Boring Portfolio Boring Sells Portion Of SHAW
August 02, 1996

The Shaw Group Inc. (NASDAQ: SHAW)
11100 Mead Road; P.O. Box 40187
Baton Rouge, LA 70835
Phone: 504-296-1140
Fax: 504-296-1199

Closing Price, August 1, 1996: $28 1/4

Trade: Sell 200 shares

On April 12, 1996, the Boring Portfolio acquired 300 shares of SHAW at $18 3/4, plus broker's commission. Shaw Group is the largest piping systems fabricator in the U.S., serving primarily the electric power, chemical, and refining industries worldwide.

On July 1, Shaw Group reported record sales and earnings for its fiscal third quarter. Reported EPS of $0.26 beat the top end of analysts' expectations by 2 cents and represented an increase of 39% over the year-ago quarter. On the day of the earnings report, SHAW was trading within a few pennies of the price at which the Borefolio had purchased it.

Since that 3Q report, SHAW has risen approximately 50% in value. At its current price, SHAW is trading at 20-times projected per-share earnings for FY97, which begins next month. SHAW is also encroaching on the $30 year-end target I had estimated for the stock when I made the purchase: for a while today, the quote on the stock was $29 1/4.

It could be argued that SHAW can handle a multiple above 20, especially since EPS is projected to grow by more than 50% over the coming year. Shaw's earnings projections have been ratcheting upward recently, as well, and there is a reasonable chance they could continue to do so. It's also evident that at least one institutional investor has taken a position in SHAW during the past month; and both Shaw Group's strong underlying business and the momentum of the stock could attract additional fund managers.

On the other hand, the recent run-up in the share price probably limits further price appreciation for the time being. Also, although the company has no specific plans for one, I surmise that a secondary stock offering is likely given the recent (and possibly continuing) rapid pace of acquisitions. Although a reasonably-sized secondary could well be in the long-run interests of shareholders, such events can weaken the share price temporarily -- especially if the offering is overly-ambitious.

In light of the foregoing, and based entirely on the run-up in the stock price and not at all on any revision in my view of the business or its prospects, I've decided to SELL A PORTION of the Borefolio's SHAW holdings. I will RETAIN A STAKE to reflect my continuing respect for the company's prospects over the longer term.

So, sometime during the next five trading days, I will sell 200 SHAW, while retaining 100 SHAW in the Borefolio.

--Greg Markus (MF Boring)