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Bits & Bytes Update      

by Jim Stevens ([email protected])

Burlington, VT (March 22, 1999) -- Over the past five years we've seen technology stocks and large cap stocks lead the markets to record high after record high. Combine these two traits together into a stock screen and you get what we call the Bits & Bytes Portfolio. Since I began an experiment which tracks this portfolio in real time on January 7, 1999, we've seen more of the same. This portfolio has been screaming!

To select the stocks for the Bits & Bytes Port we use the ValueLine Investment Survey electronic edition. First we filter out all of the companies that do not get classified as Software, Semiconductors, Telecommunications Equipment, Computers & Peripherals, or Internet stocks. After that, the 15 stocks with the largest market cap complete the portfolio.

Here's the performance (through last Friday's market close) of a hypothetical Bits & Bytes Portfolio I put together at the beginning of 1999, based on December 31, 1998, Value Line data and closing prices. The stocks are listed in descending order of 6-month total return as of that date, and returns do not include dividends.

Yahoo! Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>          43.50%
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>          53.75%
Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>     28.91%
EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %>               39.12%
Oracle Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %>         -4.13%
Int'l Business Mach. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %>    -8.58%
Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>           0.37%
Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>         9.99%
Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>        12.59%
Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %>        -26.79%
Texas Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %>       17.52%
Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>      -8.36%
Microsoft Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>      23.43%
Motorola Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>           18.01%
Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>          3.75%


Top 5                            32.23%
Top 10                           14.87%
Average gain/loss (all 15)       13.54%


A few of the stocks -- Oracle Corp., IBM and Compaq -- have hit some rough sledding of late, but as a group the performance is quite impressive since the last update. Running the screen on last Wednesday's Value Line data produces the same 15 stock portfolio. Here it is again in descending order of current 6-month total return:

America Online        327.70%
Yahoo! Inc.           268.67%
Sun Microsystems      127.74%
EMC Corp.             109.66%
Texas Instruments      91.61%
Cisco Systems          64.12%
Oracle Corp.           59.98%
Microsoft Corp.        54.48%
Motorola  Inc.         47.65%
Dell Computer          42.98%
Hewlett-Packard        42.21%
Intel Corp.            41.76%
Int'l Business Mach.   36.83%
Lucent Technologies    35.63%
Compaq Computer         3.40%

Remember, Fools, the numbers are awesome, but the long-term results of investing in this screen have not been tested. With such a high concentration of companies in the technology sector, things will get ugly when the market moves downward. Use the screen to add more stocks to an already diversified portfolio or as a starting point for more Foolish research into the individual companies.

Have a great week!

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