Boring Portfolio

Boring Portfolio Report
Wednesday,  November 12, 1997
by Greg Markus (TMFBoring@aol.com)


Fly-over Country, USA (Nov. 12, 1997) -- As I tap out today's Boring Portfolio recap at 35,000 feet, approximately halfway between Detroit and San Jose, I have only the vaguest idea about what might be happening in the world of stocks. About an hour ago, I happened to glance at the television in the waiting area for my flight (delayed due to mechanical problem) and learned that the benchmark indexes were down in the morning following another uneasy session for the Hang Seng and ahead of what would presumably be an uneventful FOMC meeting.

Perhaps Wednesday will end more auspiciously for stocks than it began, but unlike myself at this moment, you almost certainly know the outcome. For details on this day in stocks, I refer you to The Motley Fool's Evening News and other sources of business news, online and off. Ditto as regards news on individual holdings of the Boring Portfolio.

You see, I'm on my way to take care of some business in Silicon Valley and attend the annual shareholders' meeting of Cisco Systems (Nasdaq: CSCO) tomorrow morning. At that meeting -- and in follow-up discussions with folks in Cisco's Investor Relations office -- I hope to learn more about the Kid's plans for the coming year and beyond... and will of course pass along to you what I hear.

I'm particularly interested in learning more about the tremendous opportunities and challenges (two sides of the same coin, really) presented by the convergence of data and voice networks and the integration of voice, video, e-mail, voicemail, fax, and data.

But whether Cisco, the stock, moved up or (more likely) down a few points on Wednesday is something about which I have not a clue at the moment. Today, my friends, you're on your own to check that news.

What I can offer you instead are a few words about the book I brought along to (re)read on my flight. It's Common Stocks and Uncommon Profits, by Philip A. Fisher. Based on Fisher's experiences in investing that began in the depths of the Great Depression, this slim volume is as relevant today as it was when it was first published in 1958.

The Wiley paperback edition that I have also includes two briefer but equally worthwhile essays by Fisher. This edition is available in most good bookstores -- such as those owned by Borefolio investment Borders Group (NYSE: BGP).

It's somehow fitting that today's Borefolio recap focuses on Fisher. First, Fisher emphasized taking the long view rather than obsessing about daily jiggles in stock prices. (I admit to trying to make a virtue out of a necessity in mentioning this at a time when I'm up in the air, literally, regarding the day's news.) Second, Fisher hailed from the San Jose area and invested in many of the leading companies of this region -- although at the time those happened to be firms like the John Bean Spray Pump Co. (world leader in the manufacture of pumps used to spray insecticides on orchards) or Food Machinery Corp. (maker of the first mechanical peach pitter) rather than Intel (Nasdaq: INTC) or Oracle (Nasdaq: ORCL).

Long before the Motley Fool or Peter Lynch (and vastly influential upon both), Fisher was one of the original proponents of "growth" investing. That is, Fisher found that instead of trying to time business cycles -- buying stocks cheaply when they are out of favor and selling them later at (what one hopes is) the peak of the cycle -- he made far more money and with far less risk by using a different approach. That approach was "finding the really outstanding companies and staying with them through all the fluctuations of a gyrating market."

I personally don't agree with every last detail of Fisher's investment philosophy, but I endorse -- and try to practice -- much of what he says. I also find myself gradually moving more in accord with the few of Fisher's recommendations with which I had previously differed.

For example, Fisher cautions that investors be loath to sell shares of an outstanding company merely because the stock may appear to be somewhat overvalued temporarily. I continue to be perhaps more focused on matters of valuation than Fisher might consider worthwhile, but I'm discovering that the more experienced in investing I become, the smarter that old guy Fisher seems to get. I very much agree with Fisher's views on portfolio diversification: not too little but not too much, either.

As a "bottoms-up" investor who focuses on the management, practices, and products of a business in which he might invest, Fisher found it extraordinarily useful to chat with folks familiar with a particular company, and its competitors.

"Go to five companies in an industry," he wrote, "ask each of them intelligent questions about the points of strength and weakness of the other four, and nine times out of ten a surprisingly detailed and accurate picture of all five will emerge."

Beyond a company and its competitors, Fisher would also talk with vendors and customers, research scientists in universities, and members of trade associations. The mosaic that emerged from all those bits of informal information was not intended to substitute for other kinds of "due diligence" by any means, but Fisher found it often to be a valuable supplement.

Only after completing what he called his "scuttlebutt" method would he take the next step of contacting the officers of the company directly "to try an fill out some of the gaps still existing in the investor's picture of the situation being studied."

Fisher wrote that the individual investor should be aware of how useful the scuttlebutt method can be, even if he or she probably would not have much chance to apply it, alas. Only by understanding the significance of the approach, said Fisher, may individuals be in a good position "to select the type of professional advisor who can best help them."

I wonder if Fisher might have altered those comments had the Internet revolution occurred forty years sooner. After all, hasn't the exploitation of new communications technologies by The Motley Fool enabled hundreds of thousands of corporate executives, industry analysts, sales people, research scientists, doctors, engineers, vendors, customers, grandparents, students, and kids to engage in one grand, simultaneous exchange of sometimes useless but often considerably helpful scuttlebutt? And have they not become better informed and, one hopes, enriched investors thereby?

All of which, in a way, brings us back to companies like Cisco Systems and why this individual Foolish investor is on his way to Phil Fisher's neighborhood today.

                  Today's FoolWatch -- all the latest in Fooldom.


TODAY'S NUMBERS
Stock  Change    Bid
CGO   -1 1/2   25.88
BGP   -1 1/16  27.88
CSL   -1 1/8   43.00
CSCO  -4       76.63
FCH   -  3/4   36.50
GNT   -2 1/8   41.31
ORCL  -2 7/16  32.50
PMSI  -  1/8   12.88
TDW   -  3/8   65.38
                   Day   Month    Year  History
        BORING   -3.35%  -1.66%  15.47%  32.88%
        S&P:     -1.93%  -0.95%  22.30%  45.74%
        NASDAQ:  -2.72%  -3.26%  19.42%  48.10%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     27.88   147.64%
  8/13/96  200 Carlisle C    26.32     43.00    63.34%
  6/26/96  100 Cisco Syst    53.90     76.63    42.16%
 12/23/96  100 Tidewater     46.52     65.38    40.52%
   2/2/96  200 Green Tree    30.39     41.31    35.95%
   3/8/96  400 Prime Medi    10.07     12.88    27.87%
   3/5/97  150 Atlas Air     23.06     25.88    12.22%
 11/21/96  150 Oracle Cor    32.43     32.50     0.21%
  11/6/97  200 FelCor Sui    37.59     36.50    -2.90%


    Rec'd   #  Security     In At     Value    Change
    2/28/96  400 Borders Gr  4502.49  11150.00  $6647.51
  8/13/96  200 Carlisle C  5264.99   8600.00  $3335.01
  6/26/96  100 Cisco Syst  5389.99   7662.50  $2272.51
   2/2/96  200 Green Tree  6077.49   8262.50  $2185.01
 12/23/96  100 Tidewater   4652.49   6537.50  $1885.01
   3/8/96  400 Prime Medi  4027.49   5150.00  $1122.51
   3/5/97  150 Atlas Air   3458.74   3881.25   $422.51
 11/21/96  150 Oracle Cor  4864.99   4875.00    $10.01
  11/6/97  200 FelCor Sui  7518.00   7300.00  -$218.00

                             CASH   $3021.10
                            TOTAL  $66439.85



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