Workshop Portfolio

<FOOLISH WORKSHOP>

Getting Started      

by Jim Stevens (jimstevens@aol.com)

Burlington, VT (July 29, 1999) -- Back to basics in the Workshop. I've received a number of e-mails asking for detailed instructions on getting started in one of the Workshop monthly strategies. For that matter, there's really not much difference in the way you go about getting started in a monthly screen vs. an annual one, so this goes out to all interested potential investors lurking in the Foolish Workshop.

I'm going to run through a trading example, but DO NOT take this as stand-alone advice for jumping into investing. It's only meant to be a guide for someone who has already done the homework, is well versed in the concepts of mechanical investing, fully understands all the risks involved, and is comfortable making these decisions on their own.

For this example, let's say we're going to invest in the Relative Strength-Investor's Business Daily screen, and there's $25,000 sitting in our account ready for action. I imagine that this can be scary for some first timers, even for someone who fully understands the ideas behind investing in stock screens. Once you've done it, I think you'll find it remarkably simple. I like inviting friends or relatives to watch me go through the process. When they see how it actually works it removes a lot of the mystery and they're not afraid to give it a try themselves.

Step one: Get copies of the latest Investor's Business Daily (IBD) and Value Line Investment Survey. Make a list of the 100 stocks ranked #1 for Timeliness in Value Line, then look up and write down the Relative Strength (RS), and Earnings per Share (EPS) ranking for each stock in the IBD tables.

Step two: Either by hand or with a spreadsheet program, sort the stocks in descending order of RS rank. Break any tie for the fifth position with the EPS score. Let's say the stocks you come up with are (these are not the current rankings):

                                    EPS   RS  
Qualcomm Inc. (Nasdaq: QCOM)        99    99 
VISX  Inc. (Nasdaq: VISX)           97    99
PMC-Sierra (Nasdaq: PMCS)           90    97
JDS Uniphase (Nasdaq: JDSU)         96    96
IDEC Pharmaceuticals (Nasdaq: IDPH) 70    96
Steps one and two are performed each week by Fools at Workshop HQ, and the results are posted here, but it is a great idea to do the rankings yourself to both double-check the Fool's results and to be certain you understand the process.

Step three: During market hours and when you're ready to trade, get current quotes for the 5 stocks you plan to buy. Using those quotes, divide one-fifth of your total investment by the share prices to determine how many shares of each company to buy. Always round DOWN. For the example above, that would look like this:

Qualcomm -- $5,000.00/154.75 = 32 shares
VISX -- $5,000.00/101.75 = 49 shares
PMC-Sierra -- $5,000.00/72.875 = 68 shares
JDS Uniphase -- $5,000.00/157.0625 = 31 shares
IDEC -- $5,000.00/88.25 = 56 shares

Step four: Pull the trigger! Place orders for the shares in the amounts you calculated. Some Fools prefer limit orders to market orders. Limit orders assure you that you don't pay more than you specify for a stock, but if your order doesn't go through (and on an active day with a hot stock, that's a very real possibility), you may end up paying even more for it the next day. Use limit orders with care.

If you're trading in a qualified retirement account, you'll want to check your balance and get a current quote before making the last buy so you don't go over your available cash. In most cases, rounding down will have covered any small increases in price between your quote and your order and, at most deep discount brokers, will cover your commissions as well. Even so, you should check before placing the last order. You might even find you have more cash than you thought and be able to pick up an extra share or two. In a margin account, you can count on your broker to give you a quick loan for any small discrepancy.

Well, that's it, you're off and running. In a future report I'll review a monthly/annual update of a Workshop screen.

Stay Foolish!


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.