ANN ARBOR, Mich. (April 22, 1998) -- The Boring Portfolio notched another day in the plus column, if only barely. The Boring basket of stocks picked up 0.07% in value. Gaining holdings outnumbered losers four to three.
As has been the case since last week, Atlas Air (NYSE: CGO) led the Borefolio higher. Atlas -- whose ticker symbol stands for "cargo," in case you were wondering -- rose $1 1/4 to $41 3/8.
Lo and behold, shares of FelCor Suite Hotels (NYSE: FCH) gained ground, which is only fitting for a company that deals in real estate. The stock rose $5/8 to $34 5/8.
For the past couple of days, I've been griping in this column that FelCor's share price has remained virtually inert so far in 1998, despite the company announcing a string of what appear to be sound acquisitions and, not incidentally, analysts' consensus earnings estimates rising steadily.
On the latter point, three months ago analysts projected that FelCor would make $3.80 per share in "funds from operations," (FFO) in 1998 -- that according to First Call. Today, the forecast is $3.85. As for 1999, the consensus forecast three months ago for FelCor was $4.22. Now, it's $4.36.
A number of folks viewed my wonderment concerning FelCor and graciously offered their interpretations of the situation. They noted that, first, REITs in general -- and hotel REITs in particular -- enjoyed a good run over the past few years, and so some investors may believe that REITs have seen their peak earnings for this cycle.
Perhaps so, although I've noticed no softening in occupancy or room rates lately.
Second, they pointed out, REITs will almost never outperform a raging bull market such as we've witnessed so far in 1998. REITs tend to move somewhat counter to the overall stock market (which is in fact one reason why we decided to put about 10% of the Borefolio into FelCor). So expecting FelCor stock to perform well at this moment may be asking a bit much.
Third, consolidation in the hotel industry has proceeded at almost as heavy a pace in recent months as it has in the banking industry, and so FelCor may find the competition a bit tougher in the future.
This point is well taken. It should be noted, though, that FelCor has itself been among the leaders in this consolidation activity -- hence FelCor's steadily rising FFO forecasts.
At any rate, FelCor is slated to report its first-quarter results on Monday. I look forward to seeing how the quarter turned out and, especially, hearing management's views about the balance of the year. And as is our custom, we'll be covering the follow-up conference call and providing you with a timely summary.
Speaking of which, a synopsis of Carlisle's (NYSE: CSL) recent teleconference is posted for those of you who may be interested in learning more about what that company's management had to say.
Stock Change Bid ANDW + 1/4 23.88 CGO +1 1/4 41.38 BGP - 5/8 31.63 CSL - 1/2 50.25 CSCO - 3/16 73.63 FCH + 5/8 34.63 PNR + 5/8 45.31
Day Month Year History BORING +0.07% 2.90% 4.00% 30.87% S&P: +0.32% 2.56% 16.44% 81.78% NASDAQ: +0.72% 4.46% 22.11% 84.22% Rec'd # Security In At Now Change 2/28/96 400 Borders Gr 11.26 31.63 180.96% 6/26/96 150 Cisco Syst 35.93 73.63 104.89% 8/13/96 200 Carlisle C 26.32 50.25 90.88% 3/5/97 150 Atlas Air 23.06 41.38 79.44% 4/14/98 100 Pentair 43.74 45.31 3.59% 11/6/97 200 FelCor Sui 37.59 34.63 -7.89% 1/21/98 200 Andrew Cor 26.09 23.88 -8.49% Rec'd # Security In At Value Change 2/28/96 400 Borders Gr 4502.49 12650.00 $8147.51 6/26/96 150 Cisco Syst 5389.99 11043.75 $5653.76 8/13/96 200 Carlisle C 5264.99 10050.00 $4785.01 3/5/97 150 Atlas Air 3458.74 6206.25 $2747.51 4/14/98 100 Pentair 4374.25 4531.25 $157.00 1/21/98 200 Andrew Cor 5218.00 4775.00 -$443.00 11/6/97 200 FelCor Sui 7518.00 6925.00 -$593.00 CASH $9251.26 TOTAL $65432.51