Fool.com: Dozens Holding Up Well (Workshop) July 30, 1998

Dozens Holding Up Well

by Robert Sheard
(TMF Sheard)

LEXINGTON, KY. (July 30, 1998) -- While the recent correction has taken a little bit of steam out of the premiere Dozens portfolios, the returns for a handful of the models are still pretty amazing. Let's look at the four top dogs as we head into tomorrow's closing session for the month.

For those of you unfamiliar with the Dozens strategy, it is a simple approach designed for the investor who likes to add new money every month without running up a ton of costs. You pick one stock each month, using whichever strategy screening tool you wish. By the end of the year, you hold a full portfolio of twelve stocks.

In month thirteen and every month thereafter, you replace your oldest stock (if necessary) with the highest-ranking stock in the current rankings that's not already in your portfolio. That way you always hold twelve positions and have twelve opportunities a year to add new money as you update one position.

Our benchmark comparison is a portfolio fully invested in the Standard & Poor's 500 Index Spyder <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SPY)") else Response.Write("(AMEX: SPY)") end if %>. Each month we assume a new $1,000 is invested in the Spyder and in each of the Dozens portfolios. Returns in this comparison do not include dividends, but they do assume a commission per trade of $8.

The return of the benchmark Spyder portfolio is an annualized 20.4%. That is, if we continue to see growth at the same pace throughout the rest of the year, the portfolio will gain 20.4%. (Because of the regular cash inflows, these annualized returns are calculated using Excel's XIRR -- Internal Rate of Return function. Both Quicken and Microsoft Money use the same function in their portfolio tracking software.)

Currently sitting in fourth place out of our seven models is the Formula90 Dozen. Its annualized return is currently 69.4%, and it includes the following positions. (The indicated returns represent only the period since each stock entered the portfolio.)

31.1% Safeskin <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %>
119.1% Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
13.5% United Stationers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USTR)") else Response.Write("(Nasdaq: USTR)") end if %>
-30.8% Ethan Allen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ETH)") else Response.Write("(NYSE: ETH)") end if %>
18.3% Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %>
-4.7% Lowe's Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOW)") else Response.Write("(NYSE: LOW)") end if %>
-3.5% The Gap, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %>

In third place today is the 26-week version of the Relative Strength Dozen. Its annualized return to date is 90.4%. The holdings include:

159.5% Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
-13.6% Ethan Allen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ETH)") else Response.Write("(NYSE: ETH)") end if %>
-16.7% Alaska Air Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALK)") else Response.Write("(NYSE: ALK)") end if %>
-23.2% Whole Foods Market <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WFMI)") else Response.Write("(Nasdaq: WFMI)") end if %>
18.3% Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %>
35.2% America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
17.4% Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>

In the number two slot is the Keystone Dozen, currently sporting an annualized return of 95.9%.

10.8% Fifth Third Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FITB)") else Response.Write("(Nasdaq: FITB)") end if %>
31.4% Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %>
24.2% Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %>
31.1% Tele-Communications Inc. 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCOMA)") else Response.Write("(Nasdaq: TCOMA)") end if %>
40.8% America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
32.1% Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
11.4% EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %>

But blowing away the entire field of competitors is the IBD version of the Relative Strength Dozen. It's currently strutting around with an annualized gain of 191.6%.

159.5% Best Buy Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>
119.0% Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
21.2% Safeskin <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SFSK)") else Response.Write("(Nasdaq: SFSK)") end if %>
-31.1% Ethan Allen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ETH)") else Response.Write("(NYSE: ETH)") end if %>
18.3% Capital One Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COF)") else Response.Write("(NYSE: COF)") end if %>
35.2% America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
-3.5% The Gap, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %>

The remaining three models are all significantly lagging behind the benchmark S&P 500 Spyder portfolio. The Dow Dozen (which uses the Foolish Four rankings) has a 13.9% annualized gain. The Dow Racers Dozen (which chooses the Dow stock with the best relative strength) has an annualized loss of 5.8%. And the Low Price-to-Sales Dozen has an annualized loss of 4.1%.

Each of the Dozens models picks up another $1,000 deposit and its eighth stock at the closing bell tomorrow. Assuming the new database is available by then, I'll post the additions to each model in tomorrow's Workshop report.

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.]