Boring Portfolio

Wednesday, June 3, 1998
by Greg Markus

ANN ARBOR, Mich. (June 3, 1998) -- An attempt at a market rally was strangled by a wave of selling in the closing hour, sending the Dow and S&P 500 down by about 1% each and dropping the "tech-laden" Nasdaq by 1.11%.

The Boring Portfolio was solidly in positive territory for most of the day, but it, too, succumbed to the sell-off, tumbling 1.02%. Only a $7/16 gain by Borders Group (NYSE: BGP) to $31 5/8 saved the Borefolio from a total rout.

Borders received favorable coverage in an interview with portfolio manager Arden Armstrong in Barron's Online this week. Armstrong said she liked Borders because it is "a really well-managed company" with "great comp-store sales growth" and "a very profitable store-level business model."

I couldn't agree more.

Speaking of really well-managed companies, Cisco Systems (Nasdaq: CSCO) got a reiterated "buy" recommendation from Gruntal & Co. this morning. That follows The Kid's announcement of a series of new carrier-class products on Monday and the hoopla yesterday about Sprint's (NYSE: FON) new Cisco-powered multimedia network.

The Gruntal analyst sees Cisco benefiting from sales of customer premise equipment that businesses will buy to link to Sprint's Integrated On-Demand Network.

Gruntal offered a price target at $86, or 40 times its fiscal 1999 EPS estimate for Cisco.

Hey, it could happen, although of course it's not as if Cisco were selling razor blades or chewing gum or colored sugar water -- the kinds of products that ordinarily justify such lofty multiples in today's market. All Cisco sells is the equipment that makes possible the fastest growing industry in the world -- perhaps in the history of the world.

Reiterated buy recommendation or not, Cisco ended the session down $1 13/16 to $74 5/8 after cruising in positive territory nearly all day.

According to a list I spotted in the subscriber's section of the Wall Street Journal's website, REITs lead the list of industries in terms of the volume of net insider stock purchases this year. The Borefolio's REIT, FelCor Suite Hotels (NYSE: FCH), has seen its own share of insider buying.

As our own TMF Keeler pointed out in the FelCor stock folder at the Motley Fool's Home on the Web, SEC filings show that FelCor's President and CEO Tom Corcoran, company CFO Randall Churchey, and Director Charles Mathewson all bellied up to buy FelCor stock immediately following the company's report of its first quarter results in late April.

According to SEC Form-4 filings last month -- which are available at the FreeEDGAR Website, among other places -- Corcoran purchased 5800 shares of the common stock at $33 1/4, another 900 shares of common on behalf of his minor children, and 800 shares of FelCor's Series B preferred stock. Churchey bought 600 shares of common at $33 1/4, and Mathewson purchased 60,000 shares of common and 40,000 shares of preferred.

A subsequent post in TMF's FelCor folder speculated that perhaps Corcoran and Mathewson were obliged to make the purchases owing to their connection to DJONT, the limited partnership to which FelCor leases its properties in order to legally qualify as a REIT.

To that, none other than Tom Corcoran himself replied in a post:

"The shares I recently purchased had nothing to do with the provision that requires Hervey [Feldman] and I to buy shares with the after tax profits of DJONT. In fact DJONT did not have any profits last year so there was no profits to distribute to buy shares. I bought because I could, and I believe the stock was a good buy. Thanks for your interest in FelCor."

And thanks for clearing that up, Mr. Corcoran.

FelCor fell $5/16 to $33 15/16 today -- or right about where the insiders snapped it up in late April.

Finally, I need to correct something from last night's Boring recap. In it, I said that FelCor had acquired the 302-room Doubletree hotel at Campbell Centre, located at the intersection of I-75 and Northwest Highway in Dallas.

A gentle reader pointed out that the hotel must be awfully large if it stretches from Northwest Highway clear to I-75 -- which at its closest point is about 700 miles east of Dallas. The reader offered that perhaps I meant to say US 75 instead.

Indeed, I did.

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

Stock  Change    Bid 
 ANDW  -1 1/4   20.75 
 CGO   -  3/16  33.69 
 BGP   +  7/16  31.63 
 CSL   -  9/16  47.75 
 CSCO  -1 13/16 74.63 
 FCH   -  5/16  33.94 
 PNR   -  11/16 41.19 
 TBY   -  1/16   9.56 
                   Day   Month    Year  History 
         BORING   -1.02%  -1.44%  -0.25%  25.52% 
         S&P:     -0.94%  -0.74%  11.57%  74.18% 
         NASDAQ:  -1.11%  -2.06%  10.95%  67.38% 
     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     74.63   107.68% 
   8/13/96  200 Carlisle C    26.32     47.75    81.39% 
    3/5/97  150 Atlas Air     23.06     33.69    46.10% 
   5/20/98  400 TCBY Enter    10.05      9.56    -4.80% 
   4/14/98  100 Pentair       43.74     41.19    -5.84% 
   11/6/97  200 FelCor Sui    37.59     33.94    -9.72% 
   1/21/98  200 Andrew Cor    26.09     20.75   -20.47% 
     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  11193.75  $5803.76 
   8/13/96  200 Carlisle C  5264.99   9550.00  $4285.01 
    3/5/97  150 Atlas Air   3458.74   5053.13  $1594.39 
   5/20/98  400 TCBY Enter  4018.00   3825.00  -$193.00 
   4/14/98  100 Pentair     4374.25   4118.75  -$255.50 
   11/6/97  200 FelCor Sui  7518.00   6787.50  -$730.50 
   1/21/98  200 Andrew Cor  5218.00   4150.00 -$1068.00 
                              CASH   $5429.76 
                             TOTAL  $62757.89