Monday, June 08, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (June 8, 1998) -- It's Raw Relative Strength day. Several readers have requested occasional updates on pure momentum, so here, for your viewing pleasure, are a couple of lists based on relative strength.

Before I post the lists, just what are we measuring here? Relative Strength can be gauged a number of ways. Investor's Business Daily, for example, uses a somewhat complicated approach. They take each stock's total return over the last year, weighting the most recent quarterly most heavily, and then assign a percentile score for each stock in their tables. The highest ranking is a 99, which means that the stock has a better Relative Strength score using their system than 99% of all the other stocks in the database. This gives the reader a quick and easy comparison to determine which of several stocks has fared the best on this measure.

I use a much simpler measure of price momentum -- the actual total returns over a specified period, without the extra weighting IBD uses. Most investors using such a plan look at the total returns for the stocks over the past six or twelve months. Both test periods have proven effective. I prefer the six-month test because for a holding period of one year, it has proven a little more sensitive and effective than a twelve-month relative strength test.

Today, then, let me post two lists. The screening criteria I used with the Value Line database for these lists required that the stock be an American company and that it had a timeliness ranking in the Value Line ranking system. (Value Line removes such rankings for stocks involved in mergers, so by requiring that the stock have such a ranking, we weed out stocks that are very strong recently based solely on a merger announcement.)

The first list includes the top twenty stocks meeting those criteria, sorted by their total returns over the previous six months:

Capital One Fin'l <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %>
Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
Hunt (J.B.) <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBHT)") else Response.Write("(Nasdaq: JBHT)") end if %>
Ascend Communic. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
Handleman Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDL)") else Response.Write("(NYSE: HDL)") end if %>
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
LADD Furniture <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LADF)") else Response.Write("(Nasdaq: LADF)") end if %>
Haverty Furniture <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HAVT)") else Response.Write("(Nasdaq: HAVT)") end if %>
Unisys Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UIS)") else Response.Write("(NYSE: UIS)") end if %>
Pillowtex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTX)") else Response.Write("(NYSE: PTX)") end if %>
Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %>
Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %>
Lowe's Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOW)") else Response.Write("(NYSE: LOW)") end if %>
Blair Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BL)") else Response.Write("(NYSE: BL)") end if %>
Berkshire Hathaway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.A)") else Response.Write("(NYSE: BRK.A)") end if %>
EG & G Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EGG)") else Response.Write("(NYSE: EGG)") end if %>
PacifiCare Health 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHSYA)") else Response.Write("(Nasdaq: PHSYA)") end if %>
Good Guys <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GGUY)") else Response.Write("(Nasdaq: GGUY)") end if %>
Roberts Pharmac. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RPC)") else Response.Write("(NYSE: RPC)") end if %>

And now the same set of criteria, but sorted by total returns over the past twelve months:

Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
Learning Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLC)") else Response.Write("(NYSE: TLC)") end if %>
Unisys Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UIS)") else Response.Write("(NYSE: UIS)") end if %>
Cablevision Sys. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CVC)") else Response.Write("(NYSE: CVC)") end if %>
Capital One Fin'l <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") 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 %>
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
NACCO Inds. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NC)") else Response.Write("(NYSE: NC)") end if %>
Safeskin Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %>
United Stationers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USTR)") else Response.Write("(Nasdaq: USTR)") end if %>
WinStar Communic. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCII)") else Response.Write("(Nasdaq: WCII)") end if %>
SkyTel Communic. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SKYT)") else Response.Write("(Nasdaq: SKYT)") end if %>
Texas Inds. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXI)") else Response.Write("(NYSE: TXI)") end if %>
Gap (The) Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %>
Kansas City South'n Ind. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KSU)") else Response.Write("(NYSE: KSU)") end if %>
Oshkosh B'Gosh 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GOSHA)") else Response.Write("(Nasdaq: GOSHA)") end if %>
CenturyTel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTL)") else Response.Write("(NYSE: CTL)") end if %>
Pillowtex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTX)") else Response.Write("(NYSE: PTX)") end if %>
Equitable Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EQ)") else Response.Write("(NYSE: EQ)") end if %>

Strap on your safety belts, Fools. These stocks can be tremendous winners, but the ride can be a wild one. 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.]