Boring Portfolio Report
ANN ARBOR, Mich. (Dec. 9) -- Monday was good to the Boring Portfolio: six
stocks up, only two down (Borders and Oxford Health), and better than a one
percent gain in net value.
As good as that was, it didn't match the broader market averages today. The
Dow tacked on 80 points, the S&P 500 rose 1.37% and the Nasdaq soared
2.22%, as traders took their revenge on Alan Greenspan for daring to criticize
their "excessive exuberance."
Unfortunately for the Borefolio, its manager agrees with Chairman Greenspan
to a degree. And with 18% of Boring assets squirreled away in cash, there's
no way its gonna beat the market when the bull's got a full head of steam.
So should I move more of that cash back into the market? Actually ... yes,
I think so. But not indiscriminately -- i.e., not buying the (overvalued)
S&P 500 or the (even more overvalued) Dow Industrials. More than ever,
"value" is the operational term these days, and searching for value these
days just plain takes time. I'm looking, believe me.
I spent the week-end in San Jose, Calif. (more on that tomorrow), and on
the flight home I pored over the usual batch of investor-related magazines
to see if I could pick up any ideas. The current issue of _Worth_ had their
latest lists of "stocks to avoid" and value-priced "stocks to consider."
Hot dog. Just what I'm looking for. So I jotted down the lists. On the latter
were such issues as Hewlett-Packard (HWP:NYSE), Pharmacia & Upjohn
(PNU:NYSE), Salomon Brothers (SB:NYSE), and Whirlpool (WHR:NYSE). Not a bad
group: you got your tech, your health care, your financials, and your industrial.
When I got home, I powered up my spiffy new Mac clone and clicked over to
the First Call area on AOL to check the numbers. Hmm-m-m.
H-P's a terrific company -- on my short list of all-time faves. But value-priced
at 19-times FY97 earnings per share? I don't think so. Same thing with PNU,
currently priced at 17-times 1997 projected EPS -- same as its growth rate.
Saloman looks cheap at only 7-times 1996 EPS. But analysts are expecting
EPS to decline sharply next year for Salomon; and based on projected 1997
EPS, SB is fully-valued (to my eyes) at a forward p/e of 10.
Whirlpool? The company's located in my home state and is in a thoroughly
boring business, so I'd really like to find an excuse to buy WHR. Moreover,
the company's expected to grow EPS by a smashing 37% in the coming year.
But at a current price around $50, WHR is already trading at 15-times estimated
FY97 EPS of $3.28. That ain't exactly cheap for a cyclical with long-term
growth in the high single digits. Possibly still some upside, but hardly
a slam dunk.
By comparison, so-called high-fliers like Cisco Systems (up $2 3/4 today),
Green Tree Financial (up $ 5/8), and Solectron (up $ 1/2) are all trading
at multiples below their estimated long-term growth rates. Prime Medical
(which took over second place in the Borefolio standings today) is still
a steal 17-times projected EPS -- roughly half its long-term growth rate.
Even rocket ships like Oracle and Oxford Health are still a bit below full
value -- and that's for stocks growing 30%, 40%, or more annually.
So as I look for value, I find myself circling back to stuff I already own.
But I keep looking. With better than 7,000 choices out there, some high quality,
value-priced stocks still remain to be found, you can be sure.
Monday, December 9, 1996
Stock Change Bid
--------------------
BGP -1 1/2 35.25
CSL +1 1/2 59.38
CSCO +2 3/4 67.63
GNT + 5/8 39.00
ORCL +3 48.63
OXHP - 7/8 59.00
PMSI + 1/4 13.00
SLR + 1/2 58.00
Day Month Year History
BORING -0.84% -1.00% 18.54% 18.54%
S&P 500 -0.64% -2.30% 18.98% 18.98%
NASDAQ -0.96% -0.38% 23.70% 23.70%
Day Month Year History
BORING +1.03% 0.02% 19.77% 19.77%
S&P 500 +1.37% -0.96% 20.61% 20.61%
NASDAQ +2.22% 1.83% 26.45% 26.45%
Rec'd # Security In At Now Change
2/28/96 200 Borders Gr 22.51 35.25 56.58%
3/8/96 400 Prime Medi 10.07 13.00 29.11%
2/2/96 200 Green Tree 30.39 39.00 28.34%
6/26/96 100 Cisco Syst 53.90 67.63 25.46%
5/24/96 100 Oxford Hea 48.02 59.00 22.85%
8/13/96 100 Carlisle C 52.65 59.38 12.77%
10/15/96 100 Solectron 54.52 58.00 6.37%
11/21/96 100 Oracle Cor 48.65 48.63 -0.05%
Rec'd # Security In At Value Change
2/28/96 200 Borders Gr 4502.49 7050.00 $2547.51
2/2/96 200 Green Tree 6077.49 7800.00 $1722.51
6/26/96 100 Cisco Syst 5389.99 6762.50 $1372.51
3/8/96 400 Prime Medi 4027.49 5200.00 $1172.51
5/24/96 100 Oxford Hea 4802.49 5900.00 $1097.51
8/13/96 100 Carlisle C 5264.99 5937.50 $672.51
10/15/96 100 Solectron 5452.49 5800.00 $347.51
11/21/96 100 Oracle Cor 4864.99 4862.50 -$2.49
CASH $10570.94
TOTAL $59883.44
Transmitted: 12/9/96