<FOOLISH WORKSHOP>

RS-IBD Answers      

by David Forrest ([email protected])

***NOTE: As of this writing, (4:30pm) Value Line has not yet uploaded their weekly data file. We'll have the rankings up as soon as we can once they send them to us.

San Francisco, CA (May 7, 1999) -- It's been a busy week out in Workshop land, with more than 640 posts on the message board. For those of you who have never visited a message board, I strongly recommend at least starting to read the boards here at the Fool. Even if you decide to lurk and not post, at least you'll get the benefit of the collective thoughts of thousands of very smart people.

For those of you who lead incredibly busy lives, check in here only occasionally, but would love to hear bits and pieces of the conversations going on at the website, I've taken the liberty of recapping some of the more interesting and relevant discussions from the week. I hope you enjoy the compendium.

RentedAmps asked Sux2BeU about allocating money to your portfolio when you aren't doing an official "rebalancing." For those uninitiated, rebalancing is the act of trying to equally weight all of the positions in your portfolio so that no single stock is too much of your portfolio. This helps to diversify your holdings. We've written about rebalancing the portfolio in our Dozens tutorial, so you might want to check that out. However, here is how Sux2BeU does his allocation:

I'm not sure if I understand the Dozens rebalancing technique, but I'll tell you what I do. I determine the stocks to be sold, sell them, take the pile o' money, find the stocks to be bought, and then invest said pile o' money in each of them evenly. No loading due to position or anything fancy like that.

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Also, RentedAmps wanted to know what to do when RS-IBD picks are tied. Sux2BeU answers:

I talked about this last month due to the 3-way tie. To me if you are doing a monthly portfolio you should be concerned about short-term effects (unemotionally, of course). After screening with T=1, RS, and EPS there is not a lot of difference left, but if you don't want to invest in six or even seven stocks instead of five (like I like to) last month I used the Accumulation/Distribution rank from IBD.

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In keeping with the theme of the RS-IBD monthly screen, Bobov asked the age-old question "When should I sell??" A variety of answers were offered by Fools following this screen, including selling immediately if a stock falls from the top 5, selling if a stock drops below a relative strength ranking of 98, and other suggestions. This was a great discussion for anyone who is following or wants to learn more about the monthly RS-IBD screen.

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Later in the week, our friend Elann made a bold prediction about Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> and his belief that it might be included in Value Line's Timeliness 1 rankings soon. A few posts later, after the rest of the Workshop crew had a crack at ol' Elann, he recanted his position. Want to find out why?

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Mkraft asked a great question about the significance of the "short ratio" for a stock. Elann jumped in with the following explanation:

I don't know of any predictive value from the "short ratio". It's the ratio of the total short position in the stock to the average daily volume. IOW, how many days of trading are embedded in the short position. Often people look in the rear view mirror and say "the stock went down because a lot of people sold short" or "the stock went up because the 'shorts' covered". But that tells us nothing about what they will do in the future.

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Finally this week, there was a pretty good, albeit somewhat off-topic, thread about taxes and how you can avoid paying them if you live out of the country. The debate centered on whether or not you'd have to pay taxes if you were no longer living in the U.S. Several folks weighed in with rules about how long you can live here and whether you are a bona fide citizen of another country. Makes you wonder about jumping ship to a tropical country!

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Closing out today's column, I wanted to point to the returns of the RS-IBD screen that we talked about in today's column. So far this year, this model is trouncing all of the averages. RS-IBD is up 45.10% against a Nasdaq up 13.74% and the Standard & Poor's 500 Index up just 8.82% since the beginning of the year. I encourage anyone who is interested in this model to read the postings above and ask questions on our message board. Please make sure you read all of the posts and search the board before asking questions, though.

In case anyone is wondering, here is the lineup of companies that we started with in the beginning of the year that have produced these awesome returns so far. Check out the list, read the posts, and have a great weekend!

  45.10     Relative Strength-IBD
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  23.24   Yahoo! Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>
  50.59   America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
  25.79   Dycom Inds. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DY)") else Response.Write("(NYSE: DY)") end if %>
  14.78   EMC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMC)") else Response.Write("(NYSE: EMC)") end if %>
  24.96   Nokia Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOK)") else Response.Write("(NYSE: NOK)") end if %>
   7.73   Solectron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLR)") else Response.Write("(NYSE: SLR)") end if %>
  85.75   Schwab, Charles <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCH)") else Response.Write("(NYSE: SCH)") end if %>
 179.05   VISX, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %>
  25.03   AnnTaylor Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %>
  14.06   American Eagle Outfitters <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEOS)") else Response.Write("(Nasdaq: AEOS)") end if %>