Boring Portfolio

Boring Portfolio Report
Wednesday, November 26, 1997
by Greg Markus (TMF

ANN ARBOR, Mich. (Nov. 26, 1997) -- U.S. stocks meandered in light trading ahead of the Thanksgiving holiday. Movement in the Boring Portfolio was slight, as well, with our nine holdings jiggling a few "teenths" one way or the other.

Yesterday, Borefolio leader Borders Group (NYSE: BGP) fell an uncharacteristic $1 7/16 in above-average trading, and on no news that might account for the drop. Today's Wall Street Journal offers a clue.

According to the Journal's "Heard on the Street" column, Sanford C. Bernstein analyst David Poneman downgraded a number of retail stocks, speculating that holiday sales could be below expectations. Retail analysts at other firms were also making cautious noises. The discussion focused on apparel stores and general merchandise retailers, but any bearishness about holiday buying presumably washes over onto specialty retailers such as Borders.

Trading at around 24-times projected earnings of $1.20 for the coming year, BGP is no screaming bargain. But then neither is it particularly overpriced, given confirmations from Borders management that they anticipate 25% annual earnings growth for a number of years yet. For that, I am thankful -- as I am also for the fact that Borders #001 is three blocks from my office.

Boeing (NYSE: BA) says that its commercial aircraft group has returned to full production on its 747 line following a 20-day shutdown to catch up with a backlogged work. Although Boeing said that "factories may not be back to where they should be until the second quarter of next year," the folks at Atlas Air (NYSE: CGO) are probably thankful that they'll be replacing the troublesome jets leased from Federal Express (NYSE: FDX) with spanking new 747-400s next year.

Adversity sometimes makes Thanksgiving Day all that more meaningful. That being so, then this year's holiday will be particularly memorable for folks at Green Tree Financial (NYSE: GNT) ... and its shareholders. The Tree shed another few leaves today, putting the stock within a few pennies of where it was when the Borefolio purchased its 200 shares a few days after opening for business in late January 1996.

We've learned a lot about investing in those nearly two years. We learned from following the progress of such Steady-Eddie winners as Borders and Carlisle Companies (NYSE: CSL), but the recent setbacks with Oxford Health (Nasdaq: OXHP) and Green Tree have provided perhaps even more valuable lessons about paying more attention when other businesses in your company's industry begin to stumble. For that lesson I am thankful. Truly.

FelCor Suite Hotels (NYSE: FCH) is the latest Borefolio investment. FelCor is a REIT that owns an impressive string of all-suite Doubletree and Embassy Suites hotels, along with a few upper-end non-suite hotels all across America. FelCor's stock hasn't done a whole lot since we acquired our shares earlier this month, meandering around within a buck or so of our original purchase price of $36.69 (including transaction costs). On the other hand, the Borefolio quietly collects its 5.9% annual dividend from FelCor while the stock naps. And that's nothing to gobble at these days.

The only news item from one of our Boring companies came from FelCor. The company announced that Charles Ledsinger, Jr. has been elected to its board of directors, replacing Donald McNamara, who recently resigned to devote more time to other business interests. Ledsinger is Senior VP and Chief Financial Officer of St. Joe Corp. (NYSE: SJP), an outfit that has itself surfaced from time to time as a possible Boring holding. Ledsinger has worked for Holiday Inns and Promus Hotels (NYSE: PRH), and he is also a member and past chairman of the Real Estate Finance Advisory Counsel of the American Hotel and Motel Association. Sounds like a solid selection to me.

Speaking of things solid, Cisco Systems (Nasdaq: CSCO) advanced fractionally today. They say you're not supposed to fall in love with your stocks, but I admit to being in love with the Kid. I've learned a great deal from following Cisco over the years. I learned not only a lot about stocks and investing but also about what distinguishes a truly great company from a lot of very good ones. For that, I'm thankful, too.

Happy Thanksgiving, folks.

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Stock  Change    Bid
BGP   +  1/2   35.75
CSL   +  1/8   58.63
CSCO  +1 5/8   66.50
GNT   +1 1/8   39.13
ORCL  +  7/8   44.00
OXHP  ---      58.00
PMSI  ---      11.25
SLR   +2 1/8   55.38

                   Day   Month    Year  History
        BORING   +1.37%  -2.48%  16.77%  16.77%
        S&P 500  +0.64%  -0.16%  21.59%  21.59%
        NASDAQ   +0.54%   0.15%  24.36%  24.36%

    Rec'd   #  Security     In At       Now    Change
  2/28/96  400 Borders Gr    11.26     28.69   154.86%
  8/13/96  200 Carlisle C    26.32     41.63    58.12%
  6/26/96  100 Cisco Syst    53.90     85.00    57.70%
   3/8/96  400 Prime Medi    10.07     13.13    30.35%
 12/23/96  100 Tidewater     46.52     56.69    21.84%
   3/5/97  150 Atlas Air     23.06     26.63    15.47%
 11/21/96  150 Oracle Cor    32.43     32.75     0.98%
   2/2/96  200 Green Tree    30.39     30.38    -0.04%
  11/6/97  200 FelCor Sui    37.59     36.44    -3.07%

    Rec'd   #  Security     In At     Value    Change
  2/28/96  400 Borders Gr  4502.49  11475.00  $6972.51
  6/26/96  100 Cisco Syst  5389.99   8500.00  $3110.01
  8/13/96  200 Carlisle C  5264.99   8325.00  $3060.01
   3/8/96  400 Prime Medi  4027.49   5250.00  $1222.51
 12/23/96  100 Tidewater   4652.49   5668.75  $1016.26
   3/5/97  150 Atlas Air   3458.74   3993.75   $535.01
 11/21/96  150 Oracle Cor  4864.99   4912.50    $47.51
   2/2/96  200 Green Tree  6077.49   6075.00    -$2.49
  11/6/97  200 FelCor Sui  7518.00   7287.50  -$230.50

                             CASH   $3021.10
                            TOTAL  $64508.60