Workshop Portfolio

<WORKSHOP>

Unemotional Growth -- Volatility Anyone?

By Jim Stevens (Workshop)

BURLINGTON, VT (September 7, 1999) -- Start your engines: Today we check in on the Unemotional Growth mechanical stock screen. For new readers, the Unemotional Growth (UG) screen is one of the first screens Robert Sheard devised in the Foolish Workshop. Instructions for running the screen can be found on our Screen Explanations page.

UG is a high-octane, mid/large cap growth screen that selects stocks based on earnings momentum as ranked by Investor's Business Daily (IBD). As Moe Chernick points out in his Before Investing in Unemotional Growth report, the returns are anything but steady on a month-to-month basis.

Looking back on the summer of 1999, we see more of the same trademark volatility with UG's returns truly magnifying the choppy movements of the Standard & Poor's 500 index. I didn't write an update for July so before I show you how UG screamed in August, I'll recap the UG meltdown of July 1999. For that trading month, the UG5 returned -13.18%, the UG10 returned -9.12%, while the benchmark S&P 500 was less dramatic, returning -6.54% for the same period. Ouch!

If you're following along at home and are looking to match any of these numbers to your own data sources, remember that the UG portfolio tracked here is based on doing all the hypothetical buying and selling at the closing prices for the first Friday of each month. That makes the trading period four weeks in most months but five weeks in four months of the year. It also means that each "trading month" spills into the following calendar month by up to a week.

Now for a more uplifting August UG performance.... The August period was off and running at the August 6, 1999, market close and finished up last Friday, September 3, 1999. Here's how the stocks fared:

Qualcomm Inc. (Nasdaq: QCOM)         10.58%
CTS Corp. (NYSE: CTS)                18.30%
Biogen Inc. (Nasdaq: BGEN)           22.69%
Charles Schwab Inc. (NYSE: SCH)       3.58%
Siebel Systems (Nasdaq: SEBL)        39.46%
Tellabs Inc. (Nasdaq: TLAB)           4.93%
Dycom Inds. (NYSE: DY)              -19.41%
Lucent Technologies (NYSE: LU)        4.24%
American Eagle Out. (Nasdaq: AEOS)   36.77%
Ann Taylor Stores (NYSE: ANN)         6.62%

UG5               18.92%
UG10              12.78%
S&P 500 INDEX      4.38%
Talk about rebounds! For the latest Unemotional Growth stocks, click on Current Rankings. As for the longer term record for UG, through August (since the first 1999 UG update) the returns now stand at 5.41% and 5.82% for the five- and ten-stock UG versions, respectively. The S&P 500 index returned 10.41% for that period. Since the beginning of the backtest for UG -- January 1987 -- the annual returns now stand at 35.71% for the UG 5 and 26.92% for the UG10.

This kind of volatility is enough to scare off even iron-stomached investors, so UG is certainly not for everyone. The model has been underperforming some of the other monthly traded momentum screens some Fools follow in the Workshop. While I can think of quite a few reasons why investors might shy away from a monthly traded momentum screen, short-term performance wouldn't make my list.

When you're comparing investments that are concentrated in such a small number of volatile stocks, an imbalance of a few big losers as opposed to a few huge gainers over periods of months or even years will make these short-term comparisons less than perfect.

Before declaring that a trend is emerging or that one model is "better," time periods of 10 or more years need to be compared. Unless we can think of some logical explanation as to why Investor's Business Daily's EPS rank is no longer a valid stock selection criterion, I don't think it should be discarded from the Workshop tool box -- at least not yet.

That's why I'm really excited about the Value Line grave-digging project and other comprehensive backtests that are being conducted by Fools posting in the Mechanical Investing message board. We probably will be able to sort through some of the Workshop tools and determine which ones to shelve and which ones to keep handy. Many of the theories and inclinations of knowledgeable board contributors will likely get borne out in the numbers, and new ideas will grow out of those. Collaboration at its best!

Stay tuned next time for another monthly model update, the Relative Strength - IBD screen. Fool on!


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.