Boring Portfolio

Boring Portfolio Report
Monday,  November 17, 1997
by Greg Markus (TMFBoring@aol.com)


ANN ARBOR, Mich. (Nov. 17, 1997) -- U.S. stocks followed the lead of foreign markets Monday, sending the Nasdaq and S&P 500 indexes soaring nearly 2%. The Boring Portfolio did, too, as eight of nine holdings rose on the session.

The sole Boring loser today was Tidewater (NYSE: TDW), which ebbed $1/2 on a mixed day for drilling and related stocks. The weakness is presumably related to a drop in the price of crude oil as tensions in Iraq appeared to ease. Every silver lining has a dark cloud around it, I guess.

Speaking of dark clouds, the Borefolio has certainly been lost in one this past few weeks. Late last month, Oxford Health (Nasdaq: OXHP) imploded, putting roughly a $4,000 crater in the value of the portfolio.

Then last Thursday after trading ended, Green Tree Financial (NYSE: GNT) warned that it would take of charge in the current quarter to reflect a reduction in expected cash flows from certain classes of its manufactured home loans. The reduction results from faster than expected prepayment of those loans as interest rates have fallen sharply this year.

On Friday, 19% was lopped off the top of the Tree despite a morning conference call from the company intended to convince institutional shareholders not to rev up their chainsaws. At least two analysts immediately cut their ratings on the stock, although their earnings estimates for 1998 were left largely untouched.

Today, however, Morgan Stanley and Bear Stearns reiterated their "strong buy" and "buy" ratings, respectively, also leaving their 1998 estimates untouched. GNT recovered somewhat, picking up $3/4 in active trading.

A representative of Green Tree returned my call late this afternoon from New York, where he was presumably engaged in mitigating damages to the company's previously unsullied reputation. He reiterated the company's position that this charge puts Green Tree in a very strong position for the coming year and that absolutely no additional writedowns are anticipated. The company has a team in place to retain customers who inquire about prepayment, and this action has already been very effective, retaining the vast majority of the better customers at renegotiated loan rates -- often within a half-point of their former rates.

I certainly am in no position to assure anyone that the worst is over for Green Tree. All I can report is that I'm sufficiently satisfied to retain the Tree in the Borefolio, closely monitoring further developments.

On a more upbeat note, Borders Group (NYSE: BGP) reported their fiscal third quarter results. As preannounced on Nov. 4, Borders had a break-even quarter, well ahead of expectations. Comparable-store sales during the quarter were +7.3% for the superstores and -1.9% for the mall-based Waldenbooks chain. Total sales increased 15.4% over a year ago, to $477.3 million.

In a conference call this morning, Borders management said that the planned closings in the current quarter of some of the less profitable Waldenbooks would be delayed until after the holidays. The Internet launch of Borders.com will take place in early January. Although management said they couldn't offer precise guidance until after the crucial fourth quarter was behind them, they did say that they continue to be comfortable with projections of 25% EPS growth going forward.

We'll have a summary of the entire conference call available for you shortly. Oh yes: BGP gained $1 3/16.

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TODAY'S NUMBERS
Stock  Change    Bid
CGO   +  9/16  26.00
BGP   +1 3/16  28.75
CSL   +1 1/4   43.19
CSCO  +1 11/16 83.00
FCH   +  1/8   37.13
GNT   +  3/4   33.50
ORCL  +  13/16 35.19
PMSI  +  1/8   13.00
TDW   -  1/2   63.75
                   Day   Month    Year  History
        BORING   +1.96%  -1.81%  15.29%  32.67%
        S&P:     +1.92%   3.45%  27.74%  52.22%
        NASDAQ:  +1.92%   1.29%  25.02%  55.06%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     28.75   155.41%
  8/13/96  200 Carlisle C    26.32     43.19    64.06%
  6/26/96  100 Cisco Syst    53.90     83.00    53.99%
 12/23/96  100 Tidewater     46.52     63.75    37.02%
   3/8/96  400 Prime Medi    10.07     13.00    29.11%
   3/5/97  150 Atlas Air     23.06     26.00    12.76%
   2/2/96  200 Green Tree    30.39     33.50    10.24%
 11/21/96  150 Oracle Cor    32.43     35.19     8.49%
  11/6/97  200 FelCor Sui    37.59     37.13    -1.24%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  11500.00  $6997.51
  8/13/96  200 Carlisle C  5264.99   8637.50  $3372.51
  6/26/96  100 Cisco Syst  5389.99   8300.00  $2910.01
 12/23/96  100 Tidewater   4652.49   6375.00  $1722.51
   3/8/96  400 Prime Medi  4027.49   5200.00  $1172.51
   2/2/96  200 Green Tree  6077.49   6700.00   $622.51
   3/5/97  150 Atlas Air   3458.74   3900.00   $441.26
 11/21/96  150 Oracle Cor  4864.99   5278.13   $413.14
  11/6/97  200 FelCor Sui  7518.00   7425.00   -$93.00

                             CASH   $3021.10
                            TOTAL  $66336.73


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