Boring Portfolio

Calling Cisco & Atlas
...Got questions? Ring up the IR folks!

by Greg Markus (TMFBoring@aol.com)

ANN ARBOR, Mich. (Sept. 4, 1998) -- A generally benign August employment report sent stocks sharply higher Friday morning, but traders sold into the rally, squaring their positions ahead of the long Labor Day weekend, and the benchmark indices closed lower.

The Boring Portfolio fell 0.80%, also, despite daily gainers outnumbering losers five to three among its holdings.

On the losing side, shares of Cisco Systems (Nasdaq: CSCO) fell $1 3/8 to $89 1/4. A Reuters story today reported that Cisco "said Thursday its overall outlook was somewhere 'in between' positive and negative but acknowledged sales in Japan and Korea had stalled as a result of the economic crisis in those countries."

That's all the story said. I didn't quite understand, so I rang up Cisco's director of investor relations, Mary Thurber, for clarification. Whenever you've got a reasonable question about one of the companies you're part owner of, that's the thing to do. After all, the purpose of an investor relations department is to, well, relate to investors, yes?

Anyhow, Thurber informed me that the comment picked up by Reuters is not new news but simply a reiteration of the guidance Cisco provided in its fourth quarter conference call. Thurber said there has been no change in that guidance. She added that Cisco's business in Europe and the Americas continues to be very strong, with year-over-year growth projected in the 40% range there.

Also descending Friday were shares of Atlas Air (NYSE: CGO), losing $1 1/2 to $22 3/16. On Wednesday, I pointed out that the strikes at Northwest Airlines (Nasdaq: NWAC) and Air Canada (Nasdaq: ACNAF) were crimping the flow of Asian exports precisely at a time when the pre-holiday surge is being even heavier than normal due to the rock-bottom prices on many Asian goods.

On Thursday, Reuters reported that Air Canada was looking for airlift capacity it could lease until its strike was settled. Atlas was mentioned as a possibility.

A call to Atlas confirmed what I had reported previously, however, which is that Atlas's dance card is already full. Atlas Executive VP Rick Shuyler added that their guidance remains unchanged from what was provided in the July conference call.

Analysts are looking for Atlas to earn $0.55 per share in the September quarter and $2.02 for the year, according to First Call. That latter number would constitute a whopping 84% improvement over 1997's $1.10, a year in which Atlas was plagued by maintenance problems on five older aircraft leased from FedEx (NYSE: FDX). Those five flying lemons were returned, with no regrets, to the lessor early this year.

Looking down the road -- or the runway, I should say -- Atlas founder, president, chairman, CEO -- and, I dunno, head mechanic? -- Michael Chowdry told "Traffic World" last month that he's considering expanding Atlas's fleet of 747 heavyweights by adding some middle-weight aircraft late next year, perhaps to expand Atlas's operations in Latin America but also perhaps to serve the Middle East and the Indian subcontinent (Chowdry was born in Pakistan). Chowdry also has his eye on signing an agreement with a mainland China carrier.

Analysts currently project 1999 EPS of $2.74 for Atlas, or an increase of 36% over the consensus 1998 forecast. At its closing price of $22 3/16, then, CGO is trading at barely 11 times this year's EPS estimate and 8 -- eight! -- times the 1999 forecast.

So is CGO a great buy?

Well, that depends. I doubt that there is such a thing as stock that's a "great buy" for every investor. Whether or not a stock is suitable for you depends on such things as your tolerance for risk, your desire to receive dividends, your knowledge about a particular industry (or your interest in learning more about it), and so on.

With Atlas, for example, you've got the possibilities of rapid earnings growth as this mighty mite expands its presence in the air cargo industry -- an industry that is itself experiencing good growth as "just-in-time" has morphed into "I need it yesterday" and global importing and exporting has blossomed.

On the other hand, the air cargo industry is heavily capital intensive, and as a young company, Atlas has borrowed heavily to finance its fleet expansion. Also, as the recent financial turmoil in Asia, Russia, and now Latin America has demonstrated vividly, a business's exposure to international markets can be a short-term headache, even if it may constitute a long-term bonanza.

So you pays your money, and you makes your choice.

Next week, the Boring recaps will focus on each of the Borefolio's current holdings, pointing out each one's plusses and minuses. But for now...

...enjoy the long weekend!

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


09/04/98 Close

Stock  Change    Bid 
 ANDW  +  1/8   13.13 
 CGO   -1 1/2   22.19 
 BGP   -  3/4   22.25 
 CSL   +  3/4   37.50 
 CSCO  -1 3/8   89.25 
 FCH   +  1/8   21.38 
 PNR   +  11/16 30.25 
 TBY   +  1/8   6.50 
 
                   Day   Month    Year  History 
         BORING   -0.80%   5.11% -18.32%   2.78% 
         S&P:     -0.85%   1.71%   0.36%  56.67% 
         NASDAQ:  -0.34%   4.49%  -0.25%  50.49% 
  
     Rec'd   #  Security     In At       Now    Change 
   6/26/96  150 Cisco Syst    35.93     89.25   148.38% 
   2/28/96  400 Borders Gr    11.26     22.25    97.67% 
   8/13/96  200 Carlisle C    26.32     37.50    42.45% 
    3/5/97  150 Atlas Air     23.06     22.19    -3.78% 
   4/14/98  100 Pentair       43.74     30.25   -30.85% 
   5/20/98  400 TCBY Enter    10.05      6.50   -35.29% 
   11/6/97  200 FelCor Sui    37.59     21.38   -43.14% 
   1/21/98  200 Andrew Cor    26.09     13.13   -49.69% 
  
     Rec'd   #  Security     In At     Value    Change 
   6/26/96  150 Cisco Syst  5389.99  13387.50  $7997.51 
   2/28/96  400 Borders Gr  4502.49   8900.00  $4397.51 
   8/13/96  200 Carlisle C  5264.99   7500.00  $2235.01 
    3/5/97  150 Atlas Air   3458.74   3328.13  -$130.62 
   4/14/98  100 Pentair     4374.25   3025.00 -$1349.25 
   5/20/98  400 TCBY Enter  4018.00   2600.00 -$1418.00 
   1/21/98  200 Andrew Cor  5218.00   2625.00 -$2593.00 
   11/6/97  200 FelCor Sui  7518.00   4275.00 -$3243.00 
  
                              CASH   $5750.59 
                             TOTAL  $51391.22 
 

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