The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Nov. 3, 1997)

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

Now that the stock market has gyrated significantly for a short period, it's time to assess the damage to the Bits & Bytes Portfolio I've followed informally this year.

For those of you new to this portfolio, I took all of the stocks from the computer and computer-related industry groups within the S&P 500 and simply ranked the stocks by market-cap, taking the fifteen largest stocks at the beginning of 1997.

As you probably know, early in the year, the portfolio was going gangbusters as DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> and COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> soared to new heights.

Recently, however, these huge winners have taken it on the chin and have given back a chunk of the year's early profits. Nevertheless, I don't think any of us would sneer at the kinds of returns this simple screen has produced in 1997, even after the correction took its due.

58% Bits and Bytes Portfolio

27% S&P 500 Index

209% Dell Computer (DELL)

125% Compaq Computer (CPQ)

98% Applied Materials (AMAT)

80% Lucent Technologies (LU)

79% Texas Instruments (TXN)

61% Microsoft (MSFT)

56% Computer Associates (CA)

42% Sun Microsystems (SUNW)

35% Int'l Business Machines (IBM)

32% Cisco Systems (CSCO)

29% Oracle (ORCL)

25% Hewlett-Packard (HWP)

19% Intel (INTC)

4% Motorola (MOT)

-28% Seagate Technology (SEG)

If one had selected the five stocks from this list with the best Relative Strength rankings from Investor's Business Daily in January -- Dell, Compaq, MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> and SEAGATE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> -- the returns are even more impressive, despite Seagate's loss for 1997. The group of five is up 77% versus the market's rise of 27%. Not bad. Now if we could only come up with a Dell and a Compaq every year!

Don't take these results as an indication that you should call up your broker and start buying all of these stocks. This group is, in essence, a miniature sector fund, and like all sector concentrations, it will have good and bad periods and can be extremely volatile as the sector goes in and out of favor. I followed this screen strictly as an experiment to see how well large-cap stocks from the computer sector would do by themselves for those of us who concentrate on large stocks instead of small caps. It's worked wonderfully in 1997, but take that for what it is -- a single year's results and nothing more. As always, keep the larger picture in mind when making your investment decisions. Fool on!

Monthly Growth Screens
(Jan. 3 to present)
86.00%  Relative Strength  
31.74%  Investing for Growth  
30.26%  EPS Plus RS  
25.53%  S&P 500 Index  
19.54%  Formula 90  
16.50%  Low Price/Sales  
15.46%  Unemotional Growth  
15.25%  YPEG Potential  

Annual Value Screens
(Jan. 1 to present)
24.11%  Dow Combo  
23.51%  Dogs of the Dow  
23.16%  Beating the S&P  
22.94%  Foolish Four  
22.62%  Unemotional Value  
22.62%  Beating the Dow  
19.01%  Dow Jones Ind Avg