Friday, February 06, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (February 6, 1998) -- As many of you know, Kentucky was blanketed this week with one of the worst snowfalls ever recorded in the Bluegrass state. Unfortunately, that has meant suspended postal delivery since Tuesday and no newspaper delivery from Investor's Business Daily, even at local newsstands. Today's Workshop Rankings and Workshop Database updates, then, are only partial reports. I will fill in those gaps when normal delivery schedules resume here in the Bluegrass. Sorry about the inconvenience.

This week's update for the Workshop Returns for 1998, however, is complete, and the progress for the screens overall is still very positive. Through the close on February 4, seven of our eight Workshop screens are ahead of the S&P 500 Index's gain of 3.88%, with only the original Investing for Growth model showing a losing return at this stage.

Unfortunately for the Classic IFG, it holds three of the worst five stocks among all Workshop stocks. Talk about piling on! ADC Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADCT)") else Response.Write("(Nasdaq: ADCT)") end if %> is down 52%, Adaptec <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADPT)") else Response.Write("(Nasdaq: ADPT)") end if %> has slumped by 36%, and Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> has given up 19%. And yet the IFG screen is only off by a total of 2.55%. Not too bad considering those three stocks' performance year-to-date.

Best Buy <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %> continues to lead the pack with a 50% gain so far in 1998, boosting both of the pure Relative Strength screens. But a number of stocks are sporting gains between 20% and 30% so far, including Airborne Freight <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABF)") else Response.Write("(NYSE: ABF)") end if %>, Alaska Air Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALK)") else Response.Write("(NYSE: ALK)") end if %>, Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %>, Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>, Newport Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NEWP)") else Response.Write("(Nasdaq: NEWP)") end if %>, and Rio Hotel & Casino <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RHC)") else Response.Write("(NYSE: RHC)") end if %>. With four of these stocks in the Low Price/Sales screen, it's not surprising to see that one leading the field so far with a 13.27% return.

It's far too early to tell whether the gap is significant, but while the Classic IFG approach is down 2.55%, its first cousin, IFG with Relative Strength, is up by 10.12%. We've never run a backtested history of IFG with Relative Strength, but a number of readers believe replacing the classic method's industry ranking with a relative strength screen as the final step in the process of choosing the stocks will accomplish two things. First, it will focus on the stocks currently performing best out of the short list of potential IFG candidates. And second, it should help to eliminate the concentration of so many IFG stocks in a single industry.

It's far too early to call, of course, but the early returns for 1998 certainly suggest there's something to the theory. Eventually, I plan to test this variation, but with the limited time I currently have, I'll have to be content to watch the 1998 comparisons play out in real time.

Have a Foolish weekend!

[Want to be the first Fool on your block to get a copy of Robert Sheard's forthcoming book? Click here to pre-order your copy of The Unemotional Investor.]