Boring Portfolio Report
ANN ARBOR, Mich. (Nov. 5) -- The Dow gained 40 points on Tuesday, the S&P
soared more than a percentage point in value to establish a new record at
714.14, and the Nasdaq advanced nearly 9 (+0.70%), assisted by a reassuring
earnings report from U.S. Robotics.
Stocks generally followed the bond market, where interest rates hit a seven-month
low. The yield on the 30-year Treasury bond fell to 6.59%. Stories on the
wire service attribute today's activity to the fact that traders "grew confident
the Republicans will retain control of Congress." We'll see.
The Boring Portfolio did not fare nearly as well as the broader market averages.
Fine gains by Cisco, Solectron, and Green Tree Financial were nearly offset
by losses in Carlisle, Prime Medical and, to a lesser degree, Borders Group.
Shares of Oxford Health were unchanged ahead of its quarterly earnings report
tomorrow morning. The Borefolio's net gain for Election Day: fifty whole
dollars, or +0.09%.
After the market closed, Cisco Systems reported its fiscal 1997 first quarter
results. Per-share earnings of $0.47, excluding one-time charges and gains,
beat analysts' consensus estimate by a penny. The range of estimates was
$0.44 to $0.48. That compares with EPS of $0.28 for the year-ago period,
and $0.43 for the quarter ending in July 1996 -- i.e., 68% year-over-year
growth and 9.3% sequential growth.
Net sales for the quarter were $1.43 billion, compared with $798 million
for the same period last year, an increase of 80%. Sales in the July quarter
were $1.3 billion, by the way. I might note that Cisco's fiscal first quarter
sales often tend to be a bit soft due to the fact that Europeans, being the
sensible folk they are, pretty much close up shop for the month of August.
In the quarter just ended, Cisco took a one time charge of $174.6 million,
or $0.26 per share on an after-tax basis, in connection with its purchase
of Telebit Corp. and its Modem ISDN Channel Aggregation (MICA) technologies.
Cisco also realized a one-time pretax gain of $55.1 million, or a nickel
a share (after-tax), from the sale of its minority stock investment in Cascade
Communications during the quarter.
The Motley Fool is covering Cisco's post-report teleconference as I write
this. We'll be offering a Foolish summary of that conference as soon as folks
at Fool HQ can get Randy (MF Templar) fed and back at his keyboard.
There was no specific news to account for today's gains in Solectron or Green
Tree. The former was presumably bolstered by improving news from the computer
front and the latter by the benign interest rate environment.
Nor for that matter was there any news on Carlisle or Prime Medical, today's
weaklings. Carlisle stock trades fairly thinly, and Tuesday was no exception.
A grand total of 27,500 shares changed hands -- a bit above average but hardly
a sell-off. It's possible that Carlisle may feel some transient repercussions
from the GM strike in Canada, but the over all picture looks fine.
I admit to being somewhat frustrated by PMSI. The stock has virtually
round-tripped since March. I notice that the latest information from First
Call shows PMSI's summary rating has slipped a bit: from 1.3 ("strong buy")
to 1.5 ("strong buy" to "buy").
I also notice that the consensus estimate for FY96 has dropped three pennies,
to $0.65. The consensus estimate for Q4 of 1996 remains at $0.16, however.
As I've pointed out in the past, analysts' estimates on PMSI offer a somewhat
muddled picture, because at least one analyst appears to have offered fully-taxed
earnings estimates, while others have not. (PMSI still has tax-loss
carry-forwards to defray its taxes.)
Please note that through three quarters of 1996, PMSI has already booked
$0.50 per share in fully diluted earnings, excluding one-time charges for
the canceled secondary offering. Now if analysts as a whole expect PMSI to
make $0.16 in 4Q, and if PMSI has already earned $0.50 through three quarters,
how is one to make sense of a consensus estimate of $0.62 for the full year?
Answer: you can't. Possibly the numbers in First Call have confused some
folks. Possibly the stock is being depressed by sales of stock by doctors
who were paid partly in PMSI stock in connection with recent lithotripter
acquisitions. Possibly, Jupiter is in the second house of Scorpio and the
di-harmonic oscillator has switched into the negative range.
Possibly, schmossibly. What I know for a fact is that the market is placing
a current value on PMSI that is not a whole lot higher than it was back in
March -- when the company was less than half of its present size. I intend
to call the company some time in the next day or so. As soon as I learn anything,
so will you.
Meantime, I'm gonna check the latest news on the elections and see whether
those bond traders guessed right.
Tuesday, November 5, 1996
Stock Change Bid
--------------------
BGP - 5/8 33.50
CSL -2 1/8 54.00
CSCO +1 1/8 61.75
GNT +1 1/2 40.88
OXHP --- 46.63
PMSI - 1/2 10.88
SLR +1 3/4 55.25
Day Month Year History
BORING +0.09% 0.50% 12.85% 12.85%
S&P 500 +1.05% 1.26% 14.88% 14.88%
NASDAQ +0.70% 0.62% 18.07% 18.07%
Rec'd # Security In At Now Change
2/28/96 200 Borders Gr 22.51 33.50 48.81%
2/2/96 200 Green Tree 30.39 40.88 34.51%
6/26/96 100 Cisco Syst 53.90 61.75 14.56%
3/8/96 400 Prime Medi 10.07 10.88 8.01%
8/13/96 100 Carlisle C 52.65 54.00 2.56%
10/15/96 100 Solectron 54.52 55.25 1.33%
5/24/96 100 Oxford Hea 48.02 46.63 -2.91%
Rec'd # Security In At Value Change
2/28/96 200 Borders Gr 4502.49 6700.00 $2197.51
2/2/96 200 Green Tree 6077.49 8175.00 $2097.51
6/26/96 100 Cisco Syst 5389.99 6175.00 $785.01
3/8/96 400 Prime Medi 4027.49 4350.00 $322.51
8/13/96 100 Carlisle C 5264.99 5400.00 $135.01
10/15/96 100 Solectron 5452.49 5525.00 $72.51
5/24/96 100 Oxford Hea 4802.49 4662.50 -$139.99
CASH $15435.93
TOTAL $56423.43