Boring Portfolio Report
Thursday, July 11, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI (July 11) -- As was the case yesterday, warnings from companies about slowing earnings precipitated a major sell-off in stocks on Thursday. Lucky 7/11, huh?

The DJIA closed down 83 points after recovering from an intra-day low 135 points beneath Wednesday's close. The S&P 500 index ended the session lower by 1.58%. The Borefolio sustained a 1.99% loss, while the NASDAQ, once again, suffered most with a loss of 35 points -- or over 3%.

Just before 2:30PM EDT, the NASDAQ was 46.7 points below Wednesday's close. That, my friends, exceeded the largest point decline in the NASDAQ *ever* for a full session: minus 46.1 points on October 19, 1987. So if you made it through today's trading more or less in one piece, you can count yourself as a veteran of one of the biggies.

Indeed, today's session missed being the second worst for the NASDAQ in history (measured in point loss), coming in just a fraction of a point behind the July 19, 1995 free fall of 35.7 points. To tell you the truth, I can't even recall the details of that black day less than a year ago. Quick now: How much of it can you remember? Perhaps that says something about the significance of such anomalies in the larger scheme of things?

Unless you were out at the beach or on the golf course all day (and if you were, good for you), you know by now that Hewlett-Packard and United Healthcare set the stage for today's activity. H-P said late Wednesday its profits would be hurt by a slowdown in orders across the company's entire range of products. United Healthcare, the nation's largest for-profit HMO, warned its profits would fall well shy of analysts' expectations. UNH said to expect EPS of $0.40 to $0.45 for its second quarter versus a consensus estimate of $0.65, owing to increased service utilization by patients and higher costs of docs and drugs.

Naturally, the price of shares of Oxford Health Plans collapsed on the UNH news. As OXHP slid beneath the $30 mark, individual investors and big institutions alike bailed out en masse. Finally, at 3:00 PM EDT, Oxford CEO Stephen Wiggins re-re-reiterated that the company was "very comfortable with the analyst community consensus for second quarter earnings showing growth of not less than 68% from last year's second quarter and remain confident in the outlook for the remainder of the year." Wiggins went on to note that "fundamental trends discussed in our first quarter earnings conference call remain unchanged."

Unlike competitors, Oxford appears to have succeeded in adjusting upwards its rates already, consistent with medical expense trends, while competitors tried to capture market share with low-ball rates. Permit me to quote at length from today's press release:

"Despite the Company's comparatively higher premiums over the past year, we achieved approximately 70% membership growth through May 1, 1996, since our pricing decisions of one year ago. We are encouraged by the prospects of a more favorable and national pricing environment. We believe we have created a differentiated product and our many new initiatives further position Oxford for a promising future. The Company intends to announce second quarter earnings on August 6, 1996, and will be available for additional comments at that time."

Suffice it to say that OXHP stock took a share U-turn and headed north immediately. At the end of the day, the stock was basically back where it had ended the day before.

Cisco was less fortunate. H-P's warning showed that even the star companies are not invulnerable, and CSCO tumbled right along with Intel, Microsoft, and the rest of the first team to end the day down over three bucks at $54 3/4. Would everyone who believes you'll be able to buy CSCO for less than $55 this time next year please raise your hands? Yup, thought so.

The word late today from Prime Medical was that the company has no intention of offering shares at current prices, and they'll just wait until things settle down a bit, thanks. Maybe next week. There has been no news from the company that would account for the drop in PMSI's stock price. Indeed there couldn't be: the company and the financial institutions associated with the offering have to sit on their hands until after the stock sale occurs. It's gotta be frustrating; but this, too, shall pass.

Transmitted: 7/11/96