Boring Portfolio

Andrew Warns...
Won't someone buy some cable?
by Greg Markus
(TMF Boring)

ANN ARBOR, Mich. (June 17, 1998) -- A rebound in Asian markets helped U.S. equities continue their recovery Wednesday. Although intraday gains were reduced somewhat by late-session selling, the S&P 500 nevertheless gained an impressive 1.79%, while the Nasdaq rose 1.33%.

The Boring Portfolio's net value increased 0.85% with daily winners outnumbering losers five to two. Shares of Pentair (NYSE: PNR), our eighth holding, were unchanged at $39 3/8.

I could follow up on Monday's Boring recap by discussing the latest good news from Cisco Systems (Nasdaq: CSCO). Cisco's stock closed above $80 once again Wednesday following a Reuters report about The Kid's continuing good fortune in China and a press release announcing a partnership between Cisco and IBM (NYSE: IBM) to better serve the SOHO market.

I could point to the $1 3/8 advance in shares of Atlas Air (NYSE: CGO) to $33 1/2 and mention that company's recent announcement that British Airways (NYSE: BAB) has decided to upgrade to the first of Atlas's new 747-400 freighters when that aircraft enters service later this year. British Air had been leasing a 747-200 from Atlas, which now becomes available for placement with another customer, "as the demand for the -200s continues to be strong," according to the press release.

I could note that TCBY's (NYSE: TBY) stock continues to firm up -- gaining $5/16 to $8 7/8 today -- or that our lodging REIT, FelCor Suite Hotels (NYSE: FCH) has dislodged itself from a recently established 52-week low and is inching upwards ahead of its planned acquisition of the Bristol Hotels (NYSE: BH) properties later this summer.

Instead, however, I'm obliged to focus on the day's two losers in the Borefolio octet, Carlisle Companies (NYSE: CSL) and Andrew Corp. (Nasdaq: ANDW). Both stocks fell $3/8 Wednesday, Carlisle to $43 9/16 and Andrew to a bid of $19 1/2.

As noted here on June 10, I had inferred that recent softness in Carlisle's stock was related to news of work stoppages at General Motors (NYSE: GM). Carlisle derives around 4% of its revenues from sales to GM.

Short-term slumps in the stocks of other parts suppliers appear to have leveled off, however, and, heck, GM's stock even rose today.

Not only that, but trading in Carlisle has been comparatively brisk in a few sessions lately. Today, for example, volume of 177,200 was about triple what Carlisle sees in one if its typical snoozy sessions.

So what gives?

I wish I knew. Carlisle's CFO is traveling all this week, but I've got a call in; and when I learn anything, I'll let you know.

I do note, however, that Chairman and CFO Stephen Munn filed notice with the SEC on April 30 that he intended to sell 220,000 shares of his company's stock. Perhaps -- and this is pure speculation -- that stock is finding its way into the market.

If so, then this could be another one of those periodic dips that every stock negotiates from time to time. Carlisle has proved to be a very fine investment for the Borefolio -- easily outpacing the S&P 500 -- and so we'll continue to hold the stock unless we learn of some compelling reason to do otherwise.

Carlisle has been one of the Borefolio's all-time top performers. Andrew, on the other hand, is the sick man of our bag o' stocks.

Early this year, Andrew thought it perceived signs of recovery in its domestic and Asian markets for communications systems equipment. Alas, the signs soon evaporated, and Andrew's stock has languished in the low twenties and high teens all year.

After the close of trading Wednesday, Andrew warned that it expects that results for its fiscal third quarter ending June 30 will fall short of analysts' expectations.

Specifically, Andrew said it now estimates that sales and diluted EPS for the quarter might be 5% to 10% below sales in the year-ago period of $209 million and diluted earnings per share from continuing operations of $0.31, excluding restructuring charges.

To me, that sounds like we should expect EPS of $0.28 or $0.29 for the quarter -- or about a nickel below analysts' consensus forecast, according to Zacks.

In the press release, Andrew's chairman, president, and CEO Floyd English said, "Overall customer spending in the U.S. wireless infrastructure market has continued its slower pace and the economically strained Southeast Asian markets have contributed very little business. Sales continue to grow in certain emerging geographic regions such as Brazil, China, Mexico and South Africa. However, the growth is not yet strong enough to offset the combined impact from United States and Southeast Asia."

English went on to say that Andrew Corp. remains "confident in the long term opportunities in Asia and will continue to develop its manufacturing capabilities in Suzhou, China."

The press release also stated that Andrew intends to continue to repurchase its stock. To date in the June quarter, the company said it has repurchased 793,000 shares of stock for approximately $17.3 million. Today, Andrew's board of directors authorized an additional 5 million share repurchase.

Even after factoring in today's news, Andrew trades at less than 16-times projected earnings for the fiscal year ending in September. Based on earnings estimates for fiscal 1999, the stock goes for barely 13-times forward earnings. I mean, like, how much more can poor Andrew get beaten down?

We'll find out, I guess.

Oh, yeah: Andrew expects to release its results for the current quarter on July 16.

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

06/17/98 Close

Stock  Change    Bid 
 ANDW  -  3/8   19.50 
 CGO   +1 3/16  33.50 
 BGP   +  5/8   34.75 
 CSL   -  3/8   43.56 
 CSCO  +  11/16 80.63 
 FCH   +  1/8   32.69 
 PNR     ---    39.38 
 TBY   +  5/16  8.88 
                   Day   Month    Year  History 
         BORING   +0.85%  -0.79%   0.40%  26.34% 
         S&P:     +1.80%   1.49%  14.08%  78.10% 
         NASDAQ:  +1.33%  -0.14%  13.12%  70.65% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     34.75   208.72% 
   6/26/96  150 Cisco Syst    35.93     80.63   124.37% 
   8/13/96  200 Carlisle C    26.32     43.56    65.48% 
    3/5/97  150 Atlas Air     23.06     33.50    45.28% 
   4/14/98  100 Pentair       43.74     39.38    -9.98% 
   5/20/98  400 TCBY Enter    10.05      8.88   -11.65% 
   11/6/97  200 FelCor Sui    37.59     32.69   -13.04% 
   1/21/98  200 Andrew Cor    26.09     19.50   -25.26% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  13900.00  $9397.51 
   6/26/96  150 Cisco Syst  5389.99  12093.75  $6703.76 
   8/13/96  200 Carlisle C  5264.99   8712.50  $3447.51 
    3/5/97  150 Atlas Air   3458.74   5025.00  $1566.26 
   4/14/98  100 Pentair     4374.25   3937.50  -$436.75 
   5/20/98  400 TCBY Enter  4018.00   3550.00  -$468.00 
   11/6/97  200 FelCor Sui  7518.00   6537.50  -$980.50 
   1/21/98  200 Andrew Cor  5218.00   3900.00 -$1318.00 
                              CASH   $5511.82 
                             TOTAL  $63168.07