Boring Portfolio Report
Wednesday, July 17, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI (July 17) -- Well, that's a little better.

The DJIA closed up 18 points on Wednesday, well off of its intra-day peak of +72, but a decent day, nonetheless. I'm told that some traders are hesitating to commit until after Chairman Greenspan performs his semi-annual speaking in tongues at the Capitol tomorrow. Enjoy, my friends. As for myself, I think I'll pass.

The S&P 500 rose nine-tenths of a percentage point today. The Borefolio managed to triple that, rising 2.72% in net value, with six of its seven holdings in the plus column.

Even that was not quite good enough to best the NASDAQ, however, which rebounded over 33 points today (+3.15%), thanks in part to Intel's strong quarterly earnings report. (BTW, we've got tons of info on that report elsewhere in Fooldom. AOLers can just click that SEARCH button at the bottom of the main MF screen to locate more than even Andy Grove could want to know.)

Among Borefolio stocks, Borders Group booked a buck today, assisted by a Merrill-Lynch upgrade to intermediate-term "buy" from "accumulate." (Don't ask how you could "accumulate" without "buying." I think it has to do with a distinction between initiating a position in the stock versus adding to it, but don't quote me on that.) Merrill's long-term view on BGP has been "buy" for some time now.

Merrill's analyst, Fran Blechman Bernstein, sees what I see: a stock of the leading company in its niche trading at a sizable discount to its projected five-year EPS growth rate (which Merrill pegs at 25%). Bernstein is looking for FY per-share earnings of $1.23, which would represent a 45% gain over last FY, and another 30%+ growth in 1997. She also points out that the company has over $51 million in cash and a debt/capitalization ratio under 2%. Boring to the bone.

Green Tree Financial continued to bloom on Wednesday, adding $3/4 on volume of nearly 1 million shares. As noted here last night, yesterday was Investor Day at GNT, and the company apparently put on a fine show.

After generating $7 billion in loan biz in 1995, Green Tree reportedly said that it has $10 billion as a target for the current year. More than half of that will come from loans outside of the company's core manufactured homes financing business, one clear indication of how adeptly Green Tree has moved into -- indeed, created -- new markets, such as personal aircraft, boat, and motorcycle financing.

At the conference, Green Tree's management stressed its careful attention to credit quality. They pointed out that not only are the company's loan scrutinized by its internal staff, they are also inspected by investment bankers and ratings agencies when the loan portfolios are securitized for sale. Those securitized offerings scored top ratings and have been very well received by investors this year.

First Call's latest survey shows that the 14 analysts who follow GNT are collectively forecasting $2.19 for 1996, or a 21% year-over-year gain. Current consensus projections for 1997 are for $2.83, which would constitute a 29% increase if all goes according to plan. With GNT currently trading at 14-times expected 1996 EPS, permit me to assert that the stock is awfully cheap.

What else can I tell you? Well, Prime Medical appears to have had a good day following the announcement yesterday that it was postponing its planned secondary offering. The stock climbed $1 5/8 today, to close at a bid of $14 3/4. PMSI still is way, way undervalued; but at least it's once again heading in the right direction.

The Borefolio holds two healthcare stocks, the other being Oxford Health Plans. After all, healthcare is one-seventh of the domestic economy. OXHP fared less well than PMSI today, though. It declined a quarter-point on volume (NASDAQ-style) of 1.8 million shares. August 6 is when Oxford will report quarterly earnings and talk about the company's prospects. Stay tuned.

Texas Industries and Cisco Systems both picked up more than a dollar apiece today. I suspect that the previous sentence represents the first time in history that those two companies have been mentioned in the same breath. Rocks and routers ... only in the Borefolio.

I close with Shaw Group. Once again, on volume of over 200,000 shares, SHAW rose on the session -- this time for a quarter-point that moved the bid over the $23 mark.

(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: 7/17/96