The Motley Fool: The Foolish Workshop, December 7, 1998

<FOOLISH WORKSHOP>

UG Rebound

Burlington, VT (December 7, 1998) -- Last week included the first Friday of the month, so it's time once more, boys & girls, for the Unemotional Growth official monthly update. Although you'll find the UG model listed in the Workshop Returns, it's tracked there as if it we had bought in January '98 and held the same stocks since.

The UG model is one that has been shown to perform better with shorter holding periods, so each month we review the performance of a monthly traded portfolio here. It has proven to be a lesson in when it isn't always better to hold stocks for the long term.

November was a fairly good month for both the 5-stock and 10-stock UG models. Both beat the Standard & Poor's 500 Index handily, in large part on the backs of a few very hot stocks. The one standout was Arterial Vascular <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %>, up a stunning 58.79% on a takeover bid.

Profitable mid-cap franchises make juicy targets for larger companies on acquisition binges. We've seen it before. It's not uncommon to find the UG model holding a company whose stock price gets bid up overnight by news of an acquiring business.

For the period of November 6 through December 4 the Unemotional Growth five stock approach returned 14.94% and the ten stock model tacked on 9.30%. Both played a little catch-up with the S&P 500 Index, which only went up 3.13% for the month. Each stock's gains/losses:

Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>       0.48%
Staples <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %>             5.69%
Arterial Vascular <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %>  58.79%
Lexmark Int'l 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LXK)") else Response.Write("(NYSE: LXK)") end if %>      3.49%
Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>     6.24%
Vitesse Semi. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTSS)") else Response.Write("(Nasdaq: VTSS)") end if %>      25.19%
Keane Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: KEA)") else Response.Write("(AMEX: KEA)") end if %>          -22.26%
Paychex  Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAYX)") else Response.Write("(Nasdaq: PAYX)") end if %>      -1.09%
U.S. Foodservice <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UFS)") else Response.Write("(NYSE: UFS)") end if %>      -3.23%
Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>      16.03%
The Gap <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %>               12.99%

Although certainly not the best model in the Workshop this year, November's tale of the tape has shown that the UG can indeed turn up the heat in a hurry. In case anyone's counting, there are 11 stocks listed for November because Cisco and Gap were tied for the tenth slot. In the UG backtest, when ties occurred for the fifth or tenth positions, all tying stocks were carried and the returns were calculated as if a hypothetical investor had bought all stocks in equal dollar amounts.

Since January of 1998 the 5 stock UG has returned 19.21% and the UG10 has lost 0.08% while the S&P 500 is up 20.69%. Going way back from the first full year of the model's backtested history (1987) until now, the CAGR for UG5 is 36.73%. The ten stock UG now has a 27.29% CAGR since January 1987. We keep a UG History page updated here in the Foolish Workshop for those wanting to peruse or study the monthly performance of the UG portfolios over the years.

Last week's rankings show the current UG stocks as follows. These will be the official UG monthly holdings for December:

Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
Arterial Vascular <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %>
Vitesse Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTSS)") else Response.Write("(Nasdaq: VTSS)") end if %>
Concord EFS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CEFT)") else Response.Write("(Nasdaq: CEFT)") end if %>
Lexmark Int'l 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LXK)") else Response.Write("(NYSE: LXK)") end if %>
Staples Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %>
Compuware Corp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPWR)") else Response.Write("(Nasdaq: CPWR)") end if %>
Papa John's Int'l <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PZZA)") else Response.Write("(Nasdaq: PZZA)") end if %>
Just For Feet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FEET)") else Response.Write("(Nasdaq: FEET)") end if %>
Sanmina Corp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SANM)") else Response.Write("(Nasdaq: SANM)") end if %>

Note: While Arterial Vascular is still in the Value Line rankings and therefore on the Official UG list this week, it is involved in a merger/buyout. Value Line usually removes the Timeliness rank of companies in that situation. The eleventh ranked stock on the UG list this week is Gap.

Only 18 shopping days until Christmas. Get in the spirit, Fools!

Check out the latest file updates for the Workshop:
New Rankings | 1998 Returns | New Database