The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Oct. 6, 1997)

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

Today launches the fourth quarter for our Workshop screens, so now is a good time to review what has transpired in the first three quarters. (If you're wondering what drugs I'm taking, our reporting period extends from the first Friday of each month to the first Friday of the next in order to coincide with the publication date for Value Line.)

We generally report the monthly cycle returns for the growth stocks every day in this column, but the longer periods have produced some promising returns as well. And we all know that extending the holding period at least a year can generate a big tax break for those in the brackets above 28%.

Here's how the annual holding period is doing through the first three quarters of the year (the following results are through Friday's closing results):

81.34%  Relative Strength  
35.79%  YPEG Potential  
35.13%  Investing for Growth  
29.01%  S&P 500 Index  
23.46%  Low Price/Sales  
22.89%  Unemotional Growth  
20.57%  EPS Plus RS  
12.78%  Formula 90  

Aside from the Relative Strength screen's phenomenal year, thanks chiefly to DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>, the value-oriented YPEG Potential screen is putting in a solid performance, along with Investing for Growth. I mentioned some months ago that if the YPEG is going to be a useful screen, it would likely be over longer holding cycles. So far, this is being borne out. The big disappointment so far has been the Formula90 screen, which in previous years has done very well on an annual basis. This year, however, it got off to a rocky start and the shorter Formula90 update cycles have done much better.

Updating every six months has produced a good return for the screen where one adds the RS and EPS rankings together for a composite score. In fact, five of the seven screens are bettering the S&P 500 returns when updated every six months. Ahem, we're not talking about the anemic performance for Unemotional Growth, which naturally sinks based on the Sheard Effect. (When Sheard announces a new screen, it's doomed over the next year.)

57.07%  Relative Strength  
52.98%  Investing for Growth  
51.76%  YPEG Potential  
48.63%  EPS Plus RS  
35.18%  Formula 90  
29.01%  S&P 500 Index  
28.01%  Low Price/Sales  
15.78%  Unemotional Growth  

On a quarterly basis, the returns drop off a touch from the semi-annual updates, but predictable patterns have emerged. For example, the value-oriented YPEG Potential screen has not fared well on a shorter cycle. It needs more time for the inherent value pointed to by the screen to be recognized by the market.

62.60%  Relative Strength  
37.08%  Investing for Growth  
30.96%  Formula 90  
30.03%  Low Price/Sales  
29.01%  S&P 500 Index  
25.46%  EPS Plus RS  
16.00%  Unemotional Growth  
14.99%  YPEG Potential  

On the monthly cycle, the biggest disappointment for me, of course, is that the Unemotional Growth model hasn't caught back up with the S&P 500. I haven't given up hope, of course, and a good final quarter could launch the model back up near its ten-year historical return of 42%, but nevertheless, it pales in comparison to the gaudy numbers posted by the Relative Strength model. Don't get too caught up in single-year returns, however. The RS screen is being carried largely on the performance of a single mammoth gain in Dell Computer. When I tested this screen over longer periods, it produced returns only half as good as the Unemotional Growth model. Such is a problem with a five-stock portfolio. Being so concentrated, the performance leaves itself open for skewed numbers as a result of a single stock's unusual activity.

92.26%  Relative Strength  
40.77%  Investing for Growth  
33.62%  EPS Plus RS  
29.01%  S&P 500 Index  
28.53%  YPEG Potential  
24.56%  Low Price/Sales  
24.18%  Unemotional Growth  
23.56%  Formula 90  

We've one quarter left to track. Stay tuned and Fool on!

(The returns below include Monday's trading as well, the first day of our fourth quarter.)

Monthly Growth Screens
(Jan. 3 to present)
92.57%  Relative Strength  
40.07%  Investing for Growth  
34.63%  EPS Plus RS  
30.04%  S&P 500 Index  
29.36%  YPEG Potential  
26.97%  Unemotional Growth  
24.68%  Low Price/Sales  
23.75%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
29.67%  Dogs of the Dow  
27.08%  Dow Combo  
25.62%  Dow Jones Ind Avg  
24.97%  Unemotional Value  
24.97%  Beating the Dow  
24.68%  Beating the S&P  
19.09%  Foolish Four