Boring Portfolio

Boring Portfolio Report
Monday, January 26, 1998
by Greg Markus (

ANN ARBOR, Mich. (Jan. 26, 1998) -- U.S. markets closed mixed Monday, with the Dow rising slightly, the S&P 500 off nominally, and the Nasdaq down nearly a full percentage point. The Boring Portfolio sagged 1.54%, dragged under by a $3 3/4 loss in shares of Tidewater (NYSE: TDW).

Tidewater sank despite posting better than expected fiscal third-quarter earnings of $1.15 for continuing operations and $1.21 including profits from the now discontinued gas compression segment.

As usual, the market was focused on what lay ahead, rather what had already happened; and in that regard, Tidewater executives offered some cautionary comments in a conference call held this morning.

Declining oil prices did not factor very much if at all in the concerns of Tidewater chairman, president, and CEO William C. O'Malley. He said that Tidewater has seen no decrease in activity whatsoever as a result of the decline in spot crude prices over the past few months.

Nor was O'Malley particularly concerned about the effects of the "Asian flu" on Tidewater. He and CFO Ken Tamblyn noted that, excluding its operations off the coast of Australia, Tidewater has only 42 vessels operating in Southeast Asia, accounting for barely $10 million in revenues out of a total of $281 million. Moreover, the vast majority of Tidewater's contracts in that region are with U.S. customers operating there, or with large international oil companies rather than with local outfits.

Instead, the concern was about new vessels currently under construction and scheduled to enter the Gulf of Mexico market in the late summer or early fall. O'Malley said that this new capacity could very likely depress dayrates in the Gulf -- although the exact magnitude would depend on how quickly the new capacity enters the market and also how quickly additional drill rigs come on line to soak up the additional marine capacity.

O'Malley said that Tidewater intends to maintain its market share and its employee base in the Gulf and that his company will do "whatever is required" to guarantee that -- which presumably includes being competitive on dayrates.

These comments were enough to send some traders into a tizzy, unloading shares even as the conference call was in progress.

Without undercutting the significance of the concerns raised today, some additional facts pointed out in the conference call are worth considering.

First, the majority of Tidewater's fleet is based outside of the Gulf of Mexico, and the outlook for those vessels remains strong. Moreover, a substantial fraction of Tidewater's Gulf fleet is already under contracts that run, in some cases, well into 1999. By then, it's possible that new drilling rigs could be coming on line.

For what it's worth, I also think it's possible that some of Tidewater's pointed comments about the company's resolve to hang onto its Gulf market may have been aimed more at competitors than at analysts and shareholders.

At any rate, we see no reason to sell into a panic situation. We have a call in to Tidewater, and when we get some additional clarification, we'll decide where we go from there.

Briefly, in other Borefolio news, FelCor Suite Hotels (NYSE: FCH) fell $1 after being downgraded by PaineWebber today. That follows an upgrade of FelCor by Merrill Lynch on Friday. Whatever.

Also, Green Tree Financial (NYSE: GNT) got clipped $7/8 ahead of its quarterly earnings report, slated for tomorrow morning. We'll be covering the follow-up conference call.

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

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

Stock  Change    Bid 
 ANDW  +  1/2   27.69 
 CGO   +  3/8   22.19 
 BGP   +  1/8   31.50 
 CSL   -1 1/8   43.63 
 CSCO  -1 1/16  56.56 
 FCH   -1       37.31 
 GNT   -  7/8   22.06 
 TDW   -3 3/4   41.19 
                   Day   Month    Year  History 
         BORING   -1.54%  -4.83%  -4.83%  19.75% 
         S&P:     -0.07%  -1.39%  -1.39%  53.94% 
         NASDAQ:  -0.92%  -0.57%  -0.57%  50.00% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     31.50   179.85% 
   8/13/96  200 Carlisle C    26.32     43.63    65.72% 
   6/26/96  150 Cisco Syst    35.93     56.56    57.41% 
   1/21/98  200Andrew Corp    26.09     27.69     6.12% 
   11/6/97  200 FelCor Sui    37.59     37.31    -0.74% 
    3/5/97  150 Atlas Air     23.06     22.19    -3.78% 
    2/2/96  200 Green Tree    30.39     22.06   -27.40% 
  12/23/96  100 Tidewater     46.52     41.19   -11.47% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12600.00  $8097.51 
   8/13/96  200 Carlisle C  5264.99   8725.00  $3460.01 
   6/26/96  150 Cisco Syst  5389.99   8484.38  $3094.39 
   1/21/98  200Andrew Corp  5218.00   5537.50   $319.50 
    3/5/97  150 Atlas Air   3458.74   3328.13  -$130.62 
   11/6/97  200 FelCor Sui  7518.00   7462.50   -$55.50 
    2/2/96  200 Green Tree  6077.49   4412.50 -$1664.99 
  12/23/96  100 Tidewater   4652.49   4118.75  -$533.74 
                              CASH   $5206.47 
                             TOTAL  $59875.22