Monday, June 15, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (June 15, 1998) -- A number of readers have expressed interest in combining a value and growth screen to get the best of both worlds. This is what the Gardners have done in using the PEG ratio along with the relative strength score from Investor's Business Daily. It's also what James O'Shaughnessy does with his Cornerstone Growth and Reasonable Runaway screens -- he combines low price-to-sales with high relative strength.

Jim's Reasonable Runaways starts with a market-cap requirement of $150 million, to filter out stocks too small and illiquid to trade easily. Then he limits the field to stocks with a price-to-sales ratio of less than one. That means you're paying less per share for the stock than the company has earned per share over the previous twelve months.

The final step is to sort the remaining stocks by relative strength (I use the stock's previous 6-month total return) to find those bargain stocks that are currently being bought by Wall Street.

I ran the same series of screens on the Value Line database today and came up with the following twenty stocks as the best bets. Using a larger database, you'll undoubtedly find a different list. Also, you should double-check to see that these stocks are not performing well simply because they're in the process of being acquired by another company. You want stocks working well on their own merits.

Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %>
Good Guys <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GGUY)") else Response.Write("(Nasdaq: GGUY)") end if %>
LADD Furniture <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LADF)") else Response.Write("(Nasdaq: LADF)") end if %>
Hunt (J.B.) <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBHT)") else Response.Write("(Nasdaq: JBHT)") end if %>
Blair Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BL)") else Response.Write("(NYSE: BL)") end if %>
Handleman Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDL)") else Response.Write("(NYSE: HDL)") end if %>
Pillowtex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTX)") else Response.Write("(NYSE: PTX)") end if %>
Unisys Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UIS)") else Response.Write("(NYSE: UIS)") end if %>
Kmart Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KM)") else Response.Write("(NYSE: KM)") end if %>
Haverty Furniture <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HAVT)") else Response.Write("(Nasdaq: HAVT)") end if %>
EG & G Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EGG)") else Response.Write("(NYSE: EGG)") end if %>
Lehman Bros. Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %>
McKesson Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCK)") else Response.Write("(NYSE: MCK)") end if %>
Dayton Hudson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %>
Winnebago <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WGO)") else Response.Write("(NYSE: WGO)") end if %>
Shopko Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKO)") else Response.Write("(NYSE: SKO)") end if %>
Bethlehem Steel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BS)") else Response.Write("(NYSE: BS)") end if %>
Champion Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHB)") else Response.Write("(NYSE: CHB)") end if %>
Costco Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COST)") else Response.Write("(Nasdaq: COST)") end if %>

You'll notice that several of these stocks also appear in our Workshop database, carrying Value Line's highest timeliness ranking. If you'd like more information on Jim's Value and Growth strategies, pick up his last two books: What Works on Wall Street and How To Retire Rich. They're both incredibly Foolish!

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.]