Workshop Portfolio

<FOOLISH WORKSHOP>

New Recipe for Success      

by David Forrest (workshop@fool.com)


Woodbridge, VA (April 16, 1999) -- One of the basic principles of being a Motley Fool is the notion that we're "relentlessly searching for better solutions." If you ever visit Global Fool HQ, you'll even see this phrase hanging next to the Foosball table and beneath the pretzels at the front desk. In the spirit of relentlessly searching for better solutions, I've been thinking about new ways to combine some of the things we talk about when screening stocks, namely Relative Strength, Beta, and stocks that are at or near their highs.

Relative Strength is a measure of how well a company's stock is performing relative to the rest of the market. I use a software program called TeleChart 2000 to filter for all of this stuff, by the way. It allows me to sort and search on a lot of different things. In order to search for high relative strength stocks, I merely sort the entire universe of stocks they have by the 26-week return percentage. I eliminate all stocks trading below $5 and go from there.

Beta is a measure of a stock's volatility. High-beta stocks generally do much better than the total market in good times and much worse in bad times. Low-beta stocks generally have less of a reaction than the general market in both up and down times. My premise is that the market historically rises, so owning high-beta stocks might be a good idea.

Stock at or near their highs is not a new idea. Many people have followed this idea in the past, including Bill O'Neill in his CANSLIM teachings and Tom and Dave in the Motley Fool Investment Guide.The thought here is that stocks hitting new highs are in favor with investors and, as an extension, perhaps they are doing all the right things with their businesses. This isn't always the case, but the premise exists nonetheless.

Using the three elements, we look for stocks in the top 95th percentile for both 26-week return and beta and then include any stock at or within 5% of a new high. What happens when you mix these three? Do you get chocolate in your peanut butter? Swiss almonds in your vanilla ice cream? Nope. It seems you get a list of some amazing performers. In recent months, the following stocks have appeared on the list. It's fair to note that they continue to be on the list, after several months. They include:

VeriSign (Nasdaq: VRSN)
Aware (Nasdaq: AWRE)
America Online (NYSE: AOL)
Yahoo! (Nasdaq: YHOO)

You'll notice that all of them are involved in the Internet. Of course, the Internet sector has been the place to be in the stock market, so maybe this screen does its job. Let me state that this really is momentum investing with a bit if a fine tune. Filtering out stocks not right near their highs helps you avoid anything that might be slipping lower. Looking for high beta emphasizes the volatility and possible strength. Using stocks with high 26-week return helps give a sense that something might be going well with the company. It also keeps out a lot of stocks hitting new highs that haven't been great performers.

All of the things I mention above in a positive light can also be turned on their heads and talked about negatively. In the past few days we've seen these highfliers get slammed. So, if you decide to experiment with this sort of screen at home, remember that volatility is a two-way street.

Have a great weekend,

Bogey

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.