SPRINGFIELD, IL (April 2, 1998) -- The market continued its bullish course today with large-cap indices pushing into record territory. Dow 9000 is almost a done deal. Action today was fueled by a drop in factory orders. The Commerce Department reported a 0.9% drop in factory orders in February. The drop was slightly more than expected by economists and this eased fears that the Fed might move to increase interest rates.
On the day, the S&P 500 advanced 1.07%, the Nasdaq was up a more modest 0.29%, and the cash-heavy Borefolio continued its recent move into positive territory up 0.17%. There was no news on any of the Borefolio holdings today. Three Boring stocks advanced and three fell. No stock moved even a point.
Today's big winner was Cisco Systems (Nasdaq: CSCO) up $15/16. This is a new closing high for "the Kid." Cisco now trades at 55 times trailing earnings and 32 times projected fiscal 1999 earnings. The trailing P/E is the highest it has been in the past 5 years. With long-term earnings growth estimates as high as 44% per year, Cisco deserves a premium multiple. That said, the stock is by no means cheap at the current quote.
FelCor Suite Hotels (NYSE: FCH) continued to climb in the wake of its recently announced plan to acquire Bristol Hotel Co. (NYSE: BH). FelCor is now almost back to breakeven for the Borefolio. We fully anticipate a move to the plus side over the coming weeks. The Bristol Hotel deal looks like a winner to these eyes.
The other winner today was Carlisle Companies (NYSE: CSL) up $1/4. In case you missed me last Thursday, I was spending a week in London and Paris for a needed vacation. On my return I found that El Nino had continued its assault on the Midwest generally and my house in particular. My roof sprang leak under the stress of so much water.
Enter the roofing contractor... this morning I received his bid that included the following: "New Carlisle EPDM single ply membrane to be bonded directly..." I can imagine El Nino has led to more than one leaky roof, and that will be good news for Carlisle.
For the Borefolio, the El Nino clouds may have a very silver lining.
While the Borefolio continues to woefully underperform the averages, not all boring companies are lagging. From the folks at Briefing.com comes a report on the outperforming steel industry. Factors behind the move in steel include a stronger-than-expected U.S. economy, European economic recovery, and development in Latin America. This has more than compensated for Asian weakness. With the increased demand for steel comes better pricing. Better pricing produces better-than-expected earnings.
Trading at 15.4x estimated 1998 earnings, the steel industry is still more reasonably valued than the general market trading. According to the folks at Briefing.com, there may be further upside over the short term. Long term the situation is less clear, but at current valuations the general risk seems less than that of the market as a whole.
If you'd been reading the Boring Stocks message board, the steel industry story would be old news. Participants in the folder have been beating the drum for the past couple of months. Perhaps we should have taken a couple of their suggestions.
Stock Change Bid ANDW - 3/8 20.56 CGO - 1/16 33.00 BGP - 1/16 33.75 CSL + 1/4 49.50 CSCO + 15/16 70.25 FCH + 1/8 37.31
Day Month Year History BORING +0.17% 0.78% 1.86% 28.18% S&P: +1.07% 1.66% 15.41% 80.18% NASDAQ: +0.29% 0.94% 18.00% 78.00% Rec'd # Security In At Now Change 2/28/96 400 Borders Gr 11.26 33.75 199.83% 6/26/96 150 Cisco Syst 35.93 70.25 95.50% 8/13/96 200 Carlisle C 26.32 49.50 88.03% 3/5/97 150 Atlas Air 23.06 33.00 43.12% 11/6/97 200 FelCor Sui 37.59 37.31 -0.74% 1/21/98 200 Andrew Cor 26.09 20.56 -21.19% Rec'd # Security In At Value Change 2/28/96 400 Borders Gr 4502.49 13500.00 $8997.51 6/26/96 150 Cisco Syst 5389.99 10537.50 $5147.51 8/13/96 200 Carlisle C 5264.99 9900.00 $4635.01 3/5/97 150 Atlas Air 3458.74 4950.00 $1491.26 11/6/97 200 FelCor Sui 7518.00 7462.50 -$55.50 1/21/98 200 Andrew Cor 5218.00 4112.50 -$1105.50 CASH $13625.51 TOTAL $64088.01