We are starting 2001 with several exciting changes to the Workshop. The Foolish Four content and portfolio have been merged into the Workshop (notice the link on the left), and the new, real money Workshop Portfolio will be kicked off with tomorrow's screen selections. Today's article comes as part of our expansion to three weekly articles. Thursday articles will be dedicated to reviewing the best that our discussion boards have to offer.
We will highlight one or more messages from the Foolish Workshop or Mechanical Investing boards each week. We'll be looking for articles that introduce new strategies or contribute to the advancement of our "science" in other ways. We won't attempt to cover every interesting message, as George Schamel (Schamfool) does so well every week. We'll be much more selective, and we won't follow any fixed criteria for the selected messages. Instead, we'll look for posts that make us think, provide insight, inspiration, or information, or maybe just make us smile. If you run across a worthy article, please recommend it by clicking the Recommend It! link. This will help us find the best candidates each week. In addition, if you think a message has special merit, don't hesitate to drop me a line by email.
Two good messages last week identified and tested potential new investment strategies. Julian Cochran (Manlobbi) suggested two new screens, CashRS and RSCash, and provided some preliminary backtesting results. Alan Levine (Alevine), in his typically quick response, provided a more complete backtest in what has virtually become a standard format.
These screens are similar, conceptually, to the CAPRS and RSCAP screens that became very popular last year. They narrow the Value Line Timeliness 1 universe to the larger companies, using market cap as their filter. Manlobbi observed that market cap may not be the best filter for judging company size. He suggested that a company's total cash on the balance sheet may serve a dual purpose. One is to estimate the raw size of the company, and the other is to indicate how robust it is financially. Thus came CashRS and RSCash, and they are worthy additions to our bag of tricks.
The other message for this week concerns the testing of screens using Investor's Business Daily's Weekend Review (WER). The WER, which appears regularly on the back page of IBD's Friday edition, has been a long-time focus of MI investors' interest. It is a purely mechanical screen, like all our other screens, and it's independent of Value Line's data. Some of us are not too thrilled that all our screens depend on Value Line, so this is a potentially valuable addition.
Testing WER-based screens is a tough chore. A group of people banded together in the typical MI spirit early last year and began the enormous task of acquiring the weekly list from old issues of IBD and entering the data into spreadsheets. They even established a separate message board where their ideas and progress can be shared. Finally, they have come forward with limited backtesting data, covering five years from 1996 to 2000. Kent Stutzman, a data whiz if there ever was one, put together a thorough analysis of the WER data. His practical conclusions were given in this message and the one following. Stay tuned as the WER research group makes further advances during the course of this year.
Speaking of discussion boards, the tech Fools have released a beta test of Fireboards, a way to speed up the display of posts on the discussion boards. Fireboards is a Java applet that resides on your computer and fetches the next post for you while you are reading the current one so that the next post displays faster. Folks on modems will appreciate this feature, and even those with fast pipelines should notice that they move from post to post faster.
Check it out at Fireboards. You need to be a registered Fool to take advantage of Fireboards, so if you haven't registered yet, drop by and sign up.
Foolishly Yours,
Elan
