Bits n' Bytes

by Robert Sheard
(TMF Sheard)

LEXINGTON, KY. (July 21, 1998) -- Many technology stocks have been massive winners over the past three or four years, and since we've been unofficially tracking a group of the largest of them, nothing's changed. What we call the Bits n' Bytes Portfolio is really a mini-sector fund made up of the 15 largest stocks from computer and computer-related industry groups. It's been a while since I've written about this group, so let's take a look.

First, let's look at the fifteen largest stocks today, coming from five sector groups: Software, Semiconductors, Telecommunications Equipment, Computers & Peripherals, and Internet stocks. The following list is sorted in descending order by market capitalization (listed in millions of dollars):

 
 289,220   Microsoft Corp.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> 
 142,888   Intel Corp.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> 
 118,734   Lucent Technologies  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> 
 110,320   Int'l Business Mach.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> 
  99,056   Cisco Systems  <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> 
  71,320   Dell Computer  <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> 
  61,490   Hewlett-Packard  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> 
  50,345   Compaq Computer  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> 
  32,275   Motorola  Inc.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> 
  31,980   Computer Associates  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> 
  26,345   Oracle Corp.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> 
  25,620   America Online  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> 
  24,666   EMC Corp.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %> 
  24,309   Texas Instruments  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> 
  22,276   Automatic Data Proc.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AUD)") else Response.Write("(NYSE: AUD)") end if %> 
 

Year to date, the group has posted an impressive return of 55% versus 22% for the Standard & Poor's 500 Index. If you isolate the five stocks from this group that had the best returns for 1997, they have posted mammoth gains of 113% so far this year: Dell Computer, America Online, Compaq Computer, Lucent Technologies, and EMC Corp.

If you're looking for the best of this group right now, here are the stocks sorted by 26-Week Total Returns (through July 15):

 
 169%  America Online 
 145%  Dell Computer 
 131%  Lucent Technologies 
  79%  Microsoft Corp. 
  70%  EMC Corp. 
  68%  Cisco Systems 
  38%  Oracle Corp. 
  35%  Texas Instruments 
  24%  Automatic Data Proc. 
  15%  Compaq Computer 
  14%  Int'l Business Mach. 
  12%  Intel Corp. 
  10%  Computer Associates 
  -5%  Motorola  Inc. 
  -6%  Hewlett-Packard 
  

As I've said in the past, this list has regularly generated some very good holdings, but it's very concentrated in one broad industry sector. If you use it to screen for stocks, keep this in mind so you don't get the downside of this great advance wiping out major portions of your portfolio. It's real easy to argue for a sector-fund approach when it's soaring, but I've sat on the other side when technology stocks all corrected at once. It ain't pretty.

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.]