The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Sept. 5, 1997)

Scroll to the bottom for year-to-date Growth and Value Screen results.

In yesterday's column, I presented the results of an informal study applying a one-year total-return screen to a group of more than 300 large-cap stocks taken from the Value Line database in order to get a 15-stock portfolio each year since 1988.

The annualized growth rate of 52% for the period of almost ten years, of course, is phenomenal, but it may be somewhat "tainted" (as I suggested) by the fact that these stocks were undoubtedly not all considered large caps ten years ago. Some of the stocks that have enjoyed phenomenal success in recent years may have moved into the large-cap group only recently.

As a comparison, then, I also ran the same screen on the entire universe of U.S. stocks in the Value Line database (some 1500 issues). And while the returns weren't nearly as consistent as with the large-cap stocks, it was still a useful screen overall.

Here are the year-by-year returns, which add up to an annualized return for the whole period of 41%.

1988      2.72%
1989     49.38%
1990     -1.80%
1991    139.80%
1992     22.16%
1993     49.00%
1994     13.48%
1995    119.91%
1996     24.86%
1997     35.11%

There were far more bad performances in this test than in the large-cap test, but again, without having the exact market-cap data for each year, it's impossible to make too strong a claim for any result. But the results from this informal test are promising enough that the approach bears watching in a real-time test.

As an alternative, I also ran a test with a few more considerations added in, but used the actual data from a year ago to get a full year's results in what would have been "real time." Using the data from the end of last August, I screened the field of U.S. large-cap stocks, then screened further for only those stocks ranked either 1 or 2 for Timeliness. Finally, I sorted by total return over the previous six months and selected the top 15. Wowsa!!

The one-year return for the group of 15 was 96.15%. Here are the individual stocks:

 516.22% Dell Computer (DELL)   
  22.54% Nike (NKE)
  39.23% American Stores (ASC)
 117.15% Dayton Hudson (DH)
 144.95% Intel (INTC)
 100.42% Tellabs (TLAB)
  50.72% The Gap (GPS)
  57.59% Wal-Mart (WMT)
  24.40% Service Corp (SRV)
  48.83% Coca-Cola (KO)
 139.87% Microsoft (MSFT)
  48.99% Home Depot (HD)
  64.83% Monsanto (MTC)
  17.72% Parametric Tech (PMTC)
  48.79% Safeway (SWY)

If you run the same screen today, here are the top 15:

Dell Computer (DELL)
Compaq Computer (CPQ)
Applied Materials (AMAT)
Sun Microsystems (SUNW)
ServiceMaster (SVM)
Computer Associates (CA)
Warner-Lambert (WLA)
Progressive of Ohio (PGR)
Caterpillar (CAT)
Tellabs (TLAB)
The Gap (GPS)
Linear Technology (LLTC)
Halliburton (HAL)
EMC Corp. (EMC)
Schlumberger (SLB)

And on a final note, this weekend marks the updates to the monthly screens in the Workshop. The new Investing for Growth rankings, for those of you wanting a sneak preview, are as follows:

Iomega (IOM)

Western Digital (WDC)
Dell Computer (DELL)
Quantum Corp. (QNTM)
Sun Microsystems (SUNW)
Compaq Computer (CPQ)
Helen of Troy (HELE)
Dollar General (DG)
Franklin Resources (BEN)
Price, T. Rowe (TROW)

Fool on!

Monthly Growth Screens
(Jan. 3 to present)
78.70%  Relative Strength  
36.11%  Investing for Growth  
24.21%  S&P 500 Index  
22.47%  EPS Plus RS  
21.89%  Low Price/Sales  
20.48%  YPEG Potential  
17.40%  Unemotional Growth  
13.24%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
22.73%  Dogs of the Dow  
21.31%  Dow Jones Ind Avg  
18.86%  Beating the S&P  
18.47%  Dow Combo  
17.76%  Unemotional Value  
17.76%  Beating the Dow  
10.29%  Foolish Four