Wednesday, May 27, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 27, 1998) -- It has been a pretty dismal fortnight for the Dozens Models. The Dozens models add one new stock each month based on the current rankings (the highest-ranked stock not already in the portfolio). So far, then, each of the six Dozens portfolios I'm following holds five stocks and will be picking up #6 at the close on Friday.

As I've been warning all year, however, with less than the full stable of twelve ponies, and less than half a year's history, the annualized returns for these models will swing wildly with every individual stock movement. Early in the year, for several of the portfolios, this meant impossibly high numbers. Now that the market has cooled off, the returns have come back to reality (for some, an ugly reality).

The benchmark S&P 500 Index is on a pace for an annualized return in 1998 of 30.6%. By historical measures, that would be the fourth wonderful year for stocks in a row, should it remain in place until January.

But of the six Dozens portfolios, only a single one is now ahead of that S&P 500 pace -- Formula90. And even it has retraced a lot of its early stellar gains.

Two of the five trailing the S&P 500 (Dow Racers and Low Price/Sales) are actually on a pace to lose money for the year. (Again, this could change overnight this early in the year.)

Here's the breakdown for all six screens:

58.0% Formula90 Dozen
30.6% S&P 500 Index
24.6% Keystone Dozen
23.6% Dow Dozen (Unemotional Value)
17.3% Relative Strength Dozen
-6.4% Dow Racers (Dow high relative strength)
-11.1% Low Price/Sales Dozen

For the rankings-leading Formula90 model, here are the five stocks currently in the portfolio. Remember that these were all purchased on different dates and the total portfolio return is calculated using the XIRR (Internal Rate of Return) in Excel.

21.5% Safeskin <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %>
64.6% Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
-2.3% United Stationers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USTR)") else Response.Write("(Nasdaq: USTR)") end if %>
-22.0% Ethan Allen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ETH)") else Response.Write("(NYSE: ETH)") end if %>
1.2% Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %>

The value of the $5,000 invested incrementally over the last five months has grown to $5,586.99.

Don't read much into the results, though. Because the beginning of the year was so strong and we've currently hit a pullback (correction, start of major disaster, bear market, Armageddon -- insert appropriate prophetic term here), the standard portfolios that were fully invested at the beginning of the year are doing considerably better than the Dozens models, which have added money slowly throughout the year. This is a temporary discrepancy that may or may not have any significance whatsoever for one's long-term results using the Dozens approach as a savings tool. 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.]