Boring Portfolio Report
Friday, July 12, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI (July 12) -- Team Dow Jones lost 10 seconds on Friday (and 78 seconds for the week) as the big American slowed in the closing hours of today's stage, which featured a twisting, technical course with occasional hills.

The NASDAQ riders also fell further behind, as they have for six of the seven previous stages in the mountains. NASDAQ was the heavy favorite going into this year's Tour, but they've slipped further and further behind recently as first one rider and then another experienced illness or injury. Earlier in the week, Motorola suffered cramps. Then on Thursday two of their popular riders, Hewlett-Packard and United Healthcare, crashed right at the beginning of stage and barely made it to the finish line. Both riders managed to continue today, but it may take a while for them to recover completely.

The S&P 500 team managed to pick up a few seconds on Friday, but it was motley-clad Team Borefolio that surged in the last few meters to take today's stage win. Five of the seven riders for Team Borefolio advanced in the standings to date, while two, Borders Group (BGP) of Ann Arbor, Mich., and Prime Medical (PMSI), from Austin, Texas, fell back a bit.

"Uh, Boring. Wake up."

"Whaa-a?"

"Wake up. You've got a column to write."

Oh. Sorry, folks. What with the Tour de France under way and Olympic fever beginning to grip the Boring household, it's hard to focus on stocks sometimes. Actually, there's quite a lot of news on Team Borefolio, so let's get to it, shall we?

First, Prime Medical Services. As you may recall, PMSI had intended sometime this week to issue its secondary offering of 5 million shares, plus nearly 5 million shares currently held by insiders. But with the market -- and especially healthcare stocks -- being so skittish this week, PMSI decided to put it off and see how the climate would shape up next week. Can't blame 'em. PMSI lost fifty cents today, and until the offering occurs the company and its backers have to sit on their hands and keep mum. Frustrating.

Next, Borders Group. BGP lost $1 1/2 in light trading on Friday, presumably in reaction to yesterday's relatively monthly weak retail sales industry report. Only one problem: Borders isn't in the report. Late today, Rick Vanzura, Borders vice president of planning, said, "There's no news. Business trends continue to be strong."

Third on the list is Texas Industries. Early today, TXI reported its 4Q and fiscal year sales and earnings, burying analysts' estimates under a pile of concrete and steel. For the quarter, TXI earned $7.05 per share, as compared with expectations in the range of $6.65 to $6.75). That compares with EPS of $3.88 for FY95. The dividend for FY96 was a dime more than FY95's $0.30, too. For the 4Q, TXI made EPS of $2.22 versus the year-ago $1.56.

TXI's conference call will take place on Monday morning. For now, though, I note that although steel prices slipped a bit sequentially from 3Q, average gross profit per ton actually increased, to $92 from 3Q's $85, as cost savings more than made up for the lower sales price. On the cement/concrete/aggregates side of the biz, both volume and sales price were higher sequentially and as compared with the year-ago quarter. Real estate income also contributed to the bottom line.

The TXI press release notes that "Construction activity in our primary markets is strong, but we are not in a boom, which bodes well for future levels of demand."

Folks who follow TXI or who live in the Dallas area are aware that the company is currently at loggerheads with a group of down-wind residents who have lodged formal complaints about emissions from the company's cement kilns. The company has responded by pointing out that they are in compliance with all applicable regulations, and the Texas Natural Resources and Conservation Commission concurs.

I have been engaged in discussions with the company about this issue, as well as with a researcher at the University of Michigan who issued a report recently that was critical of TXI and TNRCC. My intention is to make an informed judgment as a TXI shareholder and to encourage negotiation among the disputing parties if there are in fact genuine issues to resolve. The company has invited me to show up unannounced at any time to see things for myself, and I intend at some point to do just that.

Shaw Group was the Borefolio's big winner for the week, rising 12.5% to close at a bid of $21 3/8. On July 1, the company reported blow-out 3Q earnings, which resulted in a string of upward EPS estimates by analysts, as well as some of the heaviest trading volume in SHAW's history.

Yesterday, SHAW reported that it had received overseas power project commitments totaling $10 million. The contracts cover design, fabrication, and related materials for low pressure piping for two, 600 megawatt power plants in the Pacific Rim, as well as high pressure pipe fabrication for two, 250 megawatt power plants in Osaka, Japan. The Osaka contract is SHAW's first award for projects in Japan and "introduce Shaw to a new market that we believe has potential for a significant amount of future work," in the words of the company.

Speaking of earnings reports, Green Tree Financial will be issuing theirs on Monday morning, with a conference call to follow. GNT closed higher today, to end the week at $31 1/2.

Cisco tacked on a half-point on Friday as a Salomon Brothers analyst upgraded the stock to "buy." Well, duh. Cisco completed its merger with StrataCom this week, which prompted various arbitrage games in the stock and Cisco options. Nearly 14 million shares of CSCO were traded on Friday.

And then there's Oxford Health Plans. OXHP was out of bed and walking around today. The stock still has a way to go, but perhaps Friday's $1 1/4 gain is a step on the road to recovery.

And now, back to Le Tour! Bon chance, mon ami! Ole'! Ole', ole', ole'!

(c) Copyright 1996, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.

Transmitted: 7/12/96