Boring Portfolio

Boring Portfolio Report
Tuesday,  November 18, 1997
by Greg Markus (

ANN ARBOR, Mich. (Nov. 18, 1997) -- The Boring Portfolio followed the benchmark averages lower on Tuesday, erasing about half of the previous day's gains. Only two holdings rose: Prime Medical Services (Nasdaq: PMSI), which edged up $1/8, and Borders Group (NYSE: BGP), which gained $13/16 on the heels of its quarterly earnings report on Monday.

In yesterday's telephone conference with analysts, (a summary of which will be posted shortly in the "Conference Call" section of The Motley Fool), Borders's management said that their Internet commerce site,, is scheduled for launch in early January, 1998. The launch will be aided through strategic relationships with CNET (Nasdaq: CNWK), Infoseek (Nasdaq: SEEK), Salon (the Web's leading online literary magazine), and Harvest, the world's leading out-of-print booksearch company.

The Borders folks said they do not expect the Internet initiative to be significantly dilutive to earnings in the coming year. The company expects to be able to leverage its existing buying and order fulfillment capabilities in servicing Internet-based sales. They also expect that marketing expenses associated with the Borders superstores can be leveraged to serve Another advantage is the company's existing investment in inventory, which can serve both the bricks-and-mortar stores and Internet sales.

Although there may well be some cannibalization of store sales by the Internet site, it may not be nearly as large as some may expect, according to Borders executives. Based on the experiences of other Web-based booksellers, Borders expects a substantial fraction of its Internet sales will come from international customers and another large chunk will come from domestic markets in which Borders does not currently have a store. Also, Internet book sales have thus far tended to be skewed towards technical and computer-oriented titles, many of which may not typically be carried in a Borders or Waldenbooks.

The bulk of today's Borefolio losses were centered in two stocks: Tidewater (NYSE: TDW) and Green Tree Financial (NYSE: GNT).

Tidewater was the sole loser for the Borefolio yesterday, and it continued to sink today, losing $3 in active trading. Selling in drilling and energy services stocks accelerated as tensions in Iraq appeared to ease and the price of benchmark West Texas crude dropped briefly below the psychologically significant $20 mark during the day to settle at $20.04.

Amidst the selling, I noticed that offshore rig and boat builder Halter Marine (AMEX: HLX) announced today that it had signed contracts to build two jackup drilling units for privately held Chiles Offshore. The rigs will be capable of drilling in water up to 350 feet deep.

This news follows a number of other recent announcements of new rig builds. New rigs need to be serviced, and that means more business for companies like Tidewater. This news -- together with an announcement expected soon that Tidewater will sell its slower-growing compression business -- suggests to me that Tidewater's best days are still well ahead of it.

As for Green Tree, the stock was continuing its recovery until late in the afternoon, when news came out that Standard & Poor's had lowered its issuer credit and debt ratings on Green Tree.

As noted in previous Boring recaps, Green Tree has put in place aggressive measures to stem the prepayment problem that caused it to write down the value of certain securitizations of manufactured home loans made in 1994 and 1995. Despite that, S&P said they believe that the company "will likely continue to be impacted by the increased competition in all consumer sectors."

Once this news hit the wires, GNT sold off, ultimately losing $2 1/16 on trading volume of 1.9 million shares. It would not surprise me at all to see some continued selling of the stock from here. For the time being, at least, the Borefolio continues to hold its investment in Green Tree.


Here's why. We're certainly no one to argue with S&P, but there is no evidence in the trends in any of Green Tree's business lines thus far in 1997 to suggest that competition is slowing the company's growth. Green Tree continues to increase its already large share of the MH finance industry (with an estimated 30% share), and its newer lines continue to grow at a breathtaking pace.

--Greg Markus

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Stock  Change    Bid
CGO     ---    26.00
BGP   +  13/16 29.56
CSL   -  3/4   42.44
CSCO  -  11/16 82.31
FCH   -  3/16  36.94
GNT   -1 15/16 31.56
ORCL  -  7/16  34.75
PMSI  +  1/8   13.13
TDW   -3       60.75
                   Day   Month    Year  History
        BORING   -0.96%  -2.75%  14.19%  31.40%
        S&P:     -0.84%   2.58%  26.66%  50.93%
        NASDAQ:  -0.85%   0.43%  23.97%  53.75%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     29.56   162.63%
  8/13/96  200 Carlisle C    26.32     42.44    61.21%
  6/26/96  100 Cisco Syst    53.90     82.31    52.71%
 12/23/96  100 Tidewater     46.52     60.75    30.58%
   3/8/96  400 Prime Medi    10.07     13.13    30.35%
   3/5/97  150 Atlas Air     23.06     26.00    12.76%
 11/21/96  150 Oracle Cor    32.43     34.75     7.14%
   2/2/96  200 Green Tree    30.39     31.56     3.87%
  11/6/97  200 FelCor Sui    37.59     36.94    -1.74%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  11825.00  $7322.51
  8/13/96  200 Carlisle C  5264.99   8487.50  $3222.51
  6/26/96  100 Cisco Syst  5389.99   8231.25  $2841.26
 12/23/96  100 Tidewater   4652.49   6075.00  $1422.51
   3/8/96  400 Prime Medi  4027.49   5250.00  $1222.51
   3/5/97  150 Atlas Air   3458.74   3900.00   $441.26
 11/21/96  150 Oracle Cor  4864.99   5212.50   $347.51
   2/2/96  200 Green Tree  6077.49   6312.50   $235.01
  11/6/97  200 FelCor Sui  7518.00   7387.50  -$130.50

                             CASH   $3021.10
                            TOTAL  $65702.35