What Size Cap is in Style?
by Jim Stevens ([email protected])
Burlington, VT. (Oct. 29, 1998) -- We've seen our fair share of talking haircuts on the financial shows lately discussing a return to favor of small capitalization stocks. Some comment about the "potential" of small-cap stocks to outperform the big caps over some fuzzy future time period. Others say it doesn't matter about the small-cap sector because you'd have to pick successful small companies to get real gains -- individual small stocks don't move in tandem with any index the way larger companies do.
I'm certainly not smart enough to confirm or deny any of these heady prognostications, but I thought I'd take a look at the Workshop's Current Rankings picks and their market capitalizations. Below are the stocks from the 10/14 rankings [see note below] with each of their market caps in billions of dollars as of 10/28/98 and each model's average and median market cap, as well. If you are wondering what models to look at for the smallest or largest companies in the Workshop, check it out:
Unemotional Growth:
Dell Computer 82.301
Staples Inc 8.772
HBO & Co 10.775
CKE Restaurants 1.213
Lexmark Intl 4.284
Lucent Tech 104.800
Arterial Vascular 1.776
Rob Half Intl 3.605
Keane Inc 2.406
Tellabs Inc 9.857
Average: 22.970
Median: 6.528
Relative Strength-IBD Method
Dell Computer 82.301
EMC Corp 31.157
America Online 28.093
Biogen Inc 5.092
AnnTaylor Stores 0.685
Lexmark Intl 4.284
Nokia Corp A 49.660
Symbol Tech 2.503
AEGON N.V. 49.422
Natl Computer 0.894
Average: 25.409
Median: 16.592
Relative Strength-26-Week Method
AnnTaylor Stores 0.685
Biogen Inc 5.092
Dell Computer 82.301
Roberts Pharm 0.691
McKesson Corp 7.114
EMC Corp 31.157
Watson Pharm 4.610
Quiksilver Inc 0.293
America Online 28.093
Amgen 19.616
Average: 17.965
Median: 6.103
Formula 90
Dell Computer 82.301
EMC Corp 31.157
Lexmark Intl 4.284
Symbol Tech 2.503
Nokia Corp A 49.660
Staples Inc 8.772
Gap Inc 21.296
Paychex Inc 8.003
Watson Pharm 4.610
Lucent Tech 104.800
Average: 31.738
Median: 15.034
Low Price/Sales
McKesson Corp 7.114
Quiksilver Inc 0.293
CVS Corp Delaw 16.887
Staples Inc 8.772
Dycom Inds Inc 0.510
US Foodservice 2.166
Patterson Dent 1.287
Solectron Corp 6.608
Wal-Mart Stores 146.000
Lexmark Intl 4.284
Average: 19.392
Median: 5.446
Investing For Growth-Classic
(Top Ten Off Current List)
Devry Inc 1.447
HBO & Co 10.775
Home Depot Inc 62.037
Lowes Companies 12.162
Centex Corp 1.978
Champion Entr 0.973
BMC Software 10.843
Computer Science 8.183
Fiserv Inc 3.673
Keane Inc 2.406
Average: 11.447
Median: 5.928
Investing For Growth-Relative Strength
Biogen Inc 5.092
Dell Computer 82.301
EMC Corp 31.157
Quiksilver Inc 0.293
Amgen 19.616
Symbol Tech 2.503
Gap Inc 21.296
Staples Inc 8.772
Schering-Plough 74.960
G And K Svcs 0.830
Average: 24.681
Median: 14.194
Keystone
Dell Computer 82.301
EMC Corp 31.157
Walgreen Co 22.852
BellSouth Corp 75.253
Warner-Lambert 63.004
Intl Bus Machines 137.900
Abbott Labs 70.833
Schering-Plough 74.960
Wal-Mart Stores 146.000
Medtronic Inc 30.659
Average: 73.491
Median: 72.896
None of our beloved screens would be called an "all small-cap" screen by any stretch. It seems most of the screens that begin with stocks with a timeliness ranking of 1 from Value Line come in about the same, with the occasional under-$1 billion company showing up.
If diversifying across large-cap and small- to mid-cap stocks is part of your strategy, it looks like a combination of companies picked from the Keystone screen and any other screen of your liking would do the trick, maybe with a final screen for companies under a certain market cap.
We all must go with our own research and judgement, folks. Even though the likes of Peter Lynch and Jim O'Shaughnessy are out there beating the drum for diversifying into small caps, I'm thinking the money flowing into large-cap index funds makes a mighty tough river to swim against.
I'll be off next week to Orlando with the kids for our first visit to Walt Disney World. Have a great Halloween.
[NOTE -- Due to the fact that Value Line has still not corrected their file, we've decided not to provide the database and rankings for last week. We know this inconveniences people, and we apologize. Unfortunately, this is beyond our control, and we'd rather provide no data than bad data. Thank you for your patience.]
Check out the latest file updates for the Workshop:
New Rankings
| 1998 Returns
| New Database