Boring Portfolio

Close Encounters
... of the Borefolio kind
by Greg Markus
(TMF Boring)

SEATTLE, Wash. (Aug. 5, 1998) -- As my old football coach at Key West High School (home of the Conchs, an inert shellfish) used to say -- indeed as anyone's old football coach used to say, "When the going gets tough, the tough get going."

Which is exactly what I've done.

I got going from Detroit airport bright and early Wednesday to spend a few days in Seattle, home of the Foolish Portfolio's Amazon.com (Nasdaq: AMZN) and Starbucks (Nasdaq: SBUX), and Portland, Oregon, just down the road from Nike (NYSE: NKE) headquarters and home of, uh, Schnitzer Steel (Nasdaq: SCHN)?

As I tap out today's Boring recap on my cross-country flight, it occurs to me that before this week is done, I'll have crossed paths with perhaps every one of the companies in which the Boring Portfolio is invested.

Before leaving for the airport, I packed in my bag a book that I had purchased a few days ago at Borders Group's (NYSE: BGP) Superstore #001 in Ann Arbor.

My flight at DTW boarded at Gate F-3, directly across from an airport deli that advertised "TCBY" (NYSE: TBY) frozen yogurt. At 7:00 a.m., it was a bit early in the day for me to indulge in a frozen treat, so I passed on that.

(Truth be told, it's never too early for me to indulge in a frozen treat, but a misplaced sense of what's "appropriate" prevented me from dropping everything and racing into the deli. I'm still working on giving freer rein to my inner child.)

Since it's virtually impossible for any networked data transmission to avoid passing through Cisco Systems (Nasdaq: CSCO) equipment at some point, it's a fair bet that when the gate agent checked me in for my flight, Cisco was involved. (FYI, our summary of Cisco's post-earnings conference call is now available.)

Maybe some coax cable from Andrew Corp. (Nasdaq: ANDW) helped out, too.

Just yesterday, the roofers completed their job on Casa Boring. Carlisle Companies (NYSE: CSL) doesn't make roofing shingles, so ours came from Elcor (NYSE: ELK). Carlisle did make the rubber roofing material that was used on the back porch, though.

The roofers used older model air-powered nailers, which required a noisy generator and long air hoses. I'll bet they wished that they had a few of those nifty new Bammer cordless gas-powered nailers that Pentair's (NYSE: PNR) Porter-Cable subsidiary makes.

The hotel at which I'll be staying in Portland will not be one of FelCor's (NYSE: FCH), alas. I haven't booked a room in Seattle yet, though, and so if there's one of FelCor's Embassy Suite properties there, or one of the Crowne Plazas it just acquired in the merger with Bristol Hotels, perhaps I'll stay there.

That leaves Atlas Air (NYSE: CGO). Rats! By just a few days I missed the ceremony marking Atlas's delivery of its first new 747-400 at Boeing's (NYSE: BA) facility here!

This morning's Wall Street Journal sits on the seat next to me as my flight passes over Great Falls, Montana. In its coverage of yesterday's 300-point drop in the Dow, the Journal notes that Prudential's head technical analyst, Ralph Acampora, is warning that a bear market could be in the offing, with the Dow falling by as much as 20% from its recent highs before resuming its upward march.

To that, investors who favor the good values in small- and mid-cap stocks, as the Borefolio does, have only four words for Ralph: Been there, done that.

Why? Well, with Tuesday's 2.8% decline, the Russell 2000 index of stocks of smaller companies fell 18.3% from its high-water mark and, indeed, took out its old 52-week low. As of yesterday, the Russell 2000 had lost 8.1% in value in 1998.

That sorry performance compares with year-to-date net gains of 14.3% for the stocks of the 100 largest companies in the S&P 500, 10.5% for the entire S&P 500, -0.3% for the Midcap 400 index, and -6.9% for the Smallcap 600.

In light of the better earnings growth among small-cap companies as compared with the big guys, the better valuations among the former, and their generally limited exposure to weak Asian markets, the relentless divergences in stock performance as one moves down the capitalization ladder are positively breathtaking... not unlike the feeling that occurs when one falls on a football with two or three tacklers on top.

Which brings us back to that old gridiron clich�. We're about to land in Seattle, and like the coach said, I've gotta get going.

Maybe now that we small-cappers have already had our correction, our stocks will finally see some buying interest?

Or as my wife would say, "When the going gets tough, the tough go shopping."

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


08/05/98 Close

Stock  Change    Bid 
 ANDW  -  1/2   16.25 
 CGO   -1 5/8   34.13 
 BGP   +  1/16  29.13 
 CSL   -  5/8   40.31 
 CSCO  +3 9/16  96.69 
 FCH   -  13/16 25.31 
 PNR   -  1/2   37.38 
 TBY   -  5/8   7.13 
 
                   Day   Month    Year  History 
         BORING   -0.62%  -5.19%  -5.01%  19.53% 
         S&P:     +0.87%  -3.50%  11.44%  73.97% 
         NASDAQ:  +0.13%  -4.51%  13.86%  71.76% 
  
     Rec'd   #  Security     In At       Now    Change 
   6/26/96  150 Cisco Syst    35.93     96.69   169.08% 
   2/28/96  400 Borders Gr    11.26     29.13   158.75% 
   8/13/96  200 Carlisle C    26.32     40.31    53.13% 
    3/5/97  150 Atlas Air     23.06     34.13    47.99% 
   4/14/98  100 Pentair       43.74     37.38   -14.56% 
   5/20/98  400 TCBY Enter    10.05      7.13   -29.07% 
   11/6/97  200 FelCor Sui    37.59     25.31   -32.66% 
   1/21/98  200 Andrew Cor    26.09     16.25   -37.72% 
  
     Rec'd   #  Security     In At     Value    Change 
   6/26/96  150 Cisco Syst  5389.99  14503.13  $9113.14 
   2/28/96  400 Borders Gr  4502.49  11650.00  $7147.51 
   8/13/96  200 Carlisle C  5264.99   8062.50  $2797.51 
    3/5/97  150 Atlas Air   3458.74   5118.75  $1660.01 
   4/14/98  100 Pentair     4374.25   3737.50  -$636.75 
   5/20/98  400 TCBY Enter  4018.00   2850.00 -$1168.00 
   1/21/98  200 Andrew Cor  5218.00   3250.00 -$1968.00 
   11/6/97  200 FelCor Sui  7518.00   5062.50 -$2455.50 
  
                              CASH   $5528.69 
                             TOTAL  $59763.07 
 

Spacer