The Daily Workshop Report
by Jim Stevens (MF Tools)

BURLINGTON, VT. (Mar. 21, 1997) -- The weekend is upon us, hail to the Lord of Leisure Time. The markets sure were a mixed bag this week. Today brought more uncertainty about interest rates and the strength of the dollar, and again the results were mixed. It looks like Robert might want to add TELLABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %> to his stop loss effectiveness watch list. The stock has been gaining for three days and if it stays up awhile, then some Workshop investors will no doubt be licking the wounds of the notorious dreaded "Whipsaw."

You have probably noticed that the money in the models we track here in the Workshop is all perfectly apportioned in equal dollar amounts in each company in each model at the beginning of each update period. How is this possible? Fractional shares? Ten or twenty trades every month? Well, the answer is that it is not possible. The Workshop portfolios are not real money; they do not have the same real life limitations as a real money portfolio.

A potential investor in these models would have to understand and come to peace with the fact that the costs of commissions, spreads, taxes and so fourth will affect actual results. As a practical matter though, a plan on how to deal with over-weighted or under-weighted stocks in one's portfolio before it is rebalanced at an update is probably a good thing to decide in advance.

Depending on the size of the portfolio and the cost of a trade, it will be different for each investor. If you took the 2.5% guideline for annual trading costs and reduced it by two thirds (because rebalance trades actually mean making about three trades) that might be a reasonable yardstick. When a rebalance is done, each trade would have to cost less than 0.83% of the value of the largest transaction. The slightly out of balance positions left over could be considered “close enough.” My humble opinion.

This is my last night here pinch hitting for MF DowMan. Thanks to all for the opportunity. Robert will be back with us soon, and he will faithfully fill this page with Foolishness each trading day. I have a new respect for that!

Monthly Growth Screens
     (Jan. 3 to present)
   5.51%  Relative Strength  
   4.82%  S&P 500 Index  
   3.68%  Low Price/Sales  
  -1.46%  YPEG Potential  
  -7.55%  Investing for Growth  
 -14.45%  EPS Plus RS  
 -20.86%  Formula 90  
 -22.40%  Unemotional Growth  
 

Annual Value Screens
     (Jan. 1 to present)
   5.53%  Dow Jones Ind Avg  
   5.20%  Dogs of the Dow  
   4.71%  Beating the S&P  
   0.92%  Dow Combo  
   0.55%  Unemotional Value  
   0.55%  Beating the Dow  
  -3.72%  Foolish Four