The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Oct. 14, 1997)

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

All this week, I'm discussing large-capitalization screens in the Workshop. Yesterday, to kick things off I posted a current list of the 100 largest stocks in America. Today I'll cover one of the several large-cap strategies we've been discussing in recent months -- the Bits & Bytes Portfolio.

The Bits & Bytes Portfolio grew out of the hoopla this summer surrounding the Douglas Theory, which simply buys the five largest stocks of the Nasdaq 100 and holds them for one year. (Over the past five years, it's done very well, surprise, surprise.) Since the group of five obviously includes industry giants MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> and INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, I wondered if opening the field to computer- and computer-related stocks from all exchanges would give us our own no-brainer version of a sector fund.

And so the Bits & Bytes Portfolio was created. (I called it the Technology Fund for a while, but as you know, technology is these days becoming so vague as to be almost meaningless.)

The procedure for this approach is simple. I gathered a list of the computer- and computer-related stocks from the S&P 500 industry group listings on their website (www.stockinfo.standardpoor.com) and then ranked the stocks solely by size (market cap). The fifteen largest made up the Bits & Bytes Portfolio.

As a side measure, I also checked the Relative Strength rankings in Investor's Business Daily as of the beginning of the year for these fifteen stocks and identified the five with the best RS scores.

Year-to-date, here are the portfolio results:

High RS Five 104%

Bits & Bytes Fifteen 78%

S&P 500 30%

270% Dell Computer (DELL)*

178% Applied Materials (AMAT)

150% Compaq Computer (CPQ)*

113% Texas Instruments (TXN)

90% Lucent Technologies (LU)

77% Sun Microsystems (SUNW)

64% Microsoft (MSFT)*

51% Computer Associates (CA)

38% Intel (INTC)*

36% Int'l Business Machines (IBM)

34% Hewlett-Packard (HWP)

29% Oracle (ORCL)

27% Cisco Systems (CSCO)

19% Motorola (MOT)

-1% Seagate Technology (SEG)*

* denotes a High RS stock on January 1, 1997

Today, the fifteen stocks one would include using the same criteria are very much the same:

Microsoft (MSFT)

Intel (INTC)

Int'l Business Machines (IBM)

Hewlett-Packard (HWP)

Lucent Technologies (LU)

Cisco Systems (CSCO)

Compaq Computer (CPQ)

Motorola (MOT)

Oracle (ORCL)

Dell Computer (DELL)

Computer Associates (CA)

Texas Instruments (TXN)

3Com (COMS)

Applied Materials (AMAT)

Sun Microsystems (SUNW)

Using Total Return over the previous six months as our proxy for Relative Strength, the top five are Dell, Compaq, Applied Materials, Computer Associates, and 3Com, with Lucent Technologies running a very tight sixth.

Tomorrow, we'll continue our series on large-cap screens with Ethan Haskel's ([email protected]) variation on the Dow Dividend Approach, Beating the S&P.

Monthly Growth Screens
(Jan. 3 to present)
92.34%  Relative Strength  
41.84%  Investing for Growth  
36.18%  EPS Plus RS  
31.44%  YPEG Potential  
29.71%  S&P 500 Index  
27.83%  Unemotional Growth  
25.45%  Low Price/Sales  
23.61%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
28.79%  Dow Combo  
27.59%  Unemotional Value  
27.59%  Beating the Dow  
27.32%  Dogs of the Dow  
25.56%  Dow Jones Ind Avg  
24.19%  Beating the S&P  
21.61%  Foolish Four