The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (June 23, 1998) -- The Keystone Dozen just keeps on picking up steam. Last week when I wrote about it, the model had just started to recover from a weak stretch and was closing the gap on the two very aggressive growth models, the Relative Strength Dozen and the Formula90 Dozen. (If you're unfamiliar with the Dozens concept, please see today's Foolish Four column, which also outlines the results of two more of our Dozens models.)

But now, Keystone is within a couple of points of the Formula90 group and has surged ahead of the pure Relative Strength Dozen. I use the term "surged," however, the same way long-distance runners use the term. This isn't a sprint, but rather a marathon, and short-term gains and losses are especially exaggerated by two factors: the portfolios only hold half of their eventual complements of stocks, and the annualized returns we're comparing these models with can fluctuate wildly with portfolios only six months old. Beware of reading too much into any of these preliminary results.

Nevertheless, here's how all of the Dozens models stack up against a portfolio that would have seen us invest the same $1,000 each month into an S&P 500 Spyder <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SPY)") else Response.Write("(AMEX: SPY)") end if %>. The returns are annualized growth rates and do not include dividends. Trading costs are recorded at $8 a trade.

86.9% Formula90 Dozen
83.4% Keystone Dozen
73.8% Relative Strength Dozen
22.9% S&P 500 Spyder Dozen
16.2% Dow Racers Dozen
  3.6% Dow Dozen
-6.1% Low Price/Sales Dozen

As I've written on other occasions, the most exciting thing to me about the Keystone Dozen's performance is its consistency. All six stocks are showing a profit -- even the first purchase at the end of December, Fifth Third Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITB)") else Response.Write("(Nasdaq: FITB)") end if %>, which had been showing a loss for most of the year. It's now up 5.4%. This is especially helpful because the $1,000 (hypothetical) investment in the first stock, as it's been at work in the portfolio the longest, has a powerful impact on the portfolio's annualized overall returns at this stage of the portfolio's development. That impact, of course, is reduced with the addition of each new stock as the portfolio gets closer to a full year old.

The second and third stocks added, both giant drug companies, have been very strong. Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %> is up 25.0% since the end of January and Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> is up 23.2% since the end of February.

The most recent additions have really held their own. Tele-Communications, Inc. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %> has gained 18.7% since the end of March. America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> has soared by 28.9% since the end of April. and Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> has rediscovered the up escalator, gaining 10.7% in just three weeks in the portfolio.

All in all, it's been a most impressive performance and not a flashy advance stoked by a single dynamo. This portfolio, so far, seems to have all the engines working in rhythm. Stay tuned!

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.]