Boring Portfolio Report
Tuesday, October 28, 1997
by Greg Markus (TMFBoring@aol.com)
ANN ARBOR, Mich. (Oct. 28, 1997) -- The U.S. stock market rebounded emphatically from Monday's sell-off, with the S&P 500 gaining a bit more than 5% and the Nasdaq, 4.35%. Trading volume easily surpassed all previous records, exceeding one billion shares on both the NYSE and the Nasdaq.
The Boring Portfolio rebounded, as well, rising 4.55%. Eight of nine holdings gained ground, led by a $7 1/2 advance in CISCO SYSTEMS (Nasdaq: CSCO) to a bid of $79 15/16 and a $3 7/16 surge in ORACLE (Nasdaq: ORCL) to $34 11/16.
ATLAS AIR (Nasdaq: ATLS) ascended $1 1/2 to $24 5/8 ahead of that company's quarterly earnings report, to be released tomorrow morning. We'll be covering the follow-up conference call. In light of the substantial business Atlas does in Asia and South America, analysts will no doubt want to know whether the current financial turbulence on those two continents will have any impact on the company's fortunes.
Reporting early today was PRIME MEDICAL SYSTEMS (Nasdaq: PMSI). Third quarter revenues increased 8% over last year, with "same-store" increases in lithotripsy volume largely offsetting slight declines in price per procedure. Pretax income rose 34%, thanks to decreasing interest expense and a smaller percentage of operating income going to Prime's partners in the lithotripsy practices.
Net income increased 13% to $0.23 per share, that despite Prime's effective tax rate almost doubling relative to a year ago as the company gradually uses up its tax write-offs arising from old net operating losses. The effective tax rate was 30% for the quarter, well above the 24% figure that had been projected. That was because revenues are trending higher than expected. Despite that higher than projected tax rate, the EPS of $0.23 met the Street's consensus expectations.
Prime's Prostatron business continues to develop nicely. The company has one Prostatron route currently operating in North Carolina with 53 physician partners. Additional routes are being actively developed in California (with 113 physician partners), Texas, Tennessee, Virginia, Arkansas, Virginia, and Florida.
Over 100 health insurers have approved reimbursement for prostate thermotherapy, and 21 states have approved Medicare reimbursement for the procedure. In January, the procedure will have its own "CPT" code, which should facilitate additional approvals. Altogether, Prime expects to have 10 Prostatron routes in service during 1998.
PMSI gained $3/8 to a bid of $12 today. We'll provide a more detailed summary of today's conference call shortly.
The only Borefolio holding that failed to rise Tuesday was OXFORD HEALTH PLANS (Nasdaq: OXHP). The former star performer in the HMO industry revealed yesterday that, contrary to what had once seemed true, it had fallen victim to many of the same problems plaguing its competitors. And to those problems, Oxford added one of its one: a book-keeping fiasco of historic proportions.
After OXHP crashed and burned yesterday, I wrote in this space that I'd most likely hold onto the stock until I had further information, which I expected would come in Oxford's earnings report next week. As it turned out, additional information appeared today in the form of a number of news stories using industry analysts and Oxford chairman Stephen Wiggins as their sources.
Based on today's information, I have decided to eliminate the stock from the Borefolio. Details are provided in my sell report.
As is always the case here in The Motley Fool, my write-up is intended to explain my decision only. It is not a "sell" recommendation, as some may insist on mischaracterizing it. Just as our "buy" reports and running commentaries on portfolio holdings do, our "sell" reports are intended to provide information and, most of all, to demonstrate in real time and for all to see the kinds of decisions that individual investors must grapple with from time to time. If anyone buys or sells a stock simply because someone at the Motley Fool does, then they've missed the whole point of this enterprise.
Furthermore, it may well turn out that OXHP could provide a good return from here over the long haul. The downside appears fairly limited. My own decision to sell the stock turns only secondarily on purely financial considerations, however. In a nutshell, I simply don't trust management any more; and I personally find it impossible to hold a stock under such conditions.
Mark Weaver and I have already identified a new investment to replace Oxford. We're eager to tell you about it, and we intend to do so very soon.
Stock Change Bid ATLS +1 1/4 24.63 BGP + 7/8 25.38 CSL +1 1/8 43.63 CSCO +7 1/16 79.94 GNT +2 5/8 44.50 ORCL +3 7/16 34.69 OXHP - 7/16 25.38 PMSI + 3/8 12.00 TDW +2 3/4 63.94
Day Month Year History BORING +4.55% -9.15% 15.45% 32.85% S&P: +5.05% -2.75% 24.37% 48.20% NASDAQ: +4.25% -5.06% 23.96% 53.74% Rec'd # Security In At Now Change 2/28/96 400 Borders Gr 11.26 25.38 125.43% 8/13/96 200 Carlisle C 26.32 43.63 65.72% 6/26/96 100 Cisco Syst 53.90 79.94 48.31% 2/2/96 200 Green Tree 30.39 44.50 46.44% 12/23/96 100 Tidewater 46.52 63.94 37.43% 3/8/96 400 Prime Medi 10.07 12.00 19.18% 11/21/96 150 Oracle Cor 32.43 34.69 6.95% 3/5/97 150 Atlas Air 23.06 24.63 6.79% 5/24/96 100 Oxford Hea 48.02 25.38 -47.16% Rec'd # Security In At Value Change 2/28/96 400 Borders Gr 4502.49 10150.00 $5647.51 8/13/96 200 Carlisle C 5264.99 8725.00 $3460.01 2/2/96 200 Green Tree 6077.49 8900.00 $2822.51 6/26/96 100 Cisco Syst 5389.99 7993.75 $2603.76 12/23/96 100 Tidewater 4652.49 6393.75 $1741.26 3/8/96 400 Prime Medi 4027.49 4800.00 $772.51 11/21/96 150 Oracle Cor 4864.99 5203.13 $338.14 3/5/97 150 Atlas Air 3458.74 3693.75 $235.01 5/24/96 100 Oxford Hea 4802.49 2537.50 -$2264.99 CASH $8028.59 TOTAL $66425.47