Boring Portfolio

Boring Portfolio Report
Thursday, January 8, 1998
by Mark Weaver, MD (mweav@aol.com)


St. Louis, MO (Jan. 8, 1998) -- The January effect remains ineffective at this point. It was another down day for the markets in Asia and that spilled over into our markets as well.

There may be something worse than inflation and that is deflation. The "D-word" was rarely spoken until the past several months. Earlier in the week it even landed on the lips of the Fed chairman. Today's Producer Price report showed a 0.2% DROP in the price of goods sold to producers. This gave a bit more credence to those speculating about coming deflation. Such PPI news would have sparked a huge rally in stocks at this time last year, but such was not the case today. Bond bulls were in the driver's seat when the PPI news combined with an unexpected increase in unemployment claims led to the lowest 30 year bond yield ever.

Profit worries also are spooking investors as companies continue to preannounce disappointing results. Today's culprit was Seagate (NYSE: SEG) which warned of lower than expected earnings.

At the end of the day the S&P stood down 0.83% and the Nasdaq Composite dropped 0.39%. The Borefolio dropped 1.42%. No, 1998 has not been pretty thus far.

As has become a Thursday tradition, there was no company specific news to report on any of the Borefolio holdings.

There were three winners today. Cisco Systems (Nasdaq: CSCO) rose $5/8 today in spite of the weakness in tech stocks. Perhaps this was "flight to tech quality" buying. Looking out over the years ahead there is plenty of reason to expect that Cisco will be a great stock to own.

Felcor Suite Hotels (NYSE: FCH) rose $1/2 today. Now that our FCH dividend pays out more than a 30 year Treasury bond perhaps investing interest is rising. Some complain that Felcor "hasn't done much" since we bought it several weeks ago. Given what has happened in the market over that time span, not much is pretty good. I remain increasingly convinced that FCH will be an S&P beater over the coming year. Time will tell.

Prime Medical Services (Nasdaq: PMSI) was up $1/8 today. This stock has continued to lag in spite of putting up good numbers. What is the deal? Over the past several weeks I have been trying to get a better feel for what is happening in the world of healthcare stocks.

From where I sit, as a physician in a competitive marketplace, it is increasingly apparent to me that the service side of healthcare is a tough place to make a living. Insurers compete for corporate dollars and in the process cut margins to razor thin levels. The unpredictability of healthcare spending and the costs of new technology lead the insurers to squeeze hosptials, other providers and doctors to protect those margins. The hospitals have gotten into the act and are acting as insurers, and they are probably even more draconian in their cuts. The bottom line is that, on the service side, profits are being cannibalized.

Up to this point Prime Medical has been able to maintain its profitability. However, I can't help but think that it is being painted with the same brush as other, less profitable healthcare service companies. Prime Medical is sitting in a weak sector and that can make it tough for the stock to have a significant move even while meeting investor expectations.

On the downside, Carlisle Companies (NYSE: CSL) was down $1 3/16. Greg Markus was in touch with the company today and reports that there was no corporate or industry event that could correlate with the price move. Brownian stock motion I guess...

I took my best shot at improving Tidewater's (NYSE: TDW) performance this week by reading the book Rising Tide. Alas, it didn't help at all.

Tidewater continued to suffer, down $3 1/4 today. I believe that six months from now we will all look back and wish that we had bought more oil service stocks in the winter. This morning a story entitled "Texaco sees no slow-down in exploration" crossed the wires. In the story Robert Black, Sr. VP, is quoted as saying that Texaco is projected to spend $3 billion in upstream operations this year. That includes exploration and production. Mr. Black also said that all existing Texaco projects make economic sense down to a $15 per barrel price for oil. This news can't be bad for Tidewater.

Now, back to the book report... For those who aren't familiar with the book, Rising Tide is the story of the historic Mississippi River flood of 1927. It is a fascinating story and well worth the read.

With the market looking as ugly as it has this week, I think the best thing that I can do is curl up with a good book and put it all in the back of my mind.

FoolWatch -- It's what's going on at the Fool today.

Buy a Book and Get It Signed! -- Book Tour '98


TODAY'S NUMBERS
Stock  Change    Bid 
 CGO   -  7/16  25.00 
 BGP   -  7/8   28.94 
 CSL   -1 3/16  41.94 
 CSCO  +  5/8   56.06 
 FCH   +  1/2   36.81 
 GNT   -  11/16 24.44 
 PMSI  +  1/8   12.75 
 TDW   -3 1/4   44.50 
 
                   Day   Month    Year  History 
         BORING   -1.42%  -4.08%  -4.08%  20.70% 
         S&P:     -0.83%  -1.48%  -1.48%  53.80% 
         NASDAQ:  -0.39%  -0.94%  -0.94%  49.43% 
  
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     28.94   157.08% 
   8/13/96  200 Carlisle C    26.32     41.94    59.31% 
   6/26/96  150 Cisco Syst    35.93     56.06    56.02% 
    3/8/96  400 Prime Medi    10.07     12.75    26.63% 
    3/5/97  150 Atlas Air     23.06     25.00     8.42% 
   11/6/97  200 FelCor Sui    37.59     36.81    -2.07% 
  12/23/96  100 Tidewater     46.52     44.50    -4.35% 
    2/2/96  200 Green Tree    30.39     24.44   -19.58% 
  
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  11575.00  $7072.51 
   8/13/96  200 Carlisle C  5264.99   8387.50  $3122.51 
   6/26/96  150 Cisco Syst  5389.99   8409.38  $3019.39 
    3/8/96  400 Prime Medi  4027.49   5100.00  $1072.51 
    3/5/97  150 Atlas Air   3458.74   3750.00   $291.26 
   11/6/97  200 FelCor Sui  7518.00   7362.50  -$155.50 
  12/23/96  100 Tidewater   4652.49   4450.00  -$202.49 
    2/2/96  200 Green Tree  6077.49   4887.50 -$1189.99 
  
                              CASH   $6427.47 
                             TOTAL  $60349.35