The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (June 22, 1998) -- Most of the screens I've tracked in the Workshop have been what are typically called bottom-up screens. That is, the screen is designed to pick individual stocks based on their characteristics, disregarding their industry groups and the overall "market." But for investors who work at it from the top down, so to speak, let's look at how various industries have performed recently.

Screening the 97 industry groups in the Value Line Investment Survey database, here are the fifteen industries that have recorded the best aggregate returns over the past six months:

 
 127%  Internet 
  84%  Bank (Foreign) Comp. 
  73%  Retail Building Supply 
  70%  Telecom. Equipment 
  49%  Retail Store 
  46%  Insurance (Life) Comp. 
  46%  Home Appliance 
  45%  Foreign Telecom. 
  45%  Beverage (Alcoholic) 
  41%  Apparel 
  34%  Restaurant 
  33%  Computer Software & Svcs 
  31%  Securities Brkrge Comp. 
  30%  Retail Specialty 
  29%  Air Transport

And now for the worst fifteen industry groups over the last six months:

 
 -24%  Semiconductor Cap. Equip. 
 -16%  Railroad 
 -10%  Semiconductor 
  -5%  Hotel / Gaming 
  -4%  Oilfield Svcs & Equip. 
  -3%  Gold/Silver Mining 
  -3%  Paper & Forest Prods 
  -1%  Aluminum 
   1%  Electronics 
   2%  Steel-General 
   2%  Tire & Rubber 
   2%  Petroleum-Producing 
   3%  Natural Gas Dist. 
   4%  Metals & Mining (Div) 
   4%  Industrial Services 
    

While I've never used such a top-down approach to choose stocks, it's not inconsistent with a feature in the Value Line Survey itself. Each week, Value Line lists "Timely Stocks in Timely Industries," featuring stocks with a ranking of 1 or 2 (meaning the stock is among the 400 top stocks based on their earnings momentum ranking system for the coming six to twelve months), in the highest-ranked industries. The industry rankings are determined by a composite of all the rankings for individual stocks in that industry.

I've looked at these groups of stocks on and off in the past but never found an easy way to select from among them to achieve a fine return. I haven't looked at them, however, since I became a convert to the temple of Relative Strength. It's something I'll have to play with again sometime to see what works and what doesn't. You may want to keep an eye on it, too. 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.]