The Motley Fool: The Foolish Workshop, Feb. 22, 1999

<FOOLISH WORKSHOP>

Bits & Bytes Update

Burlington, VT (Feb. 22, 1999) -- The stock market, and especially "high tech" stocks, can't keep going up forever. I wish I had a nickel for every time I heard some Wise talking head in the financial media make this proclamation. While this may well be a handy and accurate truism for market performance, it certainly glosses over another important factoid: stocks can go up a whole lot for a very long time!

And what's that got to do with tonight's topic, the Bits & Bytes portfolio? Well, not much really, except that many of the Bits & Bytes stocks have been sort of the anti-Wise performers. Just after the fifth time somebody says a certain stock is overdone or "way too expensive," it doubles or triples again. A lot of "Rule Breaker" type companies have turned up in the Bits & Bytes port.

Getting down to the brass tacks of the Bits & Bytes screen, here's how the stocks are selected: Starting with all the stocks in the ValueLine Investment Survey, filter out everything except companies in the sectors Value Line designates as Computers & Peripherals, Internet, Software, Semiconductors, and Telecommunications Equipment. For the Foolish Workshop Bits & Bytes port that I kicked off in the Three Experimental Screens report at the beginning of 1999, the 15 biggest companies left after that initial filter are tracked.

Here's how the companies have done though last Friday's close, excluding dividends. (They are listed in decreasing order of 6-month total return as of the end of 1998.)

Yahoo! Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>       14.22%
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>        3.38%
Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>  12.63%
EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %>            22.28%
Oracle Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %>      25.65%
Int'l Business Mach. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> -6.92%
Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>        8.01%
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>      9.48%
Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>      4.65%
Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %>      -2.08%
Texas Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %>     8.61%
Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>   -6.31%
Microsoft Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>    6.53%
Motorola Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>        10.34%
Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>       0.00%

Average gain/loss (all 15)        7.37%
Top 5                            15.63%
Top 10                            9.13%

All three port sizes compare favorably to a "market performer" port, which if sitting in Standard & Poor's 500 Index Depositary Receipts <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SPY)") else Response.Write("(AMEX: SPY)") end if %> would be up 0.32% on the year. The ports are smoking the Nasdaq Composite Index as well, which is up just a hair over 3%.

If you are interested in looking deeper into some of these tech Goliaths, I ran the screen on the most recent Value Line data. Here are the stocks listed with their 6-month Total Return, also from Value Line.

America Online     174.90%
Yahoo! Inc.        172.18%
Oracle Corp.       109.71%
Sun Microsystems    91.23%
EMC Corp            75.44%
Texas Instruments   50.55%
Cisco Systems       40.93%
Intel Corp.         39.25%
Dell Computer       38.32%
Microsoft Corp.     35.67%
Int'l Bus. Mach.    31.58%
Motorola  Inc.      25.75%
Hewlett-Packard     22.60%
Compaq Computer     13.40%
Lucent Tech.         8.70%

The list is staying amazingly stable, with no changes since the beginning of the year. Since market cap is the only criteria for the final list, changes come rather slowly.

Standard disclaimer and warning section: Don't just go out and buy these stocks! The model is untested, the sectors are volatile, and the stories and market mood toward the companies can turn on a dime. I think this screen serves as a great starting point for turning up large high tech companies for further Foolish examination.

Have a great week!

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