Tuesday, May 26, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 26, 1998) -- A number of readers have asked whether a pure relative strength screen might work out even better without my first step of using the highest Value Line timeliness rankings. While I haven't tested this approach historically, it certainly hasn't hurt in 1998.

Using the entire Value Line database from January, I filtered out any foreign stocks and stocks with no timeliness ranking at all (to eliminate stocks involved in merger activity and the like). Then I ranked the stocks by total returns over the past six and twelve months.

Only one of the ten stocks in the 6-month test group is showing a loss for the year so far, and eight of the ten stocks are beating the Standard & Poor's 500 Index (through May 20 for all returns quoted here).

Best Buy Co <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %> 86.10%
United Stationers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USTR)") else Response.Write("(Nasdaq: USTR)") end if %> 31.43%
Telecom. Inc. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %> 27.74%
Unisys <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UIS)") else Response.Write("(NYSE: UIS)") end if %> 84.68%
NACCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NC)") else Response.Write("(NYSE: NC)") end if %> 46.69%
Tokheim <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOK)") else Response.Write("(NYSE: TOK)") end if %> -22.66%
Safeskin <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFSK)") else Response.Write("(NYSE: SFSK)") end if %> 31.28%
Texas Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXI)") else Response.Write("(NYSE: TXI)") end if %> 34.67%
VWR Scientific <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VWRX)") else Response.Write("(Nasdaq: VWRX)") end if %> 11.50%
ICN Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICN)") else Response.Write("(NYSE: ICN)") end if %> 43.55%

Top 5 55.33%
Top 10 37.50%
S&P 500 15.61%

The group based on 12-month total returns also has eight stocks beating the S&P 500 in 1998, but neither of the remaining two stocks is showing a loss.

Best Buy Co <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %> 86.10%
Telecom. Inc. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %> 27.74%
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> 118.45%
Cablevision 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVC)") else Response.Write("(NYSE: CVC)") end if %> 24.54%
Immunex <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMNX)") else Response.Write("(Nasdaq: IMNX)") end if %> 20.60%
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> 97.13%
Navistar Int'l <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NAV)") else Response.Write("(NYSE: NAV)") end if %> 30.48%
Airborne Freight <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABF)") else Response.Write("(NYSE: ABF)") end if %> 30.48%
US Airways Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %> 5.50%
Standard Pacific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SPF)") else Response.Write("(NYSE: SPF)") end if %> 10.90%

Top 5 55.49%
Top 10 44.52%
S&P 500 15.61%

Interestingly, only two stocks appear on both lists, leaving a combined group of eighteen stocks with an average return of 39.24%.

I don't know how well this approach has fared over many years, but it once again stands to confirm my faith in relative strength as a top criterion to include in your own stock-picking models.

The rankings today would include:

6-month total return test

America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %>
ALZA Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AZA)") else Response.Write("(NYSE: AZA)") end if %>
LADD Furniture <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LADF)") else Response.Write("(Nasdaq: LADF)") end if %>
Lexmark Int'l 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LXK)") else Response.Write("(NYSE: LXK)") end if %>
J.B. Hunt <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBHT)") else Response.Write("(Nasdaq: JBHT)") end if %>
Ascend Communication <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
Roberts Pharmac. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RPC)") else Response.Write("(NYSE: RPC)") end if %>

12-month total return test

Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
Cablevision Sys. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVC)") else Response.Write("(NYSE: CVC)") end if %>
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
WinStar Communic. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCII)") else Response.Write("(Nasdaq: WCII)") end if %>
Unisys <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UIS)") else Response.Write("(NYSE: UIS)") end if %>
NACCO Inds. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NC)") else Response.Write("(NYSE: NC)") end if %>
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
ICN Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICN)") else Response.Write("(NYSE: ICN)") end if %>
Anchor Gaming <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SLOT)") else Response.Write("(Nasdaq: SLOT)") end if %>
Safeskin Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %>

Fool on!

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

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