Boring Portfolio

Boring Portfolio Report
Tuesday, January 6, 1998
by Greg Markus (

ANN ARBOR, Mich. (Jan. 6, 1998) -- Weakness in financial and oil stocks led the U.S. stock market lower Tuesday, and they sent the Boring Portfolio tumbling, as well. Green Tree Financial (NYSE: GNT) was trimmed by $1 11/16, and after sinking $3 5/16 yesterday, shares of Tidewater (NYSE: TDW) receded $3 5/8 in heavy trading.

On the upside, Atlas Air (NYSE: CGO) climbed $11/16, and Carlisle Companies (NYSE: CSL) and FelCor Suite Hotels (NYSE: FCH) rose fractionally.

Back to Tidewater. Although spot prices on crude oil held steady in world markets, the continuing concern among traders is that prices will fall further yet, especially now that the United Nations has granted Iraq permission to resume sales of oil to provide its people with food and other essentials.

It's probably not unfair to characterize this week's sell-off as fueled more by fear than logic. Major oil producers have pretty much already determined what their budgets for energy exploration and production will be for the coming year, and many contracts have already been inked.

According to a story reported yesterday evening by Reuters, a survey conducted by Salomon Smith Barney has found that oil companies intend to increase worldwide exploration and production spending by 10.9% this year. That's the second strongest growth forecast recorded in the past decade, behind only 1997's.

The survey of 97 companies found that most of the increased spending will be occurring outside of North America. Spending in international markets is projected to rise to $54.8 billion this year. That would constitute a 14.4% increase over 1997, as compared with 1997's 15.6% increase.

"Frontier territories are targeted for significant increases in spending in 1998, including deepwater West Africa," according to survey authors Geoff Kieburtz and Mark Urness.

These forecasts would seem to be particularly beneficial to Tidewater, because the company has expanded its international fleet significantly in the past year. Last spring, Tidewater purchased O.I.L., Ltd.'s 100 vessels, the bulk of which are concentrated right in the West African market noted in the new survey.

Tidewater has also demonstrated in recent years that it is quite capable of redeploying its market-dominating fleet around the globe in order to receive the highest return.

Could crude prices at or even somewhat below current levels alter these plans? Not according to the study. "Spending plans are increasingly based on a multi-year outlook rather than near-term conditions," Kieburtz and Urness wrote.

According to Reuters, the survey tested spending plans under a range of oil price scenarios, including "some ranging as low as $12.00." As it is, futures prices for benchmark West Texas crude remain north of $18, despite the slide in recent months.

Tidewater has issued no news that I'm aware of to indicate that analysts' models are materially off the mark. According to First Call, those models call for earnings in the neighborhood of $4.07 a share for Tidewater's fiscal year ending this March and EPS of $5.09 for FY99.

At today's closing price of $46 9/16, Tidewater stock thus trades at 11.4 times estimated earnings for the fiscal year more than three-quarters completed and 9.1 times projected profits for the coming fiscal year. Factor in the small dividend the stock pays plus the fact that the pending sale of Tidewater's compression business will permit the company to pay down the debt it took on last year to acquire O.I.L. and you've got what to my eye is a fairly compelling risk/reward situation.

Tidewater is slated to report results for its December quarter in about two weeks. At that time, we should get a pretty good picture of how the company sees 1998 shaping up.

Between now and then, my plan is to take my daughter to New York to catch a few Broadway shows and celebrate her 15th birthday. Hey, Tidewater stock may be tanking at the moment, but at least those cheap fuel prices make for some mighty attractive air fares.

Stock  Change    Bid 
 CGO   +  11/16 25.31 
 BGP   -  11/16 30.19 
 CSL   +  5/16  43.38 
 CSCO  -  11/16 57.19 
 FCH   +  3/16  36.25 
 GNT   -1 11/16 26.13 
 PMSI  -  9/16  12.75 
 TDW   -3 5/8   46.56 
                   Day   Month    Year  History 
         BORING   -1.75%  -1.80%  -1.80%  23.57% 
         S&P:     -1.07%  -0.40%  -0.40%  55.49% 
         NASDAQ:  -0.88%   0.62%   0.62%  51.80% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     30.19   168.18% 
   8/13/96  200 Carlisle C    26.32     43.38    64.77% 
   6/26/96  150 Cisco Syst    35.93     57.19    59.15% 
    3/8/96  400 Prime Medi    10.07     12.75    26.63% 
    3/5/97  150 Atlas Air     23.06     25.31     9.78% 
  12/23/96  100 Tidewater     46.52     46.56     0.08% 
   11/6/97  200 FelCor Sui    37.59     36.25    -3.56% 
    2/2/96  200 Green Tree    30.39     26.13   -14.03% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12075.00  $7572.51 
   8/13/96  200 Carlisle C  5264.99   8675.00  $3410.01 
   6/26/96  150 Cisco Syst  5389.99   8578.13  $3188.14 
    3/8/96  400 Prime Medi  4027.49   5100.00  $1072.51 
    3/5/97  150 Atlas Air   3458.74   3796.88   $338.14 
  12/23/96  100 Tidewater   4652.49   4656.25     $3.76 
   11/6/97  200 FelCor Sui  7518.00   7250.00  -$268.00 
    2/2/96  200 Green Tree  6077.49   5225.00  -$852.49 
                              CASH   $6427.47 
                             TOTAL  $61783.72