Investing For Growth
Investing For Growth
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(FOOL GLOBAL WIRE) LEXINGTON, KY. (August 27): It was a mixed day among the Investing For Growth holdings. Yesterday's big gainers retreated a step and recent Fool Portfolio addition 3Com bolted ahead on the announcement of restructuring plans. (For more details on 3Com's announcement, check out the Fool Portfolio write-up tonight and the Evening News area.)
Also of note today, recent powerhouse Paychex gave back some gains today as it announced the closing of its deal to merge with National Business Solutions. The outstanding shares of NBS were exchanged for a little more than 2.9 million shares of PAYX in a transaction which is being accounted for as a pooling of interests.
Now, as promised, I've been pulling numbers together for the IFG/RS (Relative Strength) variation from 1992 to the present and mentioned that I'd post the numbers a year at a time as they became available. Unfortunately, that means starting with 1992, which if you'll check out the IFG Statistics Center, was a miserable year for the Classic IFG approach.
Nevertheless, the numbers are what the numbers are, so let me detail how they're compiled so you can make of them what you will. These numbers are based on a monthly update where the positions are re-balanced evenly at the beginning of each month (much like we did in the Port Folly game). The returns do not, however, include trading costs or commissions, so account for them based on your own situation when analyzing this strategy.
The returns for 1992 were:
Classic IFG: 6.53% IFG/RS: -5.32% All IFG Stocks: 2.40%
I hesitate to make too much out of one year's data, especially one of the two worst years in IFG's 17-year history, but a couple of tentative observations are in order. The first is that the monthly updates and re-balancing of positions (which are not a part of the original IFG approach) made a dramatic difference in the returns. This monthly test of the original method gained 6.53% versus a loss of nearly 13% for the quarterly model when the positions were not re-balanced. Like the Beating the Dow approach, perhaps it's best not to let the positions get too far out of balance so that the U.S. Surgicals and Micron Techs (or America Onlines or Iomegas) of the world don't kill us when they start to collapse.
Another tentative explanation for 1992's somewhat disappointing returns for the IFG/RS approach is that, because it's laying a heavy momentum screen on top of the fundamental screens, when the market does poorly (like it did in early 1992), so will this approach. Nevertheless, the approach's performance is still better than the original quarterly IFG's performance for the year.
When I get the numbers prepared for 1993, I'll summarize the findings again. Eventually, I'll make the entire database available in some format. Stay tuned for that and the announcement of yet a new Growth Model which promises to surpass IFG! The new model will be released just as soon as Fool HQ and I can determine the best format for it. Stay Foolish!
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