The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Oct. 7, 1997) -- A number of readers have asked for more details about my large-cap relative strength screens, so I've decided to track them a bit more regularly in this column. First of all, let's give it a name instead of yet another ugly acronym, so before it takes on a life of its own, I'll call it the Keystone Portfolio.

The specific screening procedure is relatively simple and includes the following elements:

Begin with the 100 largest American stocks. This group is screened to include only those stocks with Value Line Timeliness rankings of either 1 or 2. (This usually narrows the field to 30 or 40 candidates.) Those stocks are then ranked by total return over the previous six months. Select as many stocks as you like from the top of the list and weight them equally.

Using some old Value Line data disks, I was able to run this screen for several months last year to give us a start tracking this portfolio. Here are the results since last summer.

From June 30, 1996 to June 30, 1997, the top ten stocks averaged 48% versus the S&P 500's gain of 32%.

From July 31, 1996 to July 31, 1997, the top ten stocks averaged 72% versus the S&P 500's gain of 49%.

From August 31, 1996 to August 31, 1997, the top ten stocks averaged 44% versus the S&P 500's gain of 38%.

From September 30, 1996 to September 30, 1997, the top ten stocks averaged 51% versus the S&P 500's gain of 38%.

From October 31, 1996 through today (three weeks short of a full year), the top ten stocks are up 60% versus the S&P 500's gain of 39%.

There's a five-month gap in my archive of data disks from November 1996 through March 1997, but I'll try to locate someone who has those disks so we'll have a complete record from June 1996 forward.

The pattern of returns has been consistent so far in each of the period's tests. While in every case, the entire group of stocks has out-performed the S&P 500, the ones ranked higher on the list have done better than the group's average, so the relative strength screen (total return over the previous six months) appears to give us a fine starting point for choosing among the thirty large-cap giants Value Line currently recommends.

The rankings today are dominated, as one might guess, by some of the computer makers. Here are the current rankings, thirty stocks in all.

Dell Computer (DELL)
Compaq Computer (CPQ)
Computer Associates (CA)
Texas Instruments (TXN)
Merrill Lynch (MER)
AirTouch Communications (ATI)
Schlumberger (SLB)
Warner-Lambert (WLA)
Int'l Business Machines (IBM)
Medtronic (MDT)
Cisco Systems (CSCO)
Tyco Int'l (TYC)
BankAmerica (BAC)
Home Depot (HD)
Travelers Group (TRV)
Oracle (ORCL)
Microsoft (MSFT)
Pfizer (PFE)
Schering-Plough (SGP)
Caterpillar (CAT)
General Electric (GE)
American Int'l Group (AIG)
Bank of New York (BK)
Norwest (NOB)
Intel (INTC)
Allstate (ALL)
Colgate-Palmolive (CL)
Wal-Mart (WMT)
Freddie Mac (FRE)
AlliedSignal (ALD)

There you have it, Fools; the Keystone Portfolio is born and I'll keep you updated periodically, both on the progress of the models already in place and on the rankings as they change in the future. Fool on!

Monthly Growth Screens
(Jan. 3 to present)
92.52%  Relative Strength  
39.55%  Investing for Growth  
35.10%  EPS Plus RS  
31.43%  S&P 500 Index  
31.21%  YPEG Potential  
28.85%  Unemotional Growth  
26.84%  Low Price/Sales  
23.73%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
29.61%  Dogs of the Dow  
28.12%  Dow Combo  
27.00%  Unemotional Value  
27.00%  Beating the Dow  
26.83%  Dow Jones Ind Avg  
24.07%  Beating the S&P  
21.46%  Foolish Four