Boring Portfolio Report
Monday, July 29, 1996

by Greg Markus (MF Boring)

ANN ARBOR, MI (July 29) -- Summer Mondays have been pretty slow occasions for the market, but if my numbers are right, today set a 1996 record for low volume. Moreover, what little activity did occur today was primarily defensive, as traders sold into upticks in an apparent attempt to minimize exposure to the slew of macrostats due out during the week.

After being basically flat for most of the day, the Dow sold off in the closing hour, losing 38 points. The S&P 500 followed along, dropping eight-tenths of a percentage point in value. As usual these days, the NASDAQ suffered the greatest damage: minus 1.21%. The Borefolio lost 1.13% on the day.

Some folks have asked recently: if the intention in Fooldom is to achieve long-term gains in stocks rather than slip in and out of the market or engage in a lot of short-term trading, then why have nightly updates on the Boring Portfolio (and the Foolish Portfolio)? Why the focus on whether this stock was up or that stock was down?

Fair question. In reply, let me ask you this: are you a sports fan? (Or do you know a sports fan?) If so, do you (or does that fan) have a favorite team -- amateur, collegiate, or pro? If so, then is there any contradiction between that long-term -- even life-long -- fan loyalty, on the one hand, and a strong interest in the team's day to day (or even play to play?) action, on the other? Nuh-uh. And I've got a deck of videotapes of old Michigan games to prove it.

In any event, one of the Borefolio team members, Prime Medical Services, reported quarterly earnings this morning. By the looks of things, it was a gold medal performance.

Analysts had been expecting something around $0.12 to $0.14 EPS from PMSI for the second quarter. The most optimistic of the four analysts following the company suggested $0.16 was makeable. Well, around 11 AM EDT this morning, PMSI reported per-share earnings of $0.17, on quarterly revenues of $18.7 million.

After non-recurring charges associated with loan costs and secondary offering expenses assocuiated with the recent acquisition of Lithotripters, Inc., EPS was a two penny loss. Possibly, some traders focused on that number rather than the underlying strength of the core business, because the stock fell through much of the day, dropping to $10 3/4 at one point. By late afternoon, however, some semblance of sanity prevailed, and PMSI's share price recovered, partially, on heavy volume of 357,200 shares. The stock closed at a bid of $11 5/8.

It's difficult to provide much in the way of in-depth analysis of the PMSI report (other than to note the blow-out EPS), because full financial data are not yet available. The company's practice is to release a skeleton earnings report early in the week and then provide full numbers after they've completed their 10-Q filing later in the week. I spoke with PMSI this afternoon, and they said they expected to have the 10-Q ready in a few days.

The spokesperson at PMSI pointed out that costs of the secondary offering are included in the 2Q report, so when that offering ultimately occurs, the associated costs will have already been accounted for. I was also informed that gross margins for Lithotripters, Inc. were comparable to PMSI's, and so the margins for the combined businesses are on a par with PMSI's pre-merger margins.

The company's press release notes that revenues improved not only from the joining of Lithotripter's, Inc. and PMSI but also from "improved internal revenue growth."

I'll have more to offer when the 10-Q is available. But for now, it's pretty tough for me to see how anyone can be anything other than impressed with PMSI's report. As Dr. Joe Jenkins says in the press release, PMSI is "clearly the urologist company, as we now provide lithotripsy services to 25% of all active urologists in the United States."

As for other Borefolio stocks, all of them experienced only a fraction of their normal daily trading activity on Monday. Cisco and TXI closed lower (along with the SPDRs), Shaw Group was unchanged on the bid-side, and Oxford Health Plans and Green Tree each gained $ 3/4.

One quick note on Cisco: the company announced today a multi-year, worldwide agreement with Compaq to develop the market for "industry-standard networking platforms using Cisco IOS software technology." The agreement extends the existing Compaq and Cisco strategic partnership, announced last year, to include joint sales and marketing activities. Compaq and Cisco will partner in various market development activities, recruit and train resellers, and train each other's field sales and engineering organizations on their respective products.

(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: 7/29/96