Monday, April 20, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (April 20, 1998) -- The Keystone Dozen has made a slight comeback recently and is ahead of the Standard & Poor's 500 again. If you're unfamiliar with the Dozens approach, it's a simple mechanical method where one ends up owning a dozen stocks. One stock is bought (or updated) each month, choosing the highest-ranking stock not already included in one's portfolio. As each stock ages out at one year, it's re-evaluated and replaced if necessary. Total trades for the year are 24 and taxes are capped at 28% as each stock is held a year (or if necessary, a year and a day for high-tax-bracket investors).

The first stock in this year's portfolio is lagging a bit. Fifth Third Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITB)") else Response.Write("(Nasdaq: FITB)") end if %> has only gained 2.8% for the year. The second and third stocks, however, have done quite well. Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %> has gained 13.6% since January 30, when it was acquired, and Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> is blowing the roof off with a 25.4% gain in the last six or seven weeks. The most recent addition, Telecommunications, Inc. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %> remains flat, gaining only 0.9% since being added at the end of March.

Overall, the portfolio has had cash deposits (hypothetical only) of $4,000 and has a value of $4,416. That represents an annualized return for the first 110 days of 1998 of 72.5% versus the S&P 500 Index's 62.0%. The year-to-date equivalents are 17.9% and 15.6% for the Keystone Dozen and S&P 500 Index, respectively.

Some of the other Dozens models are posting extraordinary gains so far. The following table lists all of the Dozens models we follow, their annualized rate of return, and a year-to-date equivalent:

Model                Annualized   YTD Equivalent 
 Relative Strength       228.7%      43.1% 
 Formula90                97.1%      22.7% 
 Dow Dozen                90.0%      21.3% 
 Keystone                 72.5%      17.9% 
 Low Price/Sales          71.7%      17.7% 
 S&P 500 Index            62.0%      15.6% 
 Dow Racers               12.6%       3.6% 
 

Two important points to keep in mind about such annualized figures. First, this early in the year, they're extremely volatile. A slight change in the portfolio can make for a wild swing in an annualized rate because it's based on only 110 days so far. Second, we only have four of the planned twelve holdings in place for each model, so the meat of the portfolio is yet to be included. In other words, don't put too much emphasis on these return figures yet. They'll be much more meaningful after we've been through the first anniversary and have a whole slate of stocks and more than one year's return information. Until then, the numbers are very fuzzy indicators at best. Fool on!

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

[Robert Sheard is the author of The Unemotional Investor (Simon & Schuster, 1998) available now at Amazon.com and soon at your local bookseller.]