Boring Portfolio

AOL buys Cisco...
... Gigabit Switch Routers
by Greg Markus
(TMF Boring)

ANN ARBOR, Mich. (Aug. 18, 1998) -- U.S. stocks extended Monday's advance, with the Nasdaq rising better than 2% and the S&P 500 gaining 1.6%. Unlike Monday, however, small-cap stocks participated in today's action, with the Russell 2000 benchmark gaining 1.8%.

The Boring Portfolio rose 1.7% in value, with five of eight holdings posting healthy advances.

Shares of Cisco Systems (Nasdaq: CSCO) rose $2 1/16 to close above the $100 mark after the company announced that America Online (NYSE: AOL) has selected Cisco's 12000 series Gigabit Switch Router (GSR) for deployment throughout AOL's TeraPOP, one of the largest Internet data traffic exchange points in the world.

Borders Group (NYSE: BGP) added $13/16 to Monday's $1 5/8 gain to close at $27 3/16. Trading volume continued to be very heavy, with over one million shares changing hands.

Yesterday, an analyst at Merrill Lynch reiterated his "buy" rating on BGP -- reportedly based on his interview with Borders CEO Robert Di Romualdo -- and offered a 12-month price target of $45 for the stock.

That price target would be around 30 times the consensus forecast of FY99 earnings of $1.52 per share for Borders. A multiple of 30 represents a modest premium to the 25% long-term annual growth rate that Borders has repeatedly endorsed (and demonstrated), but it is easily in line with the multiple that other consistent high-growth retailers enjoy.

I personally believe that once Borders rolls out its marketing blitz ahead of next month's announced grand opening of its e-commerce site, Borders.com, the stock could return to the mid- to upper $30s, where it was trading barely a month ago.

Atlas Air (NYSE: CGO) ascended $1 5/8 to $36 1/16 in active trading. If you've been following Atlas, you know that the company took delivery of its second 747-400 freighter last week. Atlas will put that plane into service under its contract with Cargolux Airlines.

In addition, on August 10, Atlas announced it had acquired a 747-200 freighter aircraft currently being operated by Air France, with delivery slated for the first quarter of next year. That acquisition will bring Atlas's 747-200 fleet to 20 aircraft.

If you're interested in Atlas, I suggest that you read over its most recent 10-Q statement, which was filed a few days ago and is available through the Securities and Exchange Commissions EDGAR site.

Companies generally have 45 days following the close of a quarter to file their 10-Q. Most companies that closed a quarter at the end of June (such as Atlas) have therefore filed within the past few days. That includes Carlisle Companies (NYSE: CSL) and Pentair (NYSE: PNR), for example, and it may well include a number of the companies in your own portfolio.

It's always a good idea to at least download the 'Qs and scan them over. By way of example, I'll be doing that for the Borefolio companies and reporting on anything I spot that's notable.

Pentair stock gained $1 1/2 in above-average trading to close at $38 9/16, by the way, and Carlisle stock picked up $1 1/18 to close at $45 1/16.

On the downside, FelCor (NYSE: FCH) fell $1/2 in late trading after being up for most of the session. Some large transactions late in the afternoon sent the stock south.

Block trades on FelCor are not entirely unexpected. Recall that FelCor recently merged with Bristol Hotel, and Bristol shareholders -- including some investment firms with fairly large Bristol holdings -- received FelCor stock as part of the deal (as well as receiving shares of the "new" Bristol (NYSE: BH) hotel operating company). Some of those new FelCor shareholders have apparently decided that the REIT doesn't fit with their investment needs.

Whatever. It fits with ours.

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


08/18/98 Close

Stock  Change    Bid 
 ANDW  -  1/8   15.63 
 CGO   +1 5/8   36.06 
 BGP   +  13/16 27.19 
 CSL   +1 1/8   45.06 
 CSCO  +2 1/16  100.19 
 FCH   -  1/2   23.75 
 PNR   +1 1/2   38.56 
 TBY   -  5/16  7.50 
 
                   Day   Month    Year  History 
         BORING   +1.68%  -3.64%  -3.45%  21.49% 
         S&P:     +1.62%  -1.74%  13.48%  77.15% 
         NASDAQ:  +2.04%  -0.92%  18.13%  78.21% 
  
     Rec'd   #  Security     In At       Now    Change 
   6/26/96  150 Cisco Syst    35.93    100.19   178.82% 
   2/28/96  400 Borders Gr    11.26     27.19   141.53% 
   8/13/96  200 Carlisle C    26.32     45.06    71.18% 
    3/5/97  150 Atlas Air     23.06     36.06    56.40% 
   4/14/98  100 Pentair       43.74     38.56   -11.84% 
   5/20/98  400 TCBY Enter    10.05      7.50   -25.34% 
   11/6/97  200 FelCor Sui    37.59     23.75   -36.82% 
   1/21/98  200 Andrew Cor    26.09     15.63   -40.11% 
  
     Rec'd   #  Security     In At     Value    Change 
   6/26/96  150 Cisco Syst  5389.99  15028.13  $9638.14 
   2/28/96  400 Borders Gr  4502.49  10875.00  $6372.51 
   8/13/96  200 Carlisle C  5264.99   9012.50  $3747.51 
    3/5/97  150 Atlas Air   3458.74   5409.38  $1950.64 
   4/14/98  100 Pentair     4374.25   3856.25  -$518.00 
   5/20/98  400 TCBY Enter  4018.00   3000.00 -$1018.00 
   1/21/98  200 Andrew Cor  5218.00   3125.00 -$2093.00 
   11/6/97  200 FelCor Sui  7518.00   4750.00 -$2768.00 
  
                              CASH   $5686.93 
                             TOTAL  $60743.18 
 

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