Boring Portfolio

Boring Portfolio Report
Thursday, October 30, 1997
by Mark Weaver (
mweav@aol.com)


St. Louis, MO (October 30, 1997) -- On the eve of Halloween the markets were again spooked by weakness in Hong Kong and other Asian markets. The US market opened lower, rallied and then dropped again in afternoon trading. Technology stocks were particularly hard hit. Declining stocks outnumbered advancing stocks 3:1 on the NYSE and down volume was 4.5:1 greater than up volume. It was another rout for equities. Bonds, on the other hand, enjoyed a nice gain while yields dropped to 6.17%.

The Boring Portfolio was not immune to the market's fall as the value of our holdings fell 1.79%. The S&P fared a bit better, down "only" 1.68% while the technology-heavy Nasdaq Composite dropped a full 2.03%.

On the day, 7 of our stocks fell while only 2 rose. As has become customary on Thursdays, the day I write this column, there was no news to report on any of the stocks in the Borefolio.

ATLAS AIR (Nasdaq: ATLS) lived up to its name and shouldered some of the load for the Borefolio with a $3/8 gain. The company has enjoyed a nice bounce after its estimated beating earnings report released yesterday. As you may recall, Atlas reported earnings of $0.28 which was $0.04 above consensus estimates. Greg Markus has completed his summary of the Atlas Air Q3 Conference Call and it is now available for your reading pleasure.

The only other winner was TIDEWATER (NYSE: TDW) which rose $1 1/4 along with a strong oil services group. I noted that oil driller NOBLE DRILLING (NYSE: NE) was the recipient of an upgrade today. The oil services sector may also have benefited from a jump in oil prices precipitated by sabre rattling in the middle east.

On the downside our technology holdings CISCO SYSTEMS (Nasdaq: CSCO), down $9/16, and ORACLE (Nasdaq: ORCL), down $1 5/16, fell along with the sector.

In spite of the fact that the bond market continued to rally GREEN TREE FINANCIAL (NYSE: GNT) fell $1 1/4. Yesterday Green Tree announced that McCoy's Building Supply Centers and RoomStore of Phoenix signed on for private label credit card programs. This sounds like a winner for Greentree. Fellow lender AAMES FINANCIAL (NYSE: AAM) reported estimate beating earnings and rose $1 1/4. However, there was no positive spillover to 'the Tree'.

The Borefolio did not sell its shares of OXFORD HEALTH PLANS (Nasdaq: OXHP) today. As Greg explained in last night's report, we have 5 business days to extract these shares from the portfolio. Today wasn't the day. The lawyers continue their feeding frenzy as yet another class action suit was filed against Oxford today.

Finally, in case you are feeling a bit less flush after the market turmoil this week, consider the plight of Victor Niederhoffer.

Mr. Niederhoffer is the author of one of the more intriguing investment books I have had the chance to read, The Education of a Speculator. In this book Mr. Niederhoffer offers musings on markets, stocks, sex and music. I found the book to be an entertaining glimpse into a person who is clearly a genius, albeit an eccentric one. He even has a couple of references to the Motley Fool hidden in the pages.

Today it was reported that Mr. Niederhoffer is broke. An untimely sale of deep in the money S&P 500 puts put him out of business. For the uninitiated, he essentially sold the rights to sell the S&P 500 for a price in the mid-900's. Needless to say, everyone holding those rights wants to cash in! Margin calls have wiped his business out. Last reported, that business included $130 million dollars and all of his family's money.

So what is the point of this story? While Mr. Niederhoffer's musings were entertaining, his investment approach was far from Boring.

While Boring stocks can occasionally tank, they don't go to less than zero. While the market is risky and there is the potential to lose a lot of money, the Boring investor will still have capital at the end of the day. Sometimes it is worthwhile to consider that equity assets are ultimately a piece of the company. As long as the company is a going concern those pieces have worth. I am happy to own a piece of Cisco, of Prime Medical Services, of Greentree Financial and on and on.

On the other hand, owning an option is owning a right to buy or sell. This right has a time limit and is ultimately worthless. When there is such dramatic market activity options begin to gain appeal. While there are some option strategies that have merit, owning calls or puts is ultimately a losing game. So, when you hear the siren call of the options market, consider the fate of Mr. Niederhoffer.

I don't know about you folks, but I'll be happy when this month is over.


TODAY'S NUMBERS

Stock  Change    Bid
ATLS  +  3/8   26.38
BGP   -  11/16 25.06
CSL   -1 3/4   42.94
CSCO  -  9/16  79.94
GNT   -1 1/4   43.25
ORCL  -1 5/16  33.75
OXHP  -1 3/8   25.81
PMSI  -  5/16  12.75
TDW   +1 1/4   64.69
                   Day   Month    Year  History
         BORING   -1.79%  -9.11%  15.50%  32.91%
        S&P:     -1.68%  -4.60%  22.00%  45.38%
        NASDAQ:  -2.03%  -6.84%  21.64%  50.86%

     Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     25.06   122.65%
  8/13/96  200 Carlisle C    26.32     42.94    63.11%
  6/26/96  100 Cisco Syst    53.90     79.94    48.31%
   2/2/96  200 Green Tree    30.39     43.25    42.33%
 12/23/96  100 Tidewater     46.52     64.69    39.04%
   3/8/96  400 Prime Medi    10.07     12.75    26.63%
   3/5/97  150 Atlas Air     23.06     26.38    14.38%
 11/21/96  150 Oracle Cor    32.43     33.75     4.06%
  5/24/96  100 Oxford Hea    48.02     25.81   -46.25%

     Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  10025.00  $5522.51
  8/13/96  200 Carlisle C  5264.99   8587.50  $3322.51
  6/26/96  100 Cisco Syst  5389.99   7993.75  $2603.76
   2/2/96  200 Green Tree  6077.49   8650.00  $2572.51
 12/23/96  100 Tidewater   4652.49   6468.75  $1816.26
   3/8/96  400 Prime Medi  4027.49   5100.00  $1072.51
   3/5/97  150 Atlas Air   3458.74   3956.25   $497.51
 11/21/96  150 Oracle Cor  4864.99   5062.50   $197.51
  5/24/96  100 Oxford Hea  4802.49   2581.25 -$2221.24

                             CASH   $8028.59
                            TOTAL  $66453.59