Boring Portfolio

Boring Portfolio Report
Wednesday, February 25, 1998
by Greg Markus (TMFBoring@aol.com)


ANN ARBOR, Mich. (Feb. 25, 1998) -- U.S. stocks continued to push into record territory Wednesday, as the Dow, S&P 500, and Nasdaq indexes all hit new highs. The S&P 500 advanced 1.20%, the Nasdaq rose 1.60%, and the Boring portfolio split the difference, picking up 1.40%. All six Borefolio holdings gained ground on the day.

In Tuesday's Boring recap, I ran through a list of stocks that Mark Weaver and I believe would complement our current holdings nicely. I also offered our reasoning for being slow on pulling the trigger on any of them right now. In a nutshell, we're a bit concerned about the current valuations of many (not all) of the stocks on our wish list, in light of the sharp run-up in prices since last autumn.

Are we rabid bears, urging everyone to SELL NOW!!! ahead of the coming deluge? Not even a little bit. Please note: we're actively looking for stocks of great companies to buy. To BUY. We're not selling anything. And if by some chance we're unable to locate one or two reasonably-priced stocks of the kinds of companies in which we prefer to invest, well then we'll simply buy more of some of the attractively priced stocks of great companies in which we've already invested.

Take Carlisle Companies (NYSE: CSL), for example. Carlisle's stock rose $1 15/16 to $49 5/16 today -- just under its all-time high. The company is on record as intending to grow sales and profits by a least 15% annually -- or roughly double the projected aggregate growth of the S&P 500. Yet the stock trades at approximately a 15% discount to the "market multiple" (based on projected 1998 earnings for Carlisle and for the S&P 500).

Moreover, Carlisle stock is less volatile than the market (CSL's beta is 0.86). Carlisle stock even pays a modest dividend, currently around 1.10% annually.

Even the priciest issue in the Boring bourse is not all that expensive in light of its projected long-term earnings growth and its history of market-beating performance. Cisco Systems (Nasdaq: CSCO) also rose $1 15/16 today (on the bid-side) and is also sitting within pennies of an all-time high, at $66 3/4.

CSCO trades at about 34-times projected earnings of $1.95 for calendar year 1998, according to First Call. That's certainly a premium to analysts' estimates of Cisco's earnings growth this year, which is currently in the neighborhood of 27%. But that's arguably not an excessive premium, considering longer term EPS growth prospects of around 30% and the tremendous opportunities (and challenges, to be sure) offered by the convergence of voice and data communications.

Could Cisco stock drop 10% tomorrow? Absolutely it could. But I think the likelihood of that happening is far smaller than the likelihood of the stock trading well above today's price by the end of the year.

In any event, Mark and I continue actively researching potential new Borefolio buys -- add Crane Co. (NYSE: CR) to our growing list, by the way -- and we remain committed to investing the Borefolio's cash balance in equities, one way or the other.

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


TODAY'S NUMBERS
Stock  Change    Bid 
 ANDW  +  1/16  28.00 
 CGO   +  5/8   29.50 
 BGP   +  1/16  31.94 
 CSL   +1 15/16 49.31 
 CSCO  +1 15/16 66.75 
 FCH   +  5/16  36.06 
 
                   Day   Month    Year  History 
         BORING   +1.40%   3.81%   0.25%  26.14% 
         S&P:     +1.20%   6.39%   7.47%  67.77% 
         NASDAQ:  +1.60%   9.09%  12.49%  69.70% 
  
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     31.94   183.73% 
   8/13/96  200 Carlisle C    26.32     49.31    87.32% 
   6/26/96  150 Cisco Syst    35.93     66.75    85.76% 
    3/5/97  150 Atlas Air     23.06     29.50    27.94% 
   1/21/98  200 Andrew Cor    26.09     28.00     7.32% 
   11/6/97  200 FelCor Sui    37.59     36.06    -4.06% 
  
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12775.00  $8272.51 
   6/26/96  150 Cisco Syst  5389.99  10012.50  $4622.51 
   8/13/96  200 Carlisle C  5264.99   9862.50  $4597.51 
    3/5/97  150 Atlas Air   3458.74   4425.00   $966.26 
   1/21/98  200 Andrew Cor  5218.00   5600.00   $382.00 
   11/6/97  200 FelCor Sui  7518.00   7212.50  -$305.50 
  
                              CASH  $13182.97 
                             TOTAL  $63070.47