The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Apr. 3, 1997)

When was the last time we saw strength in the Nasdaq despite weakness on the Dow? A few more days like this and the past month or so will have been merely dreary rather than dreadful.

In the Foolish Workshop message folder on AOL, reader Lane Darnton posted an interesting analysis of past sell-offs in the Unemotional Growth screen. Here's Lane's post:

"The following table shows every UG5 one-month loss from 1/87 through 12/96 that exceeded 10%, as well as every slide of two or more months' duration, of any size. The third column shows how the portfolio performed in the 12 months following the end of the loss. The fourth column shows the number of months it took the portfolio to recover from the loss, i.e., to return to the value at the end of the month before the loss began, counted from that month. All but two of these 14 losses were multi-month slides. Six were two months long, four were three months long, and two were four months long.

Loss     Amt. of    Next     Mos. to
Ended    Loss     12 mos.   Recover
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Oct-87   -37.5%    19.1%      19
Jan-88   -13.6%    43.7%       4
Aug-88   -14.2%    86.2%       7
Nov-88    -5.5%   112.2%       4
Jan-90    -8.1%    19.1%      14
Sep-90   -27.2%   128.6%       8
Jun-91    -8.0%    54.8%       4
Apr-92   -20.9%    93.8%       9
Mar-93    -2.8%    25.9%       3
Aug-93    -3.3%     8.6%       7
Jun-94   -15.0%    84.3%      12
Dec-94    -4.9%    53.4%       4
Dec-95   -18.0%    87.9%       4
Aug-96    -9.7%        *       4

*(Insufficient data to report next 12 months)

This looks like pretty good news to me. In no case for which data exists did the 12 months following a loss produce further loss, and in fact the average next-year return was a whopping 62.9%. In only 2 cases out of 14 did full recovery take longer than a year from the start of the slide. Of course, that doesn't ensure that this present slide won't turn into a complete market meltdown, but ask yourself: Do you really think it'll be worse than Oct-87? I don't."

Lane's analysis probably doesn't alleviate anyone's pain who has seen more than 25% losses in the UG approach so far in 1997, but adding a perspective which shows the model has suffered similar losses and bounced back quite well should allow you a perspective you don't get simply by watching three straight months of losses.

Hang in there.

Monthly Growth Screens
(Jan. 3 to present)
10.27%  Relative Strength  
0.48%  YPEG Potential  
0.30%  S&P 500 Index  
-0.80%  Low Price/Sales  
-7.23%  Investing for Growth  
-15.26%  EPS Plus RS  
-22.46%  Formula 90  
-26.98%  Unemotional Growth  

Annual Value Screens
(Jan. 1 to present)
 3.11%  Dogs of the Dow  
 1.96%  Beating the S&P  
 0.45%  Dow Jones Ind Avg  
-4.26%  Dow Combo  
-4.41%  Unemotional Value  
-4.41%  Beating the Dow  
-7.35%  Foolish Four