Boring Portfolio

Boring Portfolio Report
Wednesday, February 12, 1997
by Greg Markus (MF Boring)

ANN ARBOR, Mich. (Feb. 12, 1997) -- Here in America, we honor the great Presidents of our nation each February by holding a mattress sale. Today, stocks rather than mattresses were specially priced, and traders apparently liked the bargains.

The Dow Jones Industrial Average rocketed more than 100 points, or 1.5%, to 6961.63 -- the Dow's first close above 6,900. The S&P 500 did even better, rising 1.67% to establish its own new high, above the 800 mark. The Nasdaq had a better day yet, leaping more than two percentage points in value -- but still 40 points shy of its all-time high.

Life was sweet for the Boring Portfolio, too. Eight of nine holdings advanced, increasing the Borefolio's net asset value by $1637.50 (plus a few bucks of daily interest), or 2.81%.

My thanks to Gary Wall, aka MF Osprey, for filling in last night. Gary will be penning (word processing?) the occasional Borefolio recap, as well as using his knowledge of business and computer programming to help me research stocks and decipher press releases from the technology companies in our basket.

Folks who visit The Motley Fool on AOL may know Gary by his old screenname, Gary ZZZZZ (as in snoring, as in boring?). Gary is one of the Klunkers, as they call themselves, who stood an irreverent watch over the travails of semiconductor equipment manufacturer KULICKE & SOFFA (Nasdaq: KLIC) last year.

K&S was one of the original Borefolio holdings in early 1996, but I bailed out after what I had thought was a bottom for the chip equipment industry turned out to be but a rest stop on a longer journey south. The Klunkers held on, though, forming a mutual cyber-support group to see themselves through until the sun rose once again over Willow Grove, Pa. (home of K&S).

If you should happen to glance at a current list of leading stocks, you'll see KLIC up near the top. The stock has roughly doubled since I sold it -- which may suggest yet another reason why the Borefolio will benefit from Gary's presence.

Electronics assembler SOLECTRON CORP (NYSE: SLR) scooted up $2-1/2, to $56-3/8, as the Nasdaq computer index jumped 3.3%.

CISCO SYSTEMS (Nasdaq: CSCO) gained $4 on the bid side. As noted here yesterday, Cisco announced a price cut on its AS5200 access server. In addition, the company said it would provide free upgrades to 56Kbps capability on all purchases of the AS5200 made after February 1. Cisco also said it's developing new high-density access servers that will incorporate the MICA Blazer technology the company acquired from Telebit last year.

The AS5200 is marketed primarily to Internet Service Providers, although corporate intranets are another target. Cisco's product is a relatively recent entrant into a market niche that until now has been dominated by ASCEND COMMUNICATIONS (Nasdaq: ASND), US ROBOTICS (Nasdaq: USRX) and, to a lesser degree, SHIVA (Nasdaq: SHVA).

I spoke yesterday with Michael Hakkert at Cisco. Hakkert said that the sticker price on the AS5200 had been somewhat higher than that of competing products, but the price reduction will make Cisco's access server "very competitive."

I don't want this to become the Cisco Evening News, but two items that got lost in this week's riot in networking stocks deserve mention.

First, Telecom Italia, the world's sixth largest service provider, has selected Cisco's wide area Asynchronous Transfer Mode (ATM) devices for the foundation of their Italian data infrastructure. Telecom Italia has purchased and deployed 250 Cisco IGX switches and 50 of those Cisco AS5200 access servers we just discussed. The result will be Europe's largest integrated network for IP, ATM and Frame Relay services.

Second, SITA and EQUANT, which jointly own and operate the world's largest private international communications network, signed a multi-year agreement with Cisco for carrier-class ATM switches as part of a major program to increase the capacity and speed of SITA and EQUANT's global backbone network. The companies already have ordered eight Cisco BPX ATM switches for testing and deployment this year. The network spans 225 countries and territories, delivering data and voice services to customers in the hotels and hospitality, trade and transportation, financial services, and energy industries served by EQUANT and to the international air transport community served by SITA.

This is significant news, because it further demonstrates Cisco's ability to leverage last year's StrataCom acquisition to compete in the market for high-end, bomb-proof switches that telephone companies need for their network backbones in this increasingly internetworked, digital world.

GREEN TREE FINANCIAL (NYSE: GNT) grew by $1/4. The market for asset-backed securities, in which Green Tree participates actively, has not been helped any by the recent implosion of so-called sub-prime auto finance companies.

A story in today's New York Times contrasted craters like MERCURY FINANCE (NYSE: MFN) and JAYHAWK ACCEPTANCE (Nasdaq: JACCQ) with certain "striking" success stories in other sub-prime markets. According to the story, "Investors in the Green Tree Financial Co. of St. Paul, the leading sub-prime lender in mobile homes, enjoyed a return of 83.2 percent annually from 1991 through 1995, assuming they reinvested dividends -- one of the best performances ever on Wall Street."

The Times got it half right: Green Tree's performance has certainly been extraordinary. The company is not "the leading sub-prime lender in mobile homes," though. It's the leading lender in mobile homes, period.

As I mentioned a minute ago, Gary Wall has offered to translate news about ORACLE CORP (Nasdaq: ORCL) into English for me. No need today, Gary. Even I can understand the following item. According to Reuters, Oracle's Chief Financial Officer, Jeff Henley, told participants in a Goldman Sachs conference yesterday that, so far at least, the company's current quarter "looks good" and "Europe will rebound off a really tough quarter."

As you may recall, Oracle missed analysts' consensus EPS estimate by a penny last quarter, citing slower growth in European sales. Henley declined to give any further financial details at the Goldman Sachs meeting, according to Reuters. Oracle stock soared $2-3/8 on trading volume approaching 9 million shares.

The Borefolio's other "O" stock, OXFORD HEALTH PLANS (Nasdaq: OXHP) zoomed ahead $3-3/4, possibly assisted by an upgrade to "strong buy" from an analyst at Cowen & Co.

That upgrade followed an appearance by Oxford Health's CEO and chairman, Stephen Wiggins, at Smith Barney's Fifth Annual Health Care Services Conference. Wiggins reportedly offered upbeat comments about Oxford's current and future condition and affirmed Oxford's intention to expand into new market areas.

Motley Fool participant Al Pascarelli, Jr., attended the event, held at the Plaza Hotel in New York. If you click into the Oxford Health stock folder in The Motley Fool's AOL home, you can read his summary of Wiggins's featured presentation.

According to Pascarelli, Wiggins's message was that healthcare providers that focus on enhancing consumer choice, as Oxford does, will succeed, while those that do not will face serious challenges. One way Oxford offers greater choice -- and manages costs at the same time -- is through the company's new disease-based case management plans. As noted in a previous Boring recap, Oxford has begun to contract for disease-specific services, such as heart disease, oncology, or orthopedic operations, at a fixed price from physician groups.

According to Pascarelli, Wiggins went on to suggest that Oxford could leverage this strategy idea by selling the contracted services to other healthcare providers -- in effect creating customers out of competitors.

Oxford Health reports results for its fourth quarter and 1996 results on Tuesday, Feb. 18 -- right after the big mattress sale.

(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   -  1/2   43.38
CSL   +1 1/2   33.63
CSCO  +4       64.50
GNT   +  1/4   39.25
ORCL  +2 3/8   41.38
OXHP  +3 3/4   55.88
PMSI  +  1/8   11.38
SLR   +2 1/2   56.38
TDW   +  3/4   43.25
                   Day   Month    Year  History
        BORING   +2.81%   4.17%   4.17%  19.87%
        S&P:     +1.67%   8.37%   8.37%  29.14%
        NASDAQ:  +2.05%   5.26%   5.26%  30.55%

    Rec'd   #  Security     In At       Now    Change

  2/28/96  200 Borders Gr    22.51     43.38    92.67%
   2/2/96  200 Green Tree    30.39     39.25    29.17%
  8/13/96  200 Carlisle C    26.32     33.63    27.73%
  6/26/96  100 Cisco Syst    53.90     64.50    19.67%
  5/24/96  100 Oxford Hea    48.02     55.88    16.35%
   3/8/96  400 Prime Medi    10.07     11.38    12.97%
 10/15/96  100 Solectron     54.52     56.38     3.39%
 12/23/96  100 Tidewater     46.52     43.25    -7.04%
 11/21/96  100 Oracle Cor    48.65     41.38   -14.95%

    Rec'd   #  Security     In At     Value    Change

  2/28/96  200 Borders Gr  4502.49   8675.00  $4172.51
   2/2/96  200 Green Tree  6077.49   7850.00  $1772.51
  8/13/96  200 Carlisle C  5264.99   6725.00  $1460.01
  6/26/96  100 Cisco Syst  5389.99   6450.00  $1060.01
  5/24/96  100 Oxford Hea  4802.49   5587.50   $785.01
   3/8/96  400 Prime Medi  4027.49   4550.00   $522.51
 10/15/96  100 Solectron   5452.49   5637.50   $185.01
 12/23/96  100 Tidewater   4652.49   4325.00  -$327.49
 11/21/96  100 Oracle Cor  4864.99   4137.50  -$727.49

                             CASH   $5999.08
                            TOTAL  $59936.58