Boring Portfolio Report
ANN ARBOR, Mich. (Oct. 21) -- Mondays haven't been particularly kind to the
Boring Portfolio lately, and today was no exception. Seven of its nine components
slipped, three of them (Borders, Cisco, and Oxford Health) noticeably.
On the plus side, Green Tree Financial grew to a new height of $42, fed by
two news items. The first was that Lehman Brothers' analyst Mike Millman
had added Green Tree to Lehman's "Recommended List." (On Friday, I goofed
by saying that Millman was with Merrill Lynch. I caught the mistake over
the week-end and, given the advantages of online communication, corrected
it pronto. Sorry, Mike. I hope your boss didn't think you'd jumped ship.)
The second item was an announcement from Green Tree that it has signed a
definitive agreement to acquire the Manufacturer and Dealer Services (MDS)
division of Finova Group for approximately $600 million. That price represents
around a 10% premium to book, according to a press release from Finova.
MDS is "a leading provider of vendor-oriented sales finance programs involving
leasing and financing products for end-user customers."
What I think that means in English is that MDS is involved in leasing and
financing of various kinds of equipment and that MDS's chief customers are
small and medium-sized businesses. The press release goes on to say that
the equipment includes telecommunications, office equipment, computers and
peripherals, commercial laundry, and automotive diagnostics. Sounds sufficiently
boring.
According to Green Tree's chairman and CEO, Lawrence Coss, "The acquisition
of the MDS operation is a compelling strategic development for Green Tree
and its shareholders." He continued, "This acquisition represents a continuation
of Green Tree's successful diversification into new finance markets where
we can take advantage of existing company skills, such as superior credit
decision making, efficient loan servicing, and regular loan securitization."
Green Tree will report quarterly earnings tomorrow morning. Analysts are
looking for $0.61/share in earnings, which would be a 20% increase over last
year.
That's great news for Green Tree, but what about all those setbacks in the
Borefolio today? None of them appear to be stock-specific: there was no news
on any Boring stocks that might account for their losses.
Instead, there appears to be a bit of "profit taking" following the impressive
run-up in stocks recently -- and a proliferation of stories calling into
question current valuations of many stocks and the market as a whole. (I
will add my two pesos to that proliferation in a moment.)
The Dow lost only 3 points today, and the S&P 500 was off only 0.14%.
So on the surface, Monday looks like just another unremarkable day. What
these summary numbers fail to reveal, however, is that the market reversed
itself at mid-day from what had been shaping up to be a nice gain.
The Nasdaq was particularly hard hit. Not only did it lose half a percentage
point in value today, it tumbled nearly 20 points (the equivalent of roughly
100 Dow points) from its intra-day high. Technology stocks suffered pretty
much across the board, and Cisco -- which was the most active stock on the
Nasdaq today -- was among them, losing $2 3/4 (on the bid side). Pretty much
all the networking stocks fell, too.
Oxford Health dropped $1 3/4 on heavy volume of 1.9 million shares. There
was no news on OXHP today other than a story in the Wall Street Journal this
morning about persisting troubles among HMOs. Of course, that story hit the
wires back on Friday (I reported on it then.) Moreover, the story explicitly
mentions Oxford as one of the few bright spots in the industry. It's quite
possible that the item hurt OXHP, nonetheless.
Shares of Borders Group booked a pretty good loss today, too: down $1 3/8.
Absolutely no news, unless you count the fact that author Joyce Carol Oates
will be signing books here at the Ann Arbor store.
I remain upbeat about stocks for the long-run (no surprise there). I am a
bit concerned about the near-term, however. As I noted in a Boring recap
a week or so back, a good case can be made that the S&P 500 is a tad
over-valued in terms of a standard YPEG calculation -- the same kind one
would apply to a growth stock. The short-term payout on the S&P is also
falling behind that of short-term Treasuries (although not by much).
Thus, as we draw toward year's end, there may be a temptation for fund managers
to "book" the year a bit ahead of time and lock in what for many of them
has been a darned fine year.
I never panic (at least not about stocks). And I'm certainly not about to
make any dramatic moves in the Borefolio. But I am watching things a bit
more closely than I usually do.
According to the dictionary, the name Gregory means "vigilant watchman."
I think that fits about now.
Transmitted: 10/21/96
Monday, October 21, 1996
BGP -1 3/8 ...CSL - 1/4 ...CSCO -2 3/4 ...GNT + 5/8
OXHP -1 3/4 ...PMSI - 1/8 ...SPY - 3/32...SLR ---...TXI - 3/4
*Scroll down or expand screen for full portfolio accounting
Day Month Year History
BORING -1.30% -1.04% 15.20% 15.20%
S&P 500 -0.14% 3.28% 14.19% 14.19%
NASDAQ -0.49% 0.78% 18.78% 18.78%
Rec'd # Security In At Now Change
2/28/96 200 Borders Gro 22.51 34.63 53.80%
2/2/96 200 Green Tree 30.39 41.88 37.80%
3/8/96 400 Prime Medic 10.07 13.25 31.60%
6/26/96 100 Cisco Syste 53.90 60.63 12.48%
7/23/96 100 S&P Deposit 64.15 71.13 10.87%
8/13/96 100 Carlisle Co 52.65 57.00 8.26%
1/29/96 100 Texas Indus 54.50 56.38 3.44%
10/15/96 100 Solectron C 54.52 54.75 0.41%
5/24/96 100 Oxford Heal 48.02 44.38 -7.60%
Rec'd # Security Cost Value Change
2/28/96 200 Borders Gro 4502.49 6925.00 $2422.51
2/2/96 200 Green Tree 6077.49 8375.00 $2297.51
3/8/96 400 Prime Medic 4027.49 5300.00 $1272.51
7/23/96 100 S&P Deposit 6414.99 7112.50 $697.51
6/26/96 100 Cisco Syste 5389.99 6062.50 $672.51
8/13/96 100 Carlisle Co 5264.99 5700.00 $435.01
1/29/96 100 Texas Indus 5449.99 5637.50 $187.51
1/29/96 100 Solectron C 5452.49 5475.00 $22.51
5/24/96 100 Oxford Heal 4802.49 4437.50 -$364.99
CASH $2573.46
TOTAL $57598.46