The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 19, 1997)

After a short period of terrific gains, the disk-drive makers crashed again today. WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> and QUANTUM CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QNTM)") else Response.Write("(Nasdaq: QNTM)") end if %> slipped 6% and 10% respectively. There wasn't any specific news apparently, just the drop down after recent euphoria.

Over the last few weeks, I've discussed a number of possible research projects I'd like to pursue in my copious spare time. Among them is a large-capitalization strategy for technology stocks to build upon the study James Glassman wrote about recently in the Washington Post, whereby one takes the five largest stocks in the Nasdaq 100 and holds for one year (annual returns of 33% since 1991).

But as one sharp reader pointed out, that's not much different from the Dow Approach returns over those six years. Nevertheless, the "Douglas Theory" explained in the article didn't focus exclusively on hi-tech stocks, but included any stock meeting the market-cap requirements. It also went no further than a market-cap test.

One possibility I proposed last week was a strategy taking the 15 or 20 largest hi-tech companies and then screening them using Relative Strength rankings from Investor's Business Daily. Occasionally I'll update you on a five-stock model using this screen I'm tracking informally while I work with some other readers on historical numbers.

To date, then, this approach for 1997 includes these stocks, and their returns through Friday's close:

Dell Computer (DELL) 77.4%
Intel (INTC) 18.5%
Seagate Technology (SEG) 22.8%
Microsoft (MSFT) 39.7%
Compaq Computer (CPQ) 26.6%

Average 37.0%
S&P 500 12.0%

I'll keep you posted as I discover more on such approaches. Keep in mind this test is in its infancy and may or may not be indicative of a worthwhile long-term approach. This may just be one of the broken eggs one has to clean up after cooking an omelet. Fool on!

Monthly Growth Screens
(Jan. 3 to present)
21.99%  Relative Strength  
11.39%  S&P 500 Index  
9.16%  Low Price/Sales  
0.74%  YPEG Potential  
-4.15%  Investing for Growth  
-10.27%  Unemotional Growth  
-17.20%  EPS Plus RS  
-25.75%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
13.84%  Dogs of the Dow  
12.11%  Dow Jones Ind Avg  
7.39%  Beating the S&P  
3.68%  Unemotional Value  
3.68%  Beating the Dow  
2.72%  Dow Combo  
-3.44%  Foolish Four