Wednesday, February 11, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Feb. 11, 1998) -- Last year we followed a group of computer-related stocks that we dubbed the Bits & Bytes Portfolio. Quite simply, I selected the 15 largest American computer-related companies and we tracked their performance throughout the year.

Not only did the entire group outperform the S&P 500 Index, recording gains of 46%, but the five stocks with the best relative strength at the beginning of the year posted an impressive average gain of 64%.

We're not following Bits & Bytes officially in the 1998 Workshop since it's less of a strategy than a miniature sector fund, but I receive requests about it frequently, so today let me give you some statistics based on current data.

Here are the current fifteen stocks, sorted in descending order by size:

Microsoft Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> 
 Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> 
 Int'l Business Mach. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> 
 Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> 
 Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> 
 Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> 
 Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> 
 Motorola Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> 
 Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> 
 Computer Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> 
 Texas Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> 
 Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> 
 EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %> 
 Applied Materials <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> 
 3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> 
 

Through February 4, the year-to-date returns for these fifteen stocks have averaged 16.28% versus the S&P 500 Index's gain of 3.88%.

Ranking the fifteen stocks by their 26-week total returns, here's how the relative strength stacks up:

 36.25%  EMC Corp. 
  30.16%  Dell Computer 
  21.36%  Computer Associates 
  20.49%  Cisco Systems 
  18.65%  Compaq Computer 
   9.32%  Microsoft Corp. 
   8.96%  Lucent Technologies 
   1.29%  Sun Microsystems 
  -8.51%  Int'l Business Mach. 
  -9.54%  Texas Instruments 
 -12.43%  Intel Corp. 
 -13.67%  Hewlett-Packard 
 -20.91%  Motorola  Inc. 
 -21.23%  Applied Materials 
 -36.12%  3Com Corp. 
 

Again, I don't advocate the Bits & Bytes as a strategy unto itself. Like any over-concentration, your risk goes up as you eliminate diversity. In addition, many of these top stocks will show up in the several strategy screens we do follow weekly in the Workshop area.

But for those of you interested in following this specific sector, I'll occasionally post such rankings for you to incorporate into your research. Fool on!

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