Investing For Growth

What You'll Find Here | The IFG Approach Explained | The IFG Statistics Center
Friday, August 30, 1996
The Daily IFG Report (FOOL GLOBAL WIRE) by Robert Sheard (MF DowMan) LEXINGTON, KY. (August 30): No news of any import for the IFG model portfolio today. It was an overall down day, but there isn't anything specifically related to the ten holdings, so we ignore it. The new IFG Rankings are posted and the only change is Ross Stores slipped to place #11 (and off our list) and Nike scrambled back into the top ten after a short departure. I'll have the full weekend treatment in the IFG Statistics Center ready for your perusal late tomorrow or Sunday. This morning in a Fribble called "A New Growth Model," I outlined the steps of another growth stock approach I've begun tracking. Rather than summarize here, let me simply place the Fribble text here as well. Enjoy it and please join me in the IFG folder for any discussion that develops. Have a great holiday weekend.! ************************** In recent weeks I've mentioned a number of times that I've been working on a new growth model and would be announcing it soon online. Well, today's the day, but let's start with some very important disclaimers. First, the database currently only extends back to the beginning of 1992 (just 56 months). And even though the S&P 500 Index's compounded return during those 56 months was almost exactly what its much longer-term historical average has been (10.5%), we all know that a 5-year test is only a potential indication of a great thing. We're working now to get more data from Investor's Business Daily to push this model back as far as we can. Second, the model does not take into account taxes, trading costs, or dividends. It's strictly a measure of the capital appreciation had one bought these stocks on the specified dates according to the model. It also assumes that each month (or quarter) all the positions were re-balanced. On to the results for the monthly model: Year S&P 10-Stock 5-Stock 1992 3.90% 43.92% 41.47% 1993 7.85% 35.43% 32.00% 1994 -2.03% -4.78% 6.61% 1995 33.88% 39.41% 52.35% 1996** 8.08% 34.56% 69.08% **through August 23 10.52% 30.96% 42.40% Compound Annual Growth Rates The model itself is very straightforward, requiring only the data found in the Value Line Investment Survey and Investor's Business Daily. On any weekend, take that Friday's Value Line and turn to page 27, their list of the 100 stocks ranked #1 for Timeliness. Look up each of those stocks in Monday's Investor's Business Daily. (Monday's issue actually comes out on Saturday, so it's available to you for a weekend routine.) Record the two rankings Investor's Business Daily lists by each stock, the EPS (Earnings Per Share) ranking and the RS (Relative Strength) ranking. Then sort the stocks by their EPS rank, from highest to lowest. (Many of them will have the same EPS ranking. Use the RS ranking to break the ties.) Then simply select the top five to ten stocks based on your portfolio needs and hold for one month. Then go through the routine again. It sounds like a lot of work at first, but I do it on a spreadsheet each weekend and the entire process takes under an hour. Or if you're doing it by hand, you can skip over any of the stocks on the list that don't have at least a 90 for the EPS ranking. I don't recall seeing any set of 100 that didn't have at least ten stocks with EPS rankings of 90 or better. I also tested this model with a quarterly holding period instead of monthly, and it worked remarkably well during the last 56 months, too. Both the five- and ten-stock models averaged about three percentage points a year less than the monthly model. Before you ask, yes, I tested this with both the RS ranking as the primary screen and also a screen comprised of the combination of RS and EPS rankings. Neither performed as well as the EPS ranking screen. I'm sure everyone will have questions, doubts, comments. Please bring them to the Investing For Growth folder, where I'll keep you abreast of this model and our efforts to extend the database. If anyone knows of a readable and complete archive of Investor's Daily newspapers (its name from 1984 to 1991), please contact me and I'll check into the details. Keep the disclaimers in mind, Fools, and let's enjoy a good discussion of the possibilities here. See you in the IFG folder.	The Current IFG Stocks Quick & Reilly Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BQR)") else Response.Write("(NYSE:BQR)") end if %> Paychex <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:PAYX)") else Response.Write("(NASDAQ:PAYX)") end if %> Mirage Resorts <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MIR)") else Response.Write("(NYSE:MIR)") end if %> Nautica Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:NAUT)") else Response.Write("(NASDAQ:NAUT)") end if %> Tellabs <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:TLAB)") else Response.Write("(NASDAQ:TLAB)") end if %> Three Com <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:COMS)") else Response.Write("(NASDAQ:COMS)") end if %> SCI Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SCIS)") else Response.Write("(NASDAQ:SCIS)") end if %> Nike <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NKE)") else Response.Write("(NYSE:NKE)") end if %> The Gap <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GPS)") else Response.Write("(NYSE:GPS)") end if %> Ross Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ROST)") else Response.Write("(NASDAQ:ROST)") end if %>
Today's IFG Numbers Day Week Quarter Year History IFG -1.27% 0.61% -3.48% 3.32% 4103.72% DJIA -0.56% -1.86% -0.68% 9.75% 577.60% S&P 500 -0.82% -2.25% -2.78% 5.85% 512.08% NASDAQ -0.31% -0.14% -3.67% 8.49% 671.18% Bought # Stock In At Now Change 7/8/95 3866 TLAB 48.00 63.38 32.03% 7/5/96 5077 SCIS 39.88 44.63 11.91% 7/5/96 4153 PAYX 48.75 53.50 9.74% 4/5/96 7695 CKP 26.75 28.88 7.94% 7/5/96 6693 NRES 30.25 32.25 6.61% 7/5/96 4562 COMS 44.38 46.75 5.35% 7/5/96 8756 MIR 23.13 23.25 0.54% 7/5/96 4394 HWP 46.06 43.88 -4.75% 7/5/96 6402 BQR 31.63 29.25 -7.51% 4/5/96 10624 ROTC 19.38 16.25 -16.13% Bought # Stock Cost Value Change 7/8/95 3866 TLAB $185,568.00 $245,007.75 $59,439.75 7/5/96 5077 SCIS $202,445.38 $226,561.13 $24,115.75 7/5/96 4153 PAYX $202,458.75 $222,185.50 $19,726.75 4/5/96 7695 CKP $205,841.25 $222,193.13 $16,351.88 7/5/96 6693 NRES $202,463.25 $215,849.25 $13,386.00 7/5/96 4562 COMS $202,438.75 $213,273.50 $10,834.75 7/5/96 8756 MIR $202,482.50 $203,577.00 $1,094.50 7/5/96 4394 HWP $202,398.63 $192,786.75 $(9,611.88) 7/5/96 6402 BQR $202,463.25 $187,258.50 $(15,204.75) 4/5/96 10624 ROTC $205,840.00 $172,640.00 $(33,200.00) CASH $528.62 TOTAL $2,101,861.12
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