Boring Portfolio Report
ALEXANDRIA, Va. (Nov. 25) -- I don't usually write about stocks. My job at
The Motley Fool consists mainly of making sure that we're growing in the
right direction and in the proper proportion. Call me the bottleneck. Call
me the brakeman. It ain't glamorous stuff, but as I see it, if I don't yank
the handle back occasionally, the whole damn Fool trolley might careen into
a glass factory or a fruit stand.
Of course, being the company's wet blanket isn't the only role I fulfill.
Every once in a while, I do take some time to kick back, relax, and micromanage.
I spontaneously change headlines on the main screen. I complain about mailing
labels. I hold meetings on why the Xerox lid is left up instead of down.
It's a nasty habit -- often counter-productive -- but there it is. The point
is that recently I took a look at the Boring Portfolio and began to wonder
what the heck companies like Cisco and Oracle were doing in it. Weren't these
well-publicized tech stocks? Shouldn't the Boring Portfolio be a showcase
for the quiet giants who got fat off of things like caskets, cement mixers
and porta-lets?
But like I said, I don't know a whole lot about investing. Part of the danger
of being a brakeman and a micromanager is that I might slam the brakes on
something that might seem out of control to me, but that is perfectly in-line
to someone else. Put the trolley brakeman in the driver's seat of a moving
bus and he's gonna slam the thing to a stop. After all, the bus requires
steering, something the brakeman never needed to understand before.
This is a long and roundabout way of saying that I figured that I had better
understand what I was writing about before I questioned it. And so, as I
often do, I translated stocks into sports. My simple mind works best that
way. Revelation was the result.
I am a native Chicagoan and a typical one; I worship my hometown sports teams.
Lately, Chicago's franchises seem to be eager and avid collectors of players
considered "bad boys" around their respective leagues. Few people on Earth
don't know that Dennis Rodman brought his wild mood swings, gender-bender
frolics, and amazing technicolor hairdo to the basketball Bulls last year.
Not long after that, the football Bears brought aboard the occasionally
over-exuberant linebacker Bryan Cox, best known for flipping off the entire
city of Buffalo. Fight fanatic and former felon Bob Probert brought his bluster
to the hockey Blackhawks a few years back. And most recently, the Chicago
White Sox signed Albert Belle to a five-year deal. Belle is most famous for
firing baseballs and fits at fans and sportswriters.
At the time of their signing, each of these players was subjected to a level
of scrutiny that far superseded that of their peers. Every move they made,
every word they spoke, was dissected and pontificated upon by writers and
fans across the country. The teams were scolded publicly -- warned that they
were taking significant risks by investing their money in such anti-social
types. At the time of their signing, each player was hyped in the same way
that many financial journalists hype story stocks.
But so far, each player seems to have defied the skeptics, making terrific
contributions to all of my favorite teams (heh-heh). Why? How could so many
have been so wrong? Because fundamentally, these impulsive, explosive and
sometimes outrageous icons of professional sport are Boring.
And because of it, they make for terrific investments.
Each of these players does one thing, does it well, and does it consistently.
Bob Probert is an intimidator -- in a tough sport, he is a crucial role player
who serves by scaring opposing players into mistakes and protecting teammates
more talented than he is. Dennis Rodman is a rebounder. He doesn't look to
score. He grabs loose balls, giving his teammates second chances and preventing
opponents from the same. Bryan Cox fills gaps. He has an uncanny knack for
knowing which hole in the offensive line provides the quickest route to the
ball. And Albert Belle simply hits the stuffing out of the baseball. None
of these players carries their team, but all of them provide a crucial component
to a successful mix. Oh sure, they tend to attract a bit more attention than
the typical Boring stock, but the attention is usually focused on what they
do when they're NOT playing, when they're NOT producing.
The simple fact that a player is popular or polarizing doesn't mean he can't
be Boring in nature. In the same way, just because companies like Cisco and
Oracle are well-publicized leaders in the incredibly broad field of technology
doesn't mean they ain't Boring. In the end, judge the value of the stock
or the player on the importance of the trade they ply and how they ply it,
not the attention they garner or the controversy they might inspire.
Another revelation: sometimes, the brakeman isn't putting on the brake to
stop the car. Sometimes, he's just slowing down to figure it all out before
he finally gets back up to speed.
Today's Results:
On Monday, the Boring Portfolio lagged the S&P, and would have done so
even more glaringly if not for the performance of Oxford Health (up $4 1/8)
. MF Boring drops in a few paragraphs from the sunny south seas:
Oxford Health received some very favorable coverage in the current Barron's.
The magazine features an interview with David Talbot, president of HealthReform
Partners, and asset management company focusing on the companies that will
be the leaders in what Talbot sees as a "revolution" in the $2.5 trillion
healthcare industry -- a revolution that will improve the quality of care
while at the same time "rationalizing" care from an economic perspective.
Talbot singled out Oxford as "a prototype for how you should run an HMO,"
noting that the Ox "roared through with a 98% gain in earnings - all internally
generated."
Talbot argues (as I have for months now) that OXHP "is not efficiently priced."
He notes that for years now, Oxford has been growing so much faster than
other HMOs "that we have to ask ourselves what Oxford is doing differently."
Oxford is "running circles around everybody." Talbot notes Oxford's leadership
in developing and partnering with physician practice management groups, or
PPMs, that specialize in care of particular diseases. He also thinks Oxford
is "also a very interesting play on information technology. Their in-house
information-technology system is quite excellent, and it goes a long way
to account for their ability to bring home earnings when their revenues are
growing as rapidly as they have been."
Talbot concludes: "Oxford is probably two years ahead of most Wall Street
analysts - and is the Intel of managed care. And yet it's selling at 28 times
1997 earnings, which - considering that we estimate at least 50% growth -
is not a full valuation for this extraordinary company."
Monday, November 25, 1996
Stock Change Bid
--------------------
BGP + 1/4 35.63
CSL --- 56.88
CSCO - 1/4 67.25
GNT + 1/4 41.25
ORCL - 1/8 49.63
OXHP +4 1/8 58.50
PMSI --- 11.38
SLR - 3/4 59.13
Day Month Year History
BORING +0.72% 6.22% 19.27% 19.27%
S&P 500 +1.12% 7.34% 21.79% 21.79%
NASDAQ +0.48% 4.82% 23.00% 23.00%
Rec'd # Security In At Now Change
2/28/96 200 Borders Gr 22.51 35.63 58.25%
2/2/96 200 Green Tree 30.39 41.25 35.75%
6/26/96 100 Cisco Syst 53.90 67.25 24.77%
5/24/96 100 Oxford Hea 48.02 58.50 21.81%
3/8/96 400 Prime Medi 10.07 11.38 12.97%
10/15/96 100 Solectron 54.52 59.13 8.44%
8/13/96 100 Carlisle C 52.65 56.88 8.02%
11/21/96 100 Oracle Cor 48.65 49.63 2.00%
Rec'd # Security In At Value Change
2/28/96 200 Borders Gr 4502.49 7125.00 $2622.51
2/2/96 200 Green Tree 6077.49 8250.00 $2172.51
6/26/96 100 Cisco Syst 5389.99 6725.00 $1335.01
5/24/96 100 Oxford Hea 4802.49 5850.00 $1047.51
3/8/96 400 Prime Medi 4027.49 4550.00 $522.51
10/15/96 100 Solectron 5452.49 5912.50 $460.01
8/13/96 100 Carlisle C 5264.99 5687.50 $422.51
11/21/96 100 Oracle Cor 4864.99 4962.50 $97.51
CASH $10570.94
TOTAL $59633.44
Transmitted: 11/25/96