Thursday, March 26, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (March 26, 1998) -- It's been a decent stretch for the 1998 Keystone model over the last week. After treading water next to the Standard & Poor's 500 in recent weeks because several of the top five stocks were slightly under water, only one of the top ten stocks from 12/31 is still losing money -- Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %>.

As of this writing, the S&P 500 (without dividends) is up 13.4% year to date while the top ten Keystone stocks (also without dividends) have pushed forward to a 16.2% gain. No matter how you paint the scene, it's been a good first quarter for large-cap growth stocks. (A 16.2% gain after 85 days equals a pace for a 90.5% year.)

Let's look at the top ten a little more closely:

• Fifth Third Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITB)") else Response.Write("(Nasdaq: FITB)") end if %> 5%
• Coca-Cola Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCE)") else Response.Write("(NYSE: CCE)") end if %> 3%
• The Gap <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> 27%
• AirTouch Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATI)") else Response.Write("(NYSE: ATI)") end if %> 18%
• Computer Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> 4%
• Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> -6%
• Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> 62%
• Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> 26%
• Norwest <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOB)") else Response.Write("(NYSE: NOB)") end if %> 8%
• Safeway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWY)") else Response.Write("(NYSE: SWY)") end if %> 15%

The returns don't drop off as you include more and more Keystone stocks this year, either, as is typically the case historically. The entire group of 30 Keystone stocks this year is up an average of 17.2%. So the market-leading results are not just the result of a lucky stock here and there. In fact, 19 of the 30 stocks are ahead of the S&P 500 at this point.

There's been a lot of excitement recently in this area about the mammoth returns generated in a couple of tests of pure relative strength stocks from our database. And while I share that excitement, I know from my own experience that the volatility of such a program can be hard to absorb emotionally. So while the Keystone 10 has only managed a paltry 25.5% for the past dozen years (I can think of a few fund managers who'd take it), it's done so with a measure of stability I find comforting.

When you're making your own choices for your portfolios, examine yourself carefully to find the approach that fits you the best. It may not be what fits me, or your neighbor, or even who you were ten or twenty years ago. There are lots of different investment goals and equally as many ways to get there successfully. Find the right mix for you. For me, I'm pretty pleased with Keystone, thanks. (I might dabble with a more aggressive approach in my IRA since it's quite a bit smaller, but I want a little more control on the gyrations for my primary portfolio.) Fool on!

Check out the latest file updates for the Workshop:
New Rankings | 1998 Returns | New Database

[Robert Sheard is the author of the forthcoming book, The Unemotional Investor, due out from Simon & Schuster on May 12. To pre-order your copy, please visit Amazon.com, where it's available at a discounted price.]