Boring Portfolio Report
ANN ARBOR, Mich. (Sept. 26) -- The Dow slipped 8.5 points in a rockin', rollin'
session that saw a half-billion shares change hands on the NYSE. After all
of that commotion, the S&P 500 index finished virtually exactly where
it started the day.
Over on the Nasdaq, the pace was even more hectic, what with all those Iomega
electrons zippin' through the wires. The Naz gained 3 points, well off its
intra-day high.
Meantime, the Boring Portfolio bored right along, gaining three-quarters
of a percentage point in value and setting yet another high, at $58,641.
Five stocks were up, two down fractionally, and the Spiders stayed put in
their web.
Green Tree Financial set a new high of $39 3/8, on volume of over a half-million
shares. In part, GNT continues to benefit from the favorable interest-rate
environment. At the same time, though, the company has hardly been content
to snooze at the oars and drift on the waves of the prevailing yield curve.
For its part, Green Tree has had an absolutely monster third quarter, with
sales/securitization volume (of $2.3 billion) up 65% year-over-year. Margins
are improving, as well.
Wait, there's more! As I've noted here a coupla times, the sweetheart bonus
deal that Green Tree's CEO, Lawrence Coss, negotiated a few years ago will
expire in 1997. The CEO's bonus has been estimated to be worth something
like $.44/share for 1996; next year, the impact could be perhaps a tenth
of that, as I understand it.
Taking all this into account, Lehman's Michael Millman today raised his near-term
target price for GNT to the mid-$40s, based on his projected EPS for FY97
of $2.90. Sounds about right to me.
Cisco tacked two-bits on to yesterday's fine gain, on volume of nearly nine
million shares. The stock was as high as $65, intra-day. Cisco announced
today that it has selected Amsterdam as the site for the company's new
centralized European fulfillment center. Scheduled to open early next year,
the new operation will include distribution and telemarketing centers and
will consolidate many of Cisco's administrative, distribution and sales functions
for markets in Europe, Africa and the Middle East.
Fine, fine. But what about Shaw Group??
Well, Shaw Group announced today that it is following the lead of America
Online, JLG Industries, and a number of other companies in immigrating from
the Nasdaq to the Big Board, now that the company meets the NYSE's eligibility
requirements. Pending NYSE authorization, the company said trading on the
NYSE is anticipated to begin in mid-October.
In the company's press release, J.M. Bernhard, Jr., president and CEO, commented,
"The decision to list our Common Stock on the world's most recognized exchange
emphasizes our commitment to maximize shareholder value, as we believe the
listing will help lower transaction costs, reduce trading volatility and
provide greater liquidity. In addition, being listed on the New York Stock
Exchange should provide us with greater exposure to the worldwide investment
community."
For what it's worth, I think he's exactly right. It's a terrific decision.
Everything appears to be clicking for the company.
But the enthusiasm surrounding this news has now pushed the stock to where
it's trading at 24-times projected EPS of $1.50 for FY97, which ends in August.
True, even that healthy multiple is well below what would represent a 59%
EPS advance over FY96 if all worked according to plan. But presumably stock's
are valued on a company's likely *sustainable* earnings (or at least I persist
in thinking so); and 24% annual growth is pretty tough even for piping-hot
Shaw Group to sustain, in my opinion.
Therefore, I've decided to sell the remaining 100 SHAW in the Borefolio sometime
during the next five trading days, as per The Motley Fool's trading policy.
Is there a chance that the stock could continue to rise once it makes the
move to the Big Board? Oh, indeed there is. So please don't base your investing
decision simply on what I've decided. If after you've thought through the
plusses and minuses you decide you'd like to stand pat -- or even buy more
-- then please go with your decision, not mine.
In any event, I've come to admire The Shaw Group as a company, and I'll continue
to watch it develop. Should the stock prove to be a good buy at some later
date, you may well find me stepping back in -- even perhaps at a higher price.
Transmitted: 9/26/96
Thursday, September 26, 1996
BGP - 1/2 ...CSL + 7/8 ...CSCO + 1/4 ...GNT + 7/8 ...OXHP +1 3/8
PMSI ---...SHAW +1 3/8 ...SPY ---...TXI - 1/8 ...
*Scroll down or expand screen for full portfolio accounting
Day Month Year History
BORING +0.77% 8.70% 17.28% 17.28%
S&P 500 +0.01% 5.19% 10.33% 10.33%
NASDAQ +0.28% 7.58% 17.97% 17.97%
Rec'd # Security In At Now Change
4/12/96 100 The Shaw Gr 18.84 36.50 93.72%
2/28/96 200 Borders Gro 22.51 37.00 64.35%
3/8/96 400 Prime Medic 10.07 14.38 42.77%
2/2/96 200 Green Tree 30.39 39.38 29.58%
6/26/96 100 Cisco Syste 53.90 63.38 17.58%
1/29/96 100 Texas Indus 54.50 59.88 9.86%
7/23/96 100 S&P Deposit 64.15 68.63 6.98%
8/13/96 100 Carlisle Co 52.65 55.25 4.94%
5/24/96 100 Oxford Heal 48.02 48.25 0.47%
Rec'd # Security Cost Value Change
2/28/96 200 Borders Gro 4502.49 7400.00 $2897.51
2/2/96 200 Green Tree 6077.49 7875.00 $1797.51
4/12/96 100 The Shaw Gr 1884.16 3650.00 $1765.84
3/8/96 400 Prime Medic 4027.49 5750.00 $1722.51
6/26/96 100 Cisco Syste 5389.99 6337.50 $947.51
1/29/96 100 Texas Indus 5449.99 5987.50 $537.51
7/23/96 100 S&P Deposit 6414.99 6862.50 $447.51
8/13/96 100 Carlisle Co 5264.99 5525.00 $260.01
5/24/96 100 Oxford Heal 4802.49 4825.00 $22.51
CASH $4428.44
TOTAL $58640.94