Workshop Portfolio

<FOOLISH WORKSHOP>

Plowback Update

by Jim Stevens (JimStevens@aol.com)

Burlington, VT (Feb. 4, 1999) -- Well, I've checked in on two of the experimental screens I began tracking at the beginning of 1999, now for the third and last. Tonight it's the Plowback Ratio screen. It's been said that Warren Buffett is a fan of this measure of a company's use of earned cash. During the year or so we've been keeping an eye on it the screen has picked some great companies.

To bring new readers up to date, let me explain what the "plowback ratio" is and how the Workshop's Plowback Ratio screen works. Plowback ratio is one of the company balance sheet parameters that's tracked by Value Line, and they define it as "net profit less dividends divided by common equity including tangible assets, expressed as a percentage." Basically, it's the percent return on equity, but it doesn't count dividends as return.

The idea is that if a company is running a nice wide profit margin, continues to see enough expansion potential in its franchise, and has enough new ideas to keep building a bigger and bigger business, the future is bright.

To pick the high plowback stocks I am tracking, I used the following method: Starting with all 1700 stocks in the Value Line Investment Survey, select the 20 stocks with the largest market capitalization that also sport a plowback ratio of 25% or greater.

Here are the twenty that made the cut at the beginning of this year, along with how they've fared so far in 1999. They are listed in descending order of 26-week total return as of 12/31/98.

Sun Microsystems (Nasdaq: SUNW)   29.05%
Oracle Corp. (Nasdaq: ORCL)       40.87%
Int'l Business Mach. (NYSE: IBM)  -4.95%
Intel Corp. (Nasdaq: INTC)        16.97%
Dell Computer (Nasdaq: DELL)      47.40%
Amgen (Nasdaq: AMGN)              22.12%
Cisco Systems (Nasdaq: CSCO)      19.73%
Safeway Inc. (NYSE: SWY)          -8.21%
Guidant Corp. (NYSE: GDT)         -2.73%
Gap (The)  Inc. (NYSE: GPS)       19.27%
Lucent Technologies (NYSE: LU)     0.06%
Microsoft Corp. (Nasdaq: MSFT)    20.28%
Schering-Plough (NYSE: SGP)       -2.26%
Abbott Labs. (NYSE: ABT)          -4.85%
Campbell Soup (NYSE: CPB)        -20.00%
Sara Lee Corp. (NYSE: SLE)       -12.86%
Bestfoods (NYSE: BFO)             -7.75%
Caterpillar Inc. (NYSE: CAT)      -6.25%
Coca-Cola (NYSE: KO)              -3.73%
Computer Associates (NYSE: CA)    20.09%
                      Top 5       25.87%
                      Top 10      17.95%
                      Top 15      11.52%
                      All Twenty   8.11%

Well, well not a bad start at all! Remember this is an untested screen, so don't read too much into this short burst. Use this list to compare to your favorite screen performance, or maybe to key into certain companies that you'd like to study further.

Interesting that this screen is doing great and it doesn't even have any requirement for the stocks to be on Value Line's favored #1 or #2 lists. Sorry, Value Line analysts, you are unnecessary here.

Although the screen is awash with high tech outfits, it is not a narrow sector play to begin with. It found at least two non-tech companies that are trouncing the market so far this year, so you can't attribute all of its recent blip of success to the technology weighting.

I usually put up the most up-to-date plowback picks here, but Value Line's download page was broken when I tried it a few times. Below are the plowback screen stocks from the last Value Line edition I had downloaded, which was January 20, 1999. The stock list is amazingly static, so I wouldn't expect it's much different than a newer one. As usual, the stocks are listed in descending order of 26-week total return.

Sun Microsystems (Nasdaq: SUNW)  115.32%
Oracle Corp. (Nasdaq: ORCL)       96.14%
Intel Corp. (Nasdaq: INTC)        67.96%
Cisco Systems (Nasdaq: CSCO)      61.61%
Amgen (Nasdaq: AMGN)              58.95%
Dell Computer (Nasdaq: DELL)      55.91%
Int'l Business Mach. (NYSE: IBM)  53.1%
Gap (The)  Inc. (NYSE: GPS)       41.9%
Microsoft Corp. (Nasdaq: MSFT)    39.29%
Computer Associates (NYSE: CA)    22.9%
Safeway Inc. (NYSE: SWY)          21.79%
Lucent Technologies (NYSE: LU)    14.89%
Schering-Plough (NYSE: SGP)        9.83%
Abbott Labs. (NYSE: ABT)           5.73%
Sara Lee Corp. (NYSE: SLE)        -5.76%
Tellabs  Inc. (Nasdaq: TLAB)      -5.9%
British Amer Tobacco (NYSE: BTI)  -9.45%
Caterpillar Inc. (NYSE: CAT)     -11.57%
Campbell Soup (NYSE: CPB)        -18.86%
Coca-Cola (NYSE: KO)             -24.03%

Fool on!

Check out the latest file updates for the Workshop:
New Rankings | Workshop Returns


Workshop Portfolio


9/28/01 as of ~5:30:00 PM EDT

Ticker Company Price
Change
Daily Price
% Change
Price
AETAETNA INC NEW0.943.36%28.94
BABOEING CO(1.04)(3.02%)33.36
CATCATERPILLAR INC1.112.53%44.91
COGCABOT OIL & GAS 'A'0.693.59%19.90
DDDU PONT (EI) DE NEMOURS0.992.74%37.14
DGXQUEST DIAGNOSTICS(0.45)(0.73%)61.42
EKEASTMAN KODAK0.421.31%32.49
GMGENERAL MOTORS1.393.38%42.55
LHLABORATORY CORP AMER HLDG(NEW)1.141.42%81.21
MOPHILIP MORRIS COS(0.76)(1.55%)48.24
NEWPNEWPORT CORP0.261.90%13.97
NVRNVR INC(0.54)(0.38%)140.41
PKXPOHANG IRON & STEEL ADS1.097.51%15.61
PVNPROVIDIAN FINANCIAL1.075.64%20.04
QCOMQUALCOMM INC(0.40)(0.84%)47.16
RJRRJ REYNOLDS TOBACCO HLDGS(0.69)(1.19%)57.31
SLESARA LEE CORPUnchg.Unchg.21.09
UNFIUNITED NATURAL FOODS0.563.18%18.15
WMIWASTE MANAGEMENT(0.01)(0.04%)26.74

Overall Return -- total % Gained (Lost)
  Day Week Month Year
To Date
Since
Inception
(12/24/1998)
Workshop1.30%7.32%(12.02%)(20.66%)(18.91%)
Comparable S&P 500n/an/an/an/a(19.07%)
S&P 500 (DA)1.95%7.48%(8.33%)(21.22%)(14.88%)
NASDAQ2.02%4.71%(17.46%)(39.68%)(31.41%)
DJIA (DA)1.68%7.07%(11.07%)(17.86%)(2.22%)

Internal Rate of Return -- Annualized Rate of % Gained (Lost)
  Since Inception (12/24/1998)
Workshop(17.62%)
vs. S&P 500(17.63%)

Trade Date # Shares Ticker Cost/Share Price Total % Ret
1/8/0126MO40.9448.2417.82%
1/8/0122RJR50.1057.3114.39%
1/8/0167UNFI16.4518.1510.34%
12/24/9824CAT43.0844.914.24%
1/8/018NVR136.63140.412.77%
1/8/0140WMI27.4426.74(2.54%)
1/8/0150SLE22.5421.09(6.42%)
1/8/0161PKX17.8315.61(12.46%)
1/8/0115DD48.8337.14(23.95%)
1/8/0129AET38.1728.94(24.19%)
1/8/0139COG28.7519.90(30.79%)
1/8/0114QCOM75.5447.16(37.57%)
1/8/018LH134.6981.21(39.70%)
12/27/9918GM73.2642.55(41.92%)
1/8/0118BA59.5333.36(43.96%)
1/8/019DGX114.4961.42(46.35%)
12/27/9920EK65.0932.49(50.08%)
1/8/0120PVN55.5020.04(63.89%)
1/8/0115NEWP74.9613.97(81.36%)

Trade Date # Shares Ticker Total Cost Current Value Total Gain
1/8/0126MO$1,064.50$1,254.24$189.74
1/8/0122RJR$1,102.25$1,260.82$158.57
1/8/0167UNFI$1,102.12$1,216.05$113.93
12/24/9824CAT$1,034.00$1,077.84$43.84
1/8/018NVR$1,093.00$1,123.28$30.28
1/8/0140WMI$1,097.50$1,069.60($27.90)
1/8/0150SLE$1,126.88$1,054.50($72.38)
1/8/0161PKX$1,087.75$952.21($135.54)
1/8/0115DD$732.50$557.10($175.40)
1/8/0129AET$1,107.00$839.26($267.74)
1/8/0139COG$1,121.37$776.10($345.28)
1/8/0114QCOM$1,057.62$660.24($397.39)
1/8/018LH$1,077.50$649.68($427.82)
1/8/0118BA$1,071.50$600.48($471.02)
1/8/019DGX$1,030.44$552.78($477.66)
12/27/9918GM$1,318.62$765.90($552.73)
12/27/9920EK$1,301.75$649.80($651.95)
1/8/0120PVN$1,110.00$400.80($709.20)
1/8/0115NEWP$1,124.37$209.55($914.83)
 
Cash: 
Total: 
$10.80
$15,681.03
 

Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.
• DJIA (DA) = dividend adjusted. Dividends have been added to the total return of the DJIA.

Note
Note: The Workshop Portfolio was launched on December 24, 1998, with $4,000 which was invested in the Foolish Four strategy. Approximately $15,000 was added on January 8, 2001, to support five additional mechanical strategies. At that time approximately $1000 was transfered out of the Foolish Four strategy to bring the Foolish Four into balance with the other strategies. (That's why the Foolish Four's overall return is not consistent with stock values.) Such rebalancing will take place each year among the strategies so that each will start out with approximately the same value at the begining of the year. No more cash additions are planned. The first four tables above show the overall performance of the portfolio. Below that we also track the performance of each component strategy. All transactions are announced publicly before being made, and returns are compared daily to the S&P 500 and the Dow. (Dividends are included in the yearly, historic and annualized returns.) Stocks are chosen using strategies developed by the Workshop community.