Boring Portfolio

<THE BORING PORTFOLIO>
Boring Tenets
Distilling Our Philosophies

By Dale Wettlaufer (TMF Ralegh)

BUFFALO, NY (July 9, 1999) -- About nine months into managing the Boring Port, I still haven't distilled into a simple set of articles the tenets of my approach to investing. Alex Schay (who now works with Mike Mauboussin at CS First Boston) and I laid out our philosophies last year as we took over the Bore Port, but I think these lengthy articles could be distilled down to their rudiments to clarify them. So, with your indulgence, I will be doing that here in the Boring Port -- both to force me to codify more succinctly the Boring Port's approach and because every other Boring prospect is being processed in the background right now.

Tenet 1: Businesslike approach to transactions

Every decision we make, in this portfolio and in our personal portfolios, is the product of unhurried consideration and businesslike analysis. When making a decision to acquire an interest in a company, we attempt to value the entire business in a rational manner, as if we were buying the entire company in a private transaction rather than buying readily-tradable securities.

Part of this has to do with the concentration of the portfolio, which I'll discuss in another tenet. In general, we don't foresee having more than ten securities in the portfolio at any one time. And at most times, one to three of those positions will dominate the economics of the entire portfolio. There are no throwaway decisions in the portfolio, as in "well, that was only 1% of the portfolio, so it doesn't matter if it's down 90%."

To explain both of these, we see very little difference in the philosophies necessary to be productive owners of non-publicly traded business and publicly-traded businesses. In our opinion, the ability to trade in and out of stocks causes some normally rational owners of private businesses to engage in business decisions that leave a lot to be desired in the rationality department. Witness the successful entrepreneur who buys a hot Internet stock on Monday after getting a hot tip on the golf course over the weekend. Or witness the usually businesslike CEO of a household getting into daytrading because she or he has heard there are easy pickings out there.

That's not our bag, because the capital we're investing is pretty much the stored value of earlier work efforts, and every dumb decision that we would make trading on hunches or trying to game "whisper numbers" or something like that would kill the accumulated value of some of the work we've done in life. You can't make up that lost time -- engaging in any decision that is not approached in a businesslike manner puts the stored value of our life's work at risk and, when successful, runs the risk of successfully reinforcing practices that would come back to haunt us sooner or later.

I have more to add on this, and please excuse the informal presentation here, because I'm treating this as a bit of a draft. If some interesting research project comes up while I'm writing these, I'll switch this to the background and move the research to the foreground. As far as I can tell, though, this series will be the subject for next week's Bore reports. So don't feel bad if you miss these if you'll be on vacation.

By the way, the spreadsheet I mentioned on the Bore board yesterday is now on a business trip with someone else in the office. I either left the spreadsheet on one of the company laptops I was using while on vacation or I deleted the worksheet. In either case, over the weekend, I'll work up the tax shield data series again, post it on the board, and email it to those whole have requested it.

Have a good weekend. Questions, comments, and lower-intensity flames are welcome on the Boring Port message board.

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07/09/99 Close
Stock Change   Bid
APCC  +  9/16  21.50
BRKb  -28      2291.00
CSL   +  15/16 50.19
GTW   +1 9/16  67.63

                  Day     Month   Year  History
        BORING   +0.37%   3.61%   7.65%  44.55%
        S&P:     +0.64%   2.22%  14.74% 133.61%
        NASDAQ:  +0.77%   4.00%  27.38% 168.32%

    Rec'd   #  Security     In At       Now    Change
  8/13/96  200 Carlisle C    26.32     50.19    90.65%
  4/20/99  460 American P    14.48     21.50    48.52%
 12/31/98   12 Berkshire   2276.17   2291.00     0.65%
   2/9/99  100 Gateway 20    72.38     67.63    -6.56%


    Rec'd   #  Security     In At     Value    Change
  8/13/96  200 Carlisle C  5264.99  10037.50  $4772.51
  4/20/99  460 American P  6659.25   9890.00  $3230.75
 12/31/98   12 Berkshire  27314.00  27492.00   $178.00
   2/9/99  100 Gateway 20  7237.50   6762.50  -$475.00


                             CASH  $18091.65
                            TOTAL  $72273.65


</THE BORING PORTFOLIO>