ANN ARBOR, MICH. (March 18, 1998) -- The Boring Portfolio rose 0.26% today thanks to a late-session turnaround in shares of Borders Group (NYSE: BGP) and sudden strength in the stock of our snoozy hotel REIT, FelCor Suite Hotels (NYSE: FCH).
Shares of Borders Group had been soft on Monday and Tuesday. The stock continued lower for much of today, as well, after news broke that the American Booksellers Association had filed suit against Borders and rival Barnes & Noble (NYSE: BKS) for allegedly soliciting special discounts on orders and more favorable promotional advertising terms from publishers, in violation of federal trade regulations.
Late this afternoon, Borders released a statement to the effect that it had been advised that a lawsuit has been filed against the company but that it had not yet reviewed any documents related to the suit and therefore could not comment on it, other than to state that "Borders and Waldenbooks believe that our operations are conducted in full compliance with applicable trade regulation laws."
Borders went on to note that it has direct relationships "with more than 12,000 suppliers, many of whom are small and independent presses," which enables the company to "give customers access to books that have never been available before in many markets."
Borders stock rebounded in the last hour of trading to close at $32 7/16, up $13/16. Trading volume of nearly a half-million shares was roughly double a typical day's activity.
Also rising in unusually heavy trading was the stock of FelCor Suite Hotels. FelCor gained $1 1/4 on volume of 646,300 shares -- more activity than the stock sees in a typical week. I saw no news on FelCor that might account for the rise.
That said, investors' interest in hotel REITS has heightened following Monday's news that CapStar Hotel (NYSE: CHO) and American General Hospitality Corp. (NYSE: AGT) had signed a definitive agreement to merge as equals and form a so-called "paper clip" REIT.
The "paper clip" appellation arises from the unique nature of the arrangement, whereby the two stocks continue to trade separately even though the combined entity operates as a coordinated unit. By effectively "paper-clipping" together the two stocks, the new entity circumvents federal regulations precluding the formation of "paired-share" REITS that can simultaneously own and operate hotels.
I put a call in to FelCor to see if the folks there might have a comment on today's activity, but I was unable to reach anyone prior to tonight's Borefolio recap deadline.
I did, however, get a reply back from Andrew Corp. (Nasdaq: ANDW) today in response to my query about a spate of insider stock sales that occurred a few weeks prior to the company's March 10 warning about slower-than-expected sales in the current quarter.
An Andrew spokesperson pointed out that the transactions were all made "in compliance with company policy during the 'open window' period and that no trade was made in anticipation of material news." Furthermore, when the company learned that it might have to issue a news release, "the trading window was closed immediately."
The spokesperson went on to comment more specifically on each of the three insider transactions. First, the transaction linked in SEC filings to Andrew CEO and chairman Floyd L. English "was an 'indirect' sale made by a charitable foundation, which had a requirement to convert stock into cash. The transaction is only a small percent of Dr. English's total direct and indirect beneficial ownership. Shares held prior to the transaction: 262,680. Shares held after the transaction: 245,700."
Andrew group president Tom Charlton "exercised some very old options. Shares held prior to the transaction were 164,490. After the exercise of options, his net holdings remained at 164,490."
As for group president Roger K. Fisher, he is retiring on March 31, 1998. "Roger sold The Antenna Company to Andrew Corporation in 1996 for Andrew stock and has converted some of the stock he received from the sale into cash. Shares held prior to the transaction 128,000. Shares held after the transaction 115,000."
Speaking for myself, I'm satisfied with the clarification.
Shares of Andrew Corp. eased $3/16 to a bid of $20 3/8.
Also closing fractionally lower was Cisco Systems (Nasdaq: CSCO) -- down $7/8 in the wake of last night's warning from rival Bay Networks (NYSE: BAY). As noted here yesterday, Bay said it anticipates a sequential decline in operating income in the current quarter due to "weaker than anticipated demand in many of the company's customer segments."
Stock Change Bid ANDW - 3/16 20.38 CGO -1 1/16 32.94 BGP + 13/16 32.44 CSL - 7/16 46.13 CSCO - 7/8 63.56 FCH +1 1/4 36.25
Day Month Year History BORING +0.26% -2.55% -2.05% 23.25% S&P: +0.47% 3.45% 11.86% 74.63% NASDAQ: +0.50% 1.00% 13.88% 71.79% Rec'd # Security In At Now Change 2/28/96 400 Borders Gr 11.26 32.44 188.17% 6/26/96 150 Cisco Syst 35.93 63.56 76.89% 8/13/96 200 Carlisle C 26.32 46.13 75.21% 3/5/97 150 Atlas Air 23.06 32.94 42.84% 11/6/97 200 FelCor Sui 37.59 36.25 -3.56% 1/21/98 200 Andrew Cor 26.09 20.38 -21.90% Rec'd # Security In At Value Change 2/28/96 400 Borders Gr 4502.49 12975.00 $8472.51 6/26/96 150 Cisco Syst 5389.99 9534.38 $4144.39 8/13/96 200 Carlisle C 5264.99 9225.00 $3960.01 3/5/97 150 Atlas Air 3458.74 4940.63 $1481.89 11/6/97 200 FelCor Sui 7518.00 7250.00 -$268.00 1/21/98 200 Andrew Cor 5218.00 4075.00 -$1143.00 CASH $13625.51 TOTAL $61625.51