Wednesday, June 10, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (June 10, 1998) -- Relative Strength is a featured element in the Workshop time and time again, but there's typically some question about how well it might work in reverse. That is, instead of taking the top 100 stocks in Value Line's ranking system and choosing the ones with the best Relative Strength, would the short seller profit by looking at the 100 worst stocks in the ranking system and sorting them by worst Relative Strength.

The disclaimers. One, I've never shorted a stock, simply because I think it's harder to make money on the short side than going long (the market goes up more than it goes down). That said, there are undoubtedly some terrific profits to be made by shorting lousy stocks. Two, I have not tested the screen I'm describing here. This is entirely speculative on my part. Third, I won't be testing it with my own money!

So, let's see what's out there. Here are the twenty stocks with Timeliness rankings of 5 from Value Line, sorted by worst 6-month total returns:

Boston Chicken <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOST)") else Response.Write("(Nasdaq: BOST)") end if %>
National Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NSM)") else Response.Write("(NYSE: NSM)") end if %>
Sunbeam Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %>
Acme Metals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMI)") else Response.Write("(NYSE: AMI)") end if %>
OEA Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OEA)") else Response.Write("(NYSE: OEA)") end if %>
Callaway Golf <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELY)") else Response.Write("(NYSE: ELY)") end if %>
Cott Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COTTF)") else Response.Write("(Nasdaq: COTTF)") end if %>
Gulf Canada Res. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GOU)") else Response.Write("(NYSE: GOU)") end if %>
Phosphate Resource <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PLP)") else Response.Write("(NYSE: PLP)") end if %>
Apogee Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APOG)") else Response.Write("(Nasdaq: APOG)") end if %>
Walbro Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WALB)") else Response.Write("(Nasdaq: WALB)") end if %>
Tultex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TTX)") else Response.Write("(NYSE: TTX)") end if %>
Wallace Computer Serv. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WCS)") else Response.Write("(NYSE: WCS)") end if %>
K2 Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KTO)") else Response.Write("(NYSE: KTO)") end if %>
Arrow Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARW)") else Response.Write("(NYSE: ARW)") end if %>
Berry Petroleum 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRY)") else Response.Write("(NYSE: BRY)") end if %>
Inco Limited <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: N)") else Response.Write("(NYSE: N)") end if %>
Toro Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TTC)") else Response.Write("(NYSE: TTC)") end if %>
SpaceLabs Medical <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SLMD)") else Response.Write("(Nasdaq: SLMD)") end if %>
Cummins Engine <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CUM)") else Response.Write("(NYSE: CUM)") end if %>

I don't expect this to be a terrific mechanical screen, simply because the long-term results for the lowest-ranked stocks, while dismal in terms of a strategy for making money, haven't been long-term losers. I think a shorting strategy requires a stock-by-stock call, not a group choice like with our strategies for going long.

If any of you short sellers want to track this group and report back in three to six months, I'll follow up with a report on the returns. 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.]