSE: TDW) have been slipping out to sea lately, and receded $3/4 on Friday. The situation here is that crude oil prices have been falling the past few weeks, partly because OPEC member nations have stepped up production. "It's as if Opec is on autopilot," said Mehdi Varzi, oil analyst at Kleinwort Benson, in a Dow Jones wire story today. "Every month we see a little bit extra."

I have no intention of trying to second-guess the spot market for Brent crude or some such. I spoke with a Tidewater executive earlier this week, and he said that their business continued "very strong." I'm content to let Tidewater float along for the time being.

Let's end this recap on a positive note, shall we? After all, the Borefolio gained value today.

A bright spot Friday was the $2 rebound of OXFORD HEALTH PLANS (Nasdaq: OXHP). As noted in Friday's Wall Street Journal, Oxford "has struck a groundbreaking deal with a prominent hospital that assigns primary-care status, usually reserved for doctors, to a group of highly trained nurses who will be paid at doctor rates."

The agreement gives nurses at Columbia Presbyterian Medical Center an enhanced level of responsibility and autonomy in managing the basic health needs of patients, an innovation that could have broad implications for HMOs, doctors and nurses nationally. Under the contract, members of certain of Oxford's health plans will be able to choose a nurse as their principal primary-care provider.

The Journal story notes that "about 100,000 nurses have the kind of advanced training sought by the new program, including more than 60,000 who specialize in such primary-care disciplines as pediatrics and family medicine."

This is just the latest in a series of pioneering moves by Oxford to improve the quality of care while simultaneously managing costs. I applaud it, and I'm pleased to have Oxford Health in the Borefolio.

Also on the upside, CARLISLE COMPANIES (NYSE: CSL) gained $1 3/8 after reported its fourth quarter and annual results the other day. The company earned $0.42 per share, topping analysts' expectations, as listed in First Call, by two cents

(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.

Today's Numbers

Stock  Change    Bid
BGP   +  3/8   42.00
CSL   +1 3/8   31.25
CSCO  -  3/4   63.13
GNT   -1 1/4   39.00
ORCL  +  5/8   40.00
OXHP  +2       51.38
PMSI  -  1/8   11.50
SLR   +  3/8   56.13
TDW   -  3/4   42.88

                  Day   Month    Year  History
        BORING   +0.34%   1.50%   1.50%  16.80%
        S&P:     +1.21%   6.59%   6.59%  27.02%
        NASDAQ:  +0.84%   5.16%   5.16%  30.43%

    Rec'd   #  Security     In At       Now    Change

  2/28/96  200 Borders Gr    22.51     42.00    86.56%
   2/2/96  200 Green Tree    30.39     39.00    28.34%
  8/13/96  200 Carlisle C    26.32     31.25    18.71%
  6/26/96  100 Cisco Syst    53.90     63.13    17.12%
   3/8/96  400 Prime Medi    10.07     11.50    14.22%
  5/24/96  100 Oxford Hea    48.02     51.38     6.98%
 10/15/96  100 Solectron     54.52     56.13     2.93%
 12/23/96  100 Tidewater     46.52     42.88    -7.85%
 11/21/96  100 Oracle Cor    48.65     40.00   -17.78%

    Rec'd   #  Security     In At     Value    Change

  2/28/96  200 Borders Gr  4502.49   8400.00  $3897.51
   2/2/96  200 Green Tree  6077.49   7800.00  $1722.51
  8/13/96  200 Carlisle C  5264.99   6250.00   $985.01
  6/26/96  100 Cisco Syst  5389.99   6312.50   $922.51
   3/8/96  400 Prime Medi  4027.49   4600.00   $572.51
  5/24/96  100 Oxford Hea  4802.49   5137.50   $335.01
 10/15/96  100 Solectron   5452.49   5612.50   $160.01
 12/23/96  100 Tidewater   4652.49   4287.50  -$364.99
 11/21/96  100 Oracle Cor  4864.99   4000.00  -$864.99

                             CASH   $5999.08
                            TOTAL  $58399.08
transmitted February 07, 1997