Boring Portfolio Report
ANN ARBOR, Mich. (Oct. 1) -- The Dow gained 23 points today to close above
the 5900 level for the first time in history, at 5904.90. The S&P 500
also set a new high at 689.08, after rising 2 points (+0.25%). Big board
volume was a creditable 419 million shares. The Nasdaq was less lucky, however,
losing 5 to close at 1221 (-0.44%).
As for the Boring Portfolio, it tallied five holdings up, two down (Borders
and TXI), and one unchanged (Cisco Systems) and managed to edge out the S&P
with a 0.26% gain in net asset value.
Today's Borefolio gold star goes to Green Tree Financial, which closed at
$40 even at 4pm Tuesday, which matches its record high first attained just
a few days ago. In subsequent trading, GNT was quoted at $40 5/8, on
above-average volume. As I've noted here recently, a relatively favorable
interest rate environment coupled with record-smashing business volume for
the company are what's helping this Tree grow.
Shares of TXI, on the other hand, have crumbled noticeably in the past few
weeks. Investors are apparently troubled by some recent price reductions
for some products of TXI's 85%-owned Chaparral Steel mini-mill. On the other
hand, scrap steel prices remain flat and overall steel production in the
US has been strong recently. My understanding is that EPS of $7.50 remains
a plausible target for the current FY, which would certainly merit a stock
price above $70. I'll check with the fellas in Dallas and report whatever
I find out, even if it turns out there's nothing to find out.
The Borefolio's two healthcare stocks, Prime Medical Services and Oxford
Health Plans rose today. Oxford Health's President, William Sullivan, was
interviewed by the Dow Jones Investor Network (DJIN) this afternoon. A RealAudio
recording of the interview is available for at the DJIN Website:
http://www.djin.com/
If you haven't registered at the DJIN site before, you'll need to do so to
access the RealAudio files (at no charge other than a few bits of info about
yourself). And you'll need a copy of RealAudio software, of course (which
you can download at the DJIN site). I listened to the interview this afternoon,
and it runs approximately 19 minutes. I recommend it highly -- partly for
the info it provides about Oxford Health and partly as a way to develop your
capacity as a wired individual investor.
In the interview, Sullivan makes his case for Oxford. He points out that
the company just experienced its greatest 12-month period of growth ever
(in absolute terms), despite the fact that Oxford's products were priced
10-15% higher than those of its competitors. So much for the theory that
all health plans are basically commodities and that consumers simply pick
the cheapest one.
Sullivan argues that while competitors were cutting rates in an effort to
gain market share -- and losing money hand-over-fist in the process -- Oxford
was pursuing a different strategy, which is to "create a different experience
for the customer." That experience revolves around choice for the member
and partnerships between Oxford and small groups of physicians that serve
to align the docs' incentives with the company's.
What that last point means is Oxford helps educate doctors on how to control
costs without compromising quality of care, while physicians in turn educate
Oxford about new treatments and procedures and also help the company establish
relationships with hospitals, nursing care providers, and other health
professionals.
Now that Oxford's competitors are raising their rates to recapture lost profits,
the price differential between them and Oxford will decrease, because Oxford's
pricing scheme is already generally where it needs to be. This should make
life as an Oxford competitor just that much tougher. A glimpse of that future
may perhaps be seen in Philadelphia. Oxford entered that market barely 18
months ago, and is already the #3 health plan provider -- on its way to #2.
Meanwhile, in Oxford's core New York market area, Aetna and US Healthcare
are completing their merger. Sullivan actually sees this as a plus for Oxford,
because his company now has only one major competitor in the marketplace,
where two used to exist. Moreover, as the merged company comes to resemble
the old Aetna less and US Healthcare more, that should work to Oxford's benefit,
because Aetna had been Oxford's keenest competition in the upper-tier market
niche, while USHC focuses on lower price-point products.
Sullivan ended his interview by affirming that the company is "very comfortable"
with analysts' consensus estimates for EPS of $0.32 for the third quarter
just ended and $1.20 for the year. In a previous interview, Oxford's CEO,
Stephen Wiggins, offered $1.77 as an estimate for 1997 -- which would imply
a year of fine 45-50% EPS growth ahead.
Transmitted: 10/1/96
Tuesday, October 1, 1996
BGP - 1/2 ...CSL + 3/8 ...CSCO ---...GNT + 3/4 ...OXHP + 1/8
PMSI + 1/4 ...SPY + 3/8 ...TXI - 7/8 ...
*Scroll down or expand screen for full portfolio accounting
Day Month Year History
BORING +0.26% 0.26% 16.70% 16.70%
S&P 500 +0.25% 0.25% 10.85% 10.85%
NASDAQ -0.44% -0.44% 17.34% 17.34%
Rec'd # Security In At Now Change
2/28/96 200 Borders Gro 22.51 36.75 63.24%
3/8/96 400 Prime Medic 10.07 13.50 34.08%
2/2/96 200 Green Tree 30.39 40.00 31.63%
6/26/96 100 Cisco Syste 53.90 62.00 15.03%
1/29/96 100 Texas Indus 54.50 59.00 8.26%
7/23/96 100 S&P Deposit 64.15 69.00 7.56%
8/13/96 100 Carlisle Co 52.65 55.88 6.13%
5/24/96 100 Oxford Heal 48.02 49.88 3.85%
Rec'd # Security Cost Value Change
2/28/96 200 Borders Gro 4502.49 7350.00 $2847.51
2/2/96 200 Green Tree 6077.49 8000.00 $1922.51
3/8/96 400 Prime Medic 4027.49 5400.00 $1372.51
6/26/96 100 Cisco Syste 5389.99 6200.00 $810.01
7/23/96 100 S&P Deposit 6414.99 6900.00 $485.01
1/29/96 100 Texas Indus 5449.99 5900.00 $450.01
8/13/96 100 Carlisle Co 5264.99 5587.50 $322.51
5/24/96 100 Oxford Heal 4802.49 4987.50 $185.01
CASH $8025.95
TOTAL $58350.95