Workshop Portfolio Y2K Port: Picking Your Screens for a New Millennium

By Moe Chernick (Moebruin)

EL SEGUNDO, CA (Dec. 21, 1999) -- With lots of people using these last days to put together their 2000 portfolios, I figured now would be the ideal time to review the screens of the Workshop and the Foolish Four. I will briefly discuss the pros and cons of the various screens, which are grouped by investment style. Hopefully this discussion will help you decide which ones best fit your portfolio.

Value Screens

Screen names: RP4/BTD/EYBTD
Holding period: one year
Pros:

  1. Long backtested screen with consistent results
  2. Only current value screen in the Workshop
  3. Value stocks are bound to come back in favor sooner or later
Cons:
  1. Historical returns less than growth screens
  2. Are dividends still a reliable indicator?
  3. With Dow removing cyclicals in favor of growth stocks, does the theory still hold?
Warning: Buying mega-cap stocks with high P/Es is not a substitute for a value screen.

Large-Cap Growth Screens

Screen names: Keystone/KeyEPS/Key100
Holding period: one year
Pros:
  1. Strong, consistent backtested returns that hold up with 30 stocks (Keystone, KeyEPS)
  2. Larger companies tend to be more stable than smaller companies
  3. Investing in theory that winning stocks tend to keep on growing
Cons:
  1. How will momentum stocks react during an extended market decline?
  2. Are the stocks overbought?

Screen name: Spark
Holding period: one year
Pros:
  1. Strong, backtested returns
  2. Larger companies tend to be more stable than smaller companies
  3. Stocks meet multiple criteria that indicate strong past and future growth
Cons:
  1. Since the screen uses fixed values that any number of stocks may or may not meet, the number that pass the criteria each week will vary. When too few stocks make it through, you might not get enough stocks to even fill the screen, or you may miss out on getting larger-cap stocks. If too many stocks make it through the screen, then stocks are picked just on the basis of being the mega-caps.

Screen name: Plowback
Holding period: one year
Pros:
  1. Strong, backtested returns for first few stocks
  2. Buying large-company stocks with huge momentum that are plowing money back into the company
Cons:
  1. Does it really work beyond the first few positions?

No-Size Growth Screens

Screen name: PEG-26 Weeks
Holding period: One year, six months, or three months
Pros:
  1. Strong, consistent, backtested returns especially for semiannual and quarterly holding period
  2. Buying strong momentum stocks that are still priced at a reasonable value
Cons:
  1. Annual returns not as consistent over various start months and have not been particularly compelling the last two years

Screen Name: RS-26 Weeks
Holding Period: one year
Pros:
  1. Strong, backtested returns, but not as strong as monthly version
  2. For some start months, the strategy works best when number one stock is skipped
Cons:
  1. Returns not consistent over various start months
Note: If using this screen in January, it is best to skip the number one stock.

Screen name: RS-IBD
Holding period: one year
Pros:
  1. Has performed well the last couple of years
  2. Adds in an earnings growth factor in deciding which stocks to buy
Cons:
  1. Has not been backtested beyond the last couple of years

Monthly Screens

Screen names: RS-26wk/RS-13wk/PEG-13wk
Holding period: one month
Pros:
  1. Screens perform more consistently and with higher returns than longer-period versions
  2. Screens have performed particularly well over the last two years
Cons:
  1. High costs, especially if investing less then $20K
  2. Time consuming, requires trading 12 times a year


Hopefully this synopsis will give you some points to think about when choosing your portfolio for 2000. A couple of suggestions:
  1. If you can afford it, pick at least a couple of screens.
  2. If you need more information on any of these screens, first look at the Report Archives for recent articles on these screens.
  3. If you still need help, go to the Workshop Board and post your question. You'll find many Fools ready to help.
  4. Don't invest in anything you don't understand.
Good luck with your portfolio. Until next time, Fool on!

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.