The Motley Fool: The Foolish Workshop, Wednesday, February 18, 1998

Wednesday, February 18, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (February 18, 1998) -- In our 1998 Year-to-Date Returns file, we track 10-stock models for each of the eight screens. But the Keystone model, of course, is actually a 30-stock group from which we skim off the top. In its 12-year history, however, the full group of 30 stocks has still outperformed not only the Standard & Poor's 500 Index, but also the basic 5- and 10-stock Beating the Dow portfolios. Not a bad feat for a 30-stock portfolio to out-pace a five-stock model.

From January 1, 1986, through February 11, 1998, the Keystone 30 have generated compound annual returns of 20.5%. Over the same period, the S&P 500 Index (with dividends reinvested) has returned 17.3%. Beating the Dow 5 has returned 19.0% and the High Yield 10 has returned 18.9% a year.

Naturally, Keystone investors won't typically buy all thirty stocks, and the twelve-year returns go up in regular fashion as you drop another five stocks off of the bottom of the list, focusing on the stocks with the best relative strength over the past 26 weeks.

This year, however, is starting off strangely. Of the 30 stocks, only five have actually posted losses so far, but unusually, three of those five are stocks in the top five Keystone slots. The rest of the group of 30 is doing quite well, thank you, but this early in the year, it's actually the stocks lowest on the list that are performing the best so far.

Here are the 30 stocks, listed in order by their rankings on 12/31/97, and their returns as of 3:30 this afternoon.

 -2%  Fifth Third Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITB)") else Response.Write("(Nasdaq: FITB)") end if %> 
  -6%  Coca-Cola Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCE)") else Response.Write("(NYSE: CCE)") end if %> 
  19%  Gap (The)  Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> 
   4%  AirTouch Communic. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATI)") else Response.Write("(NYSE: ATI)") end if %> 
 -11%  Computer Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> 
  23%  Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> 
  35%  Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> 
  15%  Pfizer  Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> 
   3%  Norwest Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOB)") else Response.Write("(NYSE: NOB)") end if %> 
  10%  Safeway Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWY)") else Response.Write("(NYSE: SWY)") end if %> 
   6%  Cendant Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> 
   3%  Travelers Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %> 
  -7%  Schlumberger Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> 
  14%  Home Depot <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %> 
  22%  Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %> 
   6%  Medtronic  Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDT)") else Response.Write("(NYSE: MDT)") end if %> 
  12%  Dayton Hudson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %> 
   7%  Tyco Int'l Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TYC)") else Response.Write("(NYSE: TYC)") end if %> 
   4%  Allstate Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALL)") else Response.Write("(NYSE: ALL)") end if %> 
  12%  Walgreen Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAG)") else Response.Write("(NYSE: WAG)") end if %> 
  15%  Freddie Mac <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %> 
  15%  Wal-Mart Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %> 
   1%  Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> 
  -7%  Merrill Lynch & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> 
  17%  Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> 
  29%  MBNA Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KRB)") else Response.Write("(NYSE: KRB)") end if %> 
   2%  BankAmerica Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> 
  13%  Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> 
  19%  Microsoft Corp. Nasdaq: MSFT) 
  13%  Xerox Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XRX)") else Response.Write("(NYSE: XRX)") end if %>

Grouped in fives, here are the returns:

Top 5     1% 
 Top 10    9% 
 Top 15    8% 
 Top 20    8% 
 Top 25    8% 
 Top 30   10% 
    
 S&P 500   6%

It's a long time to next January, of course, but the top five stocks have some climbing to do if they're going to perform up to their historical norms. I'm also still looking (so far with no luck) for a useful list of the largest market caps each December 31 from 1965 on so I can test the Keystone model over a much longer time frame. If you come across a consistent and usable source, please let me know. Fool on!

[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.]