Boring Portfolio

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

ANN ARBOR, Mich. (March 4, 1997) -- The Dow dropped 66 points in a late sell-off. The S&P 500 lost 0.55% as well. The Nasdaq managed a decent 0.47% advance, however, and the Russell 2000 index of small-cap stocks rose nicely, too.

Perhaps the markets have finally taken note of my complaints about the way money has flowed into a few mega-cap stocks while neglecting better values further down the food chain?

Or perhaps it's a case of even a stopped watch being right twice a day.

Either way, I'll take it. The Boring Portfolio gained 0.46% in net value on Tuesday. The day would have been even finer had not another round of Greenspeak sent bond yields rising and interest-sensitive stocks like our GREEN TREE FINANCIAL (NYSE: GNT) tumbling. Chairman Greenspan gets one more bite at the apple tomorrow.

I spent much of this afternoon preparing a "buy" report on ATLAS AIR (Nasdaq: ATLS), which will be the newest addition to the Borefolio. As a consequence, this evening's recap will be brief.

First, a quick note on Atlas. (You can catch my longer review elsewhere in the Boring Portfolio section of The Motley Fool.)

As noted at the top of tonight's recap (and in incessant whining in recent Borefolio recaps) the current fashion is to buy stock in large-cap companies and/or stocks that are displaying strong short-term upward momentum. My intended purchase of shares of Atlas Air runs directly counter to both of those trends: the company is still relatively small and unknown, and the stock was weak during the fourth quarter of last year and got clobbered a few weeks ago.

Clearly, Atlas Air is not a stock for everyone -- and perhaps not even for anyone. I've followed the company for over a year and am of the opinion that they will recover from temporary growing pains. I also am of the opinion that the reaction to the company's warnings about the current quarter was way overdone.

According to fresh numbers in First Call, the median analysts' estimate of Atlas's 1997 EPS is $2.28. That would constitute a 21% advance over 1996's $1.88 (excluding at $0.12 extraordinary charge in the third quarter). Analysts are also forecasting longer-term growth of 25% or so. Even using an industry-average multiple of 13.4 times projected 1997 earnings, fair value for ATLS is $30 1/2, with good growth prospects (but not without risk) from there.

Consistent with what The Motley Fool is all about, I'm making this purchase in the spirit of an on-line, real-time learning experience. There is no end of discussion of how to buy stocks that are zooming ever higher. The Atlas purchase is a "buy low, sell high" experiment. I intend to learn at least as much from it as I hope you will. Also, I'm buying a bit less than my usual "10% of the portfolio" stake -- partly because this is an experiment that is not without some risk and partly because I have at least on other buy waiting in the wings.

I close tonight by following up briefly on two stories from last night.

The first, naturally, is CISCO SYSTEMS (Nasdaq: CSCO), which gained $1 1/2 today on trading volume in excess of 13 million shares. Yesterday morning, I half-jokingly declared in the Cisco message folder in Fooldom that the Cisco correction was over.

Heck, anything to stir up some conversation.

Little did I know that traders would circulate a rumor Monday that Cisco was planning to snatch US ROBOTICS (Nasdaq: USRX) out of the arms of 3COM (Nasdaq: COMS). The rumor had no substantive basis to it, but it did help to crunch Cisco stock some more.

Today, though, with news that AT&T (NYSE: T) intends to spend $9 billion (with a "B") dollars for capital improvements this year, Cisco took what I expect to be the first steps on the road to recovery. According to the Wall Street Journal, "AT&T is going on the attack in all markets," from local phone services to Internet service provision. CEO-designate John Walter said he would personally oversee the latter operation.

Another story in WSJ this morning probably helped buoy TIDEWATER (NYSE: TDW). The stock rose $1 3/8 on news that energy analysts foresee stabilizing gas and oil prices and heavy demand for companies that provide drilling, exploration, and support services.

That’s it for tonight. Now to put some wings on this Borefolio and get it off the ground again.

(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   -  1/4   41.75
CSL   -  1/8   32.38
CSCO  +1 1/2   55.63
GNT   -  7/8   36.50
ORCL  +  1/8   39.50
OXHP  +2       57.50
PMSI  -  3/8   10.50
SLR   +1 5/8   51.63
TDW   +1 3/8   43.25
                    Day   Month    Year  History
        BORING   +0.46%  -0.57%  -0.59%  14.39%
        S&P:     -0.55%   0.02%   6.78%  27.24%
        NASDAQ:  +0.47%   0.64%   2.04%  26.55%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  200 Borders Gr    22.51     41.75    85.45%
  8/13/96  200 Carlisle C    26.32     32.38    22.98%
   2/2/96  200 Green Tree    30.39     36.50    20.12%
  5/24/96  100 Oxford Hea    48.02     57.50    19.73%
   3/8/96  400 Prime Medi    10.07     10.50     4.28%
  6/26/96  100 Cisco Syst    53.90     55.63     3.20%
 10/15/96  100 Solectron     54.52     51.63    -5.32%
 12/23/96  100 Tidewater     46.52     43.25    -7.04%
 11/21/96  100 Oracle Cor    48.65     39.50   -18.81%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  200 Borders Gr  4502.49   8350.00  $3847.51
   2/2/96  200 Green Tree  6077.49   7300.00  $1222.51
  8/13/96  200 Carlisle C  5264.99   6475.00  $1210.01
  5/24/96  100 Oxford Hea  4802.49   5750.00   $947.51
  6/26/96  100 Cisco Syst  5389.99   5562.50   $172.51
   3/8/96  400 Prime Medi  4027.49   4200.00   $172.51
 10/15/96  100 Solectron   5452.49   5162.50  -$289.99
 12/23/96  100 Tidewater   4652.49   4325.00  -$327.49
 11/21/96  100 Oracle Cor  4864.99   3950.00  -$914.99

                             CASH   $6121.70
                            TOTAL  $57196.70