Boring Portfolio

Boring Portfolio Report
Monday, February 24, 1997
by Greg Markus (MF Boring)

ANN ARBOR, Mich. (Feb. 24, 1997) -- The Dow soared 77 points, or 1.10%, to move back above 7000 on Monday. The S&P 500 came in a close second, gaining 1.06%. Further back was the Nasdaq Composite, up 0.81%, thanks to a late afternoon rally.

As for the Boring Portfolio, it fell 0.88%. Splat. Andthe damage would have been even worse had not that aforesaid rally in four-letter stocks propelled CISCO SYSTEMS (Nasdaq: CSCO) into positive territory.

The divergence between the cash gushing into Dow and large-cap stocks, on the one bejeweled hand, and the pittance afforded small and mid-cap stocks, on the grimy, hang-nailed other, is quite astounding. While the Dow and S&P 500 have risen approximately 10% in 1997, the Russell 2000 has gained barely 2%. And if you look back into last year, the discrepancy is even more pronounced: the Dow has surged through one century mark after another over the past six months, but the Russell 2000 Index of small capitalization stocks is virtually exactly where it was last June.

Being an investor who tends to favor mid-caps and small-caps, I admit that on days like today I feel a bit like a salmon: swimming relentlessly upstream, hoping to avoid the jaws of a waiting bear.

Ah, well.

On Friday, Cisco, fell $4 1/2 on volume in excess of 24 million shares. Rumors apparently had circulated on the trading floor that Cisco had instituted a freeze on hiring -- a rumor the company later denied strenuously. Presumably, the initiator of the rumor committed an honest mistake. After all, who would knowingly spread falsehoods on a double-witching expirations day merely to make a few bucks?

In any event, Cisco made up that ground and a bit more today -- and on trading volume nearly equal to Friday's enormous activity -- but only after sinking to a low of $55 1/2 in the early going. Amazing. Simply amazing.

In Friday's Borefolio recap, I argued that increased "coopetition" among the big three of INTEL (Nasdaq: INTC), MICROSOFT (Nasdaq: MSFT), and Cisco was inevitable as all three companies understood that networking was where the action will surely be over the next decade. It turns out that we didn't have to wait very long for evidence: this morning, Cisco and Microsoft announced that they would be working together to improve the security of Internet transactions.

Microsoft will be a founding partner of Cisco's Enterprise Security Alliance. The group also includes Borefolio holding ORACLE (Nasdaq: ORCL), along with HEWLETT-PACKARD (NYSE: HWP), CYLINK (Nasdaq: CYLK), the RSA Data Security unit of SECURITY DYNAMICS TECHNOLOGY INC. (Nasdaq: SDTI), and VeriSign Inc.

Among the Borefolio's troubled smaller stocks today were BORDERS GROUP (NYSE: BGP) and GREEN TREE FINANCIAL (NYSE: GNT). The former was mentioned as a "short" target of the Fusion hedge fund, featured in Barron's. According to the story, "Fusion is long Barnes & Noble but short Borders."

Period. That's it. No explanation, no justification, no nothing.

Hey, it's a couple of weeks before Borders reports earnings, so they're stuck in a "quiet period" and can't defend themselves. So let's hit 'em with a cheap shot and see if we can rattle a few folks.

Happily, not all of the Boring small caps slipped lower today. PRIME MEDICAL SERVICES (Nasdaq: PMSI) gained a quarter-point on twice its average trading volume. The company announced that they had formed a new partnership to provide mobile lithotripsy services in Hawaii. Prime Medical reports its fourth quarter results on Thursday morning.

(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       42.50
CSL   +  3/8   34.50
CSCO  +  1/2   58.88
GNT   -  5/8   37.63
ORCL  -  5/8   40.25
OXHP  -1 7/8   57.00
PMSI  +  1/4   11.38
SLR   -  7/8   55.25
TDW   -  7/8   43.00
                  Day   Month    Year  History
        BORING   -0.88%  -2.10%   2.39%  17.82%
        S&P:     +1.06%   3.07%   9.39%  30.35%
        NASDAQ:  +0.81%  -2.52%   4.19%  29.22%

    Rec'd   #  Security     In At       Now    Change

  2/28/96  200 Borders Gr    22.51     42.50    88.78%
  8/13/96  200 Carlisle C    26.32     34.50    31.05%
   2/2/96  200 Green Tree    30.39     37.63    23.82%
  5/24/96  100 Oxford Hea    48.02     57.00    18.69%
   3/8/96  400 Prime Medi    10.07     11.38    12.97%
  6/26/96  100 Cisco Syst    53.90     58.88     9.23%
 10/15/96  100 Solectron     54.52     55.25     1.33%
 12/23/96  100 Tidewater     46.52     43.00    -7.58%
 11/21/96  100 Oracle Cor    48.65     40.25   -17.27%

    Rec'd   #  Security     In At     Value    Change

  2/28/96  200 Borders Gr  4502.49   8500.00  $3997.51
  8/13/96  200 Carlisle C  5264.99   6900.00  $1635.01
   2/2/96  200 Green Tree  6077.49   7525.00  $1447.51
  5/24/96  100 Oxford Hea  4802.49   5700.00   $897.51
   3/8/96  400 Prime Medi  4027.49   4550.00   $522.51
  6/26/96  100 Cisco Syst  5389.99   5887.50   $497.51
 10/15/96  100 Solectron   5452.49   5525.00    $72.51
 12/23/96  100 Tidewater   4652.49   4300.00  -$352.49
 11/21/96  100 Oracle Cor  4864.99   4025.00  -$839.99

                             CASH   $5999.08
                            TOTAL  $58911.58