The Motley Fool: The Foolish Workshop, Jan. 4, 1999

<FOOLISH WORKSHOP>

UG Plus RS

Burlington, VT (Jan. 4, 1999) -- One of the most interesting of the Workshop models, one that pretty much spawned the creation of the area, is the Unemotional Growth strategy. To run this mechanical stock screen, you start with the 100 stocks ranked #1 for timeliness by the Value Line Investment Survey, look up the earnings per share (EPS) rank in the Investor's Business Daily, and rank the stocks highest to lowest. The top five or ten stocks -- each month -- comprise the Unemotional Growth model. Ties for the fifth and tenth slot are broken with the IBD Relative Strength rank.

After a very wild ride in 1998, when the discussion about the Unemotional Growth monthly model decreased substantially here on the Fool, I offer the year-end results for the UG monthly screens. With such a dramatic drop in interest, you'd think the approach was hemorrhaging badly.

Actually, the ten-stock screen did lag the market, but the five-stock model turned in a stellar December performance to pull way out in front of the 1998 returns of the Standard & Poor's 500 Index. If you check mutual fund returns, you'll see that the 1998 S&P 500 benchmark was very hard to top for even the most savvy professional growth fund managers. Yet the UG5 creamed it once more. Here's the December returns:

Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>         10.89%
Arterial Vascular <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVEI)") else Response.Write("(Nasdaq: AVEI)") end if %>      3.32%
Vitesse Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTSS)") else Response.Write("(Nasdaq: VTSS)") end if %>  7.99%
Concord EFS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CEFT)") else Response.Write("(Nasdaq: CEFT)") end if %>           24.18%
Lexmark Int'l 'A' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LXK)") else Response.Write("(NYSE: LXK)") end if %>        29.05%   
Staples Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %>          21.35%          
Compuware Corp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPWR)") else Response.Write("(Nasdaq: CPWR)") end if %>        26.26%
Papa John's Int'l <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PZZA)") else Response.Write("(Nasdaq: PZZA)") end if %>      8.45%
Just For Feet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FEET)") else Response.Write("(Nasdaq: FEET)") end if %>         -6.71%
Sanmina Corp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SANM)") else Response.Write("(Nasdaq: SANM)") end if %>          11.73%

Putting that together with the first eleven months of 1998, the Unemotional Growth 5-stock model returned a cruising 37.20% for 1998 and the ten-stock screen a lackluster 13.56%. The plain vanilla S&P 500 Index returned 26.07%.

For the complete backtested history of the screen -- since January 1987 -- the UG5 returns now stand at 37.45% CAGR and the UG10 at 28.01%. You can find a complete blow-by-blow monthly Unemotional Growth backtested performance history at the Unemotional Growth History page.

Going forward for 1999, which will be the thirteenth full year for the model's tracked history, here are the January stocks:

Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>
Network Assoc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NETA)") else Response.Write("(Nasdaq: NETA)") end if %>
Papa John's Int'l <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PZZA)") else Response.Write("(Nasdaq: PZZA)") end if %>
MiniMed Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MNMD)") else Response.Write("(Nasdaq: MNMD)") end if %>
Staples Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %>
Concord EFS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CEFT)") else Response.Write("(Nasdaq: CEFT)") end if %>
Compuware Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPWR)") else Response.Write("(Nasdaq: CPWR)") end if %>
Tellabs Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %>
Dollar Tree Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLTR)") else Response.Write("(Nasdaq: DLTR)") end if %>
Just For Feet <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FEET)") else Response.Write("(Nasdaq: FEET)") end if %>

Monthly traded models aren't for everybody, but if you're trading in a qualified retirement account, the historical returns are hard to ignore. Recently, the Relative Strength screen -- ranked by Investor's Business Daily -- has also proven a profitable monthly strategy. Although it boasts no long-term backtest that I know of, many a Workshop reader has noticed the recent burst of steam by the RS-IBD monthly screen. Keeping with the Foolish traditions of being open to new ideas and listening to the community, I figured I'd reinstate the tracking of this popular model on a monthly basis. Check the first Current Rankings of each month to get the new stocks. Although it won't be up on the Workshop Returns, I'll keep a running tally on the IBD-RS monthly port right here with the monthly Unemotional Growth results.

For the 1999 start, here are the top ten RS stocks as selected by IBD also ranked #1 for Timeliness by The Value Line Investment Survey:

Yahoo! Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
Dycom Inds. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DY)") else Response.Write("(NYSE: DY)") end if %>
EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %>
Nokia Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOK.A)") else Response.Write("(NYSE: NOK.A)") end if %>
Solectron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLR)") else Response.Write("(NYSE: SLR)") end if %>
Schwab (Charles) <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCH)") else Response.Write("(NYSE: SCH)") end if %>
VISX Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %>
AnnTaylor Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>
Amer. Eagle Outfitters <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEOS)") else Response.Write("(Nasdaq: AEOS)") end if %>

Here's to a great 1999, every Fool!

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