The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Apr. 22, 1997)

I mentioned in yesterday's and today's Foolish Four column that AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> is getting poked in the eye so far in 1997. An observant reader noticed, however, that many Dow investors who use the Foolish Four approach (skipping the cheapest stock) picked up INTERNATIONAL PAPER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %> instead of AT&T as those rankings fluctuated.

Obviously, an investor who holds International Paper instead of AT&T is seeing the difference between a gain and a loss for the year so far. The fact that these two stocks were flip-flopping for the coveted #2 position, on which many investors double the weighting, also raises some interesting questions.

The historical numbers aside (and they are compelling), I've never been a big fan of doubling the weight of any stock, regardless of its ranking. For precisely the reason we're seeing with the swap between AT&T and International Paper, a day's difference making a huge difference in one's portfolio performance, I prefer to keep all the stocks weighted evenly each year.

This goes against the numbers, of course, but one thing every investor has to take into account is personal preference and comfort factors. For me, doubling the weight of any stock makes me uneasy, so I simply go with even positions. For other investors, an elaborate weighting scheme may work perfectly well.

The point is take these proven systems to stock selection and then make them fit your own needs. A perfect example of that is the recent flood of questions by readers who have qualms about investing in PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> now that it's among the five low-priced high yielders. If you can't invest in a certain stock, just pretend it's not there and adjust the rankings around it.

Remember that this approach isn't as precise as we would perhaps like; it plays off of long-term averages and on average does very well. But a little fluff around the edges isn't going to destroy the strategy. Make it work for you, in other words.

Monthly Growth Screens
(Jan. 3 to present)
  9.97%  Relative Strength  
  3.55%  S&P 500 Index  
 -4.03%  Low Price/Sales  
 -7.93%  YPEG Potential  
-14.73%  Investing for Growth  
-23.68%  EPS Plus RS  
-25.49%  Unemotional Growth  
-30.02%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
 7.53%  Dogs of the Dow  
 5.98%  Dow Jones Ind Avg  
 4.00%  Beating the S&P  
-1.41%  Unemotional Value  
-1.41%  Beating the Dow  
-2.57%  Dow Combo  
-6.79%  Foolish Four