Boring Portfolio

Boring Portfolio Report
Thursday, November 20, 1997
by Mark Weaver (MWEAV@aol.com)


St. Louis, MO (Nov. 20, 1997) -- The general market moved higher today as tensions eased in Iraq and the Tokyo market moved sharply higher on word that the banking situation may be improving. The S&P 500 rose 1.52% and the Nasdaq Composite rose 1.58%. The Borefolio was also in the plus column, up 0.96%. There were 7 winners and 2 losers in the portfolio today.

In a story dated October 19, out of all places Dubai, comes word that Boeing (NYSE: BA) will compensate Atlas Air (NYSE: CGO) for any delays in delivery of the new 747's it ordered. This certainly takes away the uncertainty surrounding delayed delivery of the planes. Atlas took off, up $1 1/16 today.

The Nasdaq Stock Market announced that MCI (Nasdaq: MCIC) will help it set up a new communications infrastructure. Buried within the press release was news that Borefolio holding Cisco Systems (Nasdaq: CSCO) would be providing the routers for the new system. In addition Internet Access Group, a midwest Internet service, announced that it tapped Cisco for its Asynchronous Transfer Mode switches. This news, combined with a technology rally, may have accounted for Cisco's move today, up $2 5/16. Greg intends to have much more to say about Cisco in tomorrow night's report.

There was more news today out of normally quiet Carlisle Companies (NYSE: CSL). This is the second straight news day for the company. Carlisle Engineered Products subsidiary announced that it intends to joint venture with Lander Plastics Ltd., a privately held U.K. firm. This will help Carlisle expand in the European market. On the surface, the partnership looks like a good fit. The market was underwhelmed as Carlisle slipped $5/16.

Prime Medical Services (Nasdaq: PMSI) presented today at the Southeast Research Partner's conference. The company made no new announcements but reiterated its strong position in the urology market. Fully 25% of U.S. urologists use Prime Medical's lithotripsy devices. That is an extraordinary market share. The company intends to leverage this relationship into further ventures including prostatron partnerships. The stock closed to day up $1/4 on the bid.

Well, the Borefolio has certainly taken its lumps of late. Three of our stocks have taken a pounding. First came Oxford Health Plans (Nasdaq: OXHP) with its "out of the blue" announcement of an earnings shortfall. Then came Green Tree Financial (NYSE: GNT) with a charge against earnings and an S&P downgrade. Finally, Tidewater (NYSE: TDW) became the victim of anxiety about the oil services sector. It was the old "is it overextended" line of thinking. Green Tree came back $7/8 today and Tidewater rallied $1 13/16 in spite of an easing in oil prices related to dimishing tensions over Iraq.

The result of this tri-imper-fecta has been a substantial decline in our year-to-date performance. If there wasn't some reflection on this situation we would be negligent.

A couple of questions come to mind. First, was there a way to have avoided this situation? And second, should we do anything differently?

The answer to the first question is a qualified no. I am in synch with Greg on the prospects for Green Tree and Tidewater. The selling has been overdone in my opinion. While Green Tree is now a near break-even stock for us, Tidewater remains a big gainer for the Borefolio. The long term upside for these stocks appears, to these eyes, solid.

As for Oxford, I recall one of my earliest columns was on the subject of Oxford's valuation. At that time the stock was trading at almost $90 per share and was nearing full and fair value. An earnings report was pending and subsequently the earnings report was favorable. All looked well. When I pause to reflect I know that the basis for my attraction to the stock was the strong feeling that Oxford had a better managed care mousetrap. In the light of subsequent events it appears that, in many ways, Oxford regressed to the mean -- an unfortunately common problem.

While I don't believe the answer to the second question, should we doing anything differently, is yes, I do believe I have learned something from the Oxford experience. It is one thing to have a better mousetrap in an industry with robust margins however, the 3-5% margins of managed healthcare don't leave a lot of room for error. Witness Oxford. I will think twice before investing in a premium valued business in a low margin industry. That is the lesson I have learned. That said, the debacle at Oxford came like a bolt out of the blue and, as such didn't give an investor time to act. There wasn't much avoiding it if you were along for the ride.

I recently had the opportunity to read the comments of newsletter writer Harry Browne on the issue of financial safety. I found these ideas highly Foolish and worthy of keeping in mind when things aren't going so well in the markets. I thought I might pass them along to you all. While I don't agree with each and every idea, they all have merit.

"1. - Your career provides your wealth. You most likely will make far more money from your business than from your investments.

2. - Don't assume you can replace your wealth...Treat what you have as though you could never earn it again.

3. - Don't use leverage.

4. - No one can predict the future. Events in the investment markets result from the decisions of millions of different people. Investment advisors have no more ability to predict the future actions of human beings than psychics and fortune-tellers.

5. - No one can move you in and out of investments consistently with precise and profitable timing.

6. - No trading system will work as well in the future as it did in the past.

7. - Recognize the difference between investing and speculating. When you invest, you accept the return the markets are paying in general. When you speculate you attempt to beat that return through astute timing, forecasting, or stock selection, and with the implied belief that you're smarter than a mere investor. There's nothing wrong with speculating -- provided you do it with money you can afford to lose.

8. - Don't let anyone make your decisions.

9. - Don't ever do anything you don't understand.

10. - Keep some assets outside the country in which you live.

11. - Beware of tax avoidance schemes.

12. - Don't depend on any one investment or institution for your safety. Every investment has bad periods.

13. - Create a balanced portfolio for protection. This needn't be complicated; you can achieve a great deal of diversification with a surprisingly simple portfolio.

14. - Speculate only with money you can afford to lose.

15. - Enjoy yourself with a budget for pleasure.

16. - Whenever you're in doubt about a course of action, it is always better to err on the side of safety. If you pass up an opportunity to increase your fortune, there always will be another chance..."

Food for thought.


TODAY'S NUMBERS
Stock  Change    Bid
Stock  Change    Bid
CGO   +1 1/16  27.13
BGP   -  9/16  29.25
CSL   -  5/16  42.75
CSCO  +2 5/16  85.44
FCH   +  1/8   36.88
GNT   +  7/8   31.25
ORCL  +  3/8   35.13
PMSI  +  1/4   13.25
TDW   +1 13/16 60.94
                   Day   Month    Year  History
        BORING   +0.98%  -2.06%  15.01%  32.34%
        S&P:     +1.52%   4.85%  29.46%  54.27%
        NASDAQ:  +1.58%   2.07%  25.99%  56.26%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     29.25   159.86%
  8/13/96  200 Carlisle C    26.32     42.75    62.39%
  6/26/96  100 Cisco Syst    53.90     85.44    58.51%
   3/8/96  400 Prime Medi    10.07     13.25    31.60%
 12/23/96  100 Tidewater     46.52     60.94    30.98%
   3/5/97  150 Atlas Air     23.06     27.13    17.64%
 11/21/96  150 Oracle Cor    32.43     35.13     8.30%
   2/2/96  200 Green Tree    30.39     31.25     2.84%
  11/6/97  200 FelCor Sui    37.59     36.88    -1.90%

    Rec'd   #  Security     In At     Value    Change
2/28/96  400 Borders Gr  4502.49  11700.00  $7197.51
  8/13/96  200 Carlisle C  5264.99   8550.00  $3285.01
  6/26/96  100 Cisco Syst  5389.99   8543.75  $3153.76
 12/23/96  100 Tidewater   4652.49   6093.75  $1441.26
   3/8/96  400 Prime Medi  4027.49   5300.00  $1272.51
   3/5/97  150 Atlas Air   3458.74   4068.75   $610.01
 11/21/96  150 Oracle Cor  4864.99   5268.75   $403.76
   2/2/96  200 Green Tree  6077.49   6250.00   $172.51
  11/6/97  200 FelCor Sui  7518.00   7375.00  -$143.00

                             CASH   $3021.10
                            TOTAL  $66171.10


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