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Reasonable Runaways Update      

by Jim Stevens (JimStevens@aol.com)

Burlington, VT (March 29, 1999) -- Today I update the Reasonable Runaways screen I've been following since the beginning of 1999. This has been a rather uninspiring model to follow. Many of the stocks so far would have been great companies to sell short! The model has roots in a model tested by James O'Shaughnessy in his book What Works on Wall Street.

I've gotten some mail pointing out that the method I use to pick the stocks differs from the original O'Shaughnessy screen. The Workshop "RR" screen goes like this: Start with all of the stocks in the ValueLine Investment Survey. Filter out companies with a market capitalization less then $150 million and narrow the remaining field to companies with a price to sales ratio of less then one. Finally, rank the remaining stocks by 26-week total return. I track the top twenty companies.

O'Shaughnessy used 12-month relative strength for his model, which produces a very different list of companies. I used the 6-month RS because that is the common measure for Foolish Workshop screens. A UCLA study indicated that it produced superior backtested returns when compared to the pure 12-month RS screen. That's the main thing that causes different companies to be selected, I believe, but O'Shaughnessy's model also differed in that it selected 25 companies instead of 20 and he used a sliding market capitalization cutoff through the period of the backtest. Since his testing ended a few years ago, the new market cap cutoff would now be something higher than $150 million.

As I mentioned above, the Workshop Reasonable Runaways haven't been impressing anyone. With the exception of a few standouts, the portfolio has been really bleeding. Here are the returns through March 26, 1999:

Micro Warehouse(Nasdaq: MWHS)      -55.64%
Read-Rite (Nasdaq: RDRT)           -56.87%
Best Buy Co. (NYSE: BBY)            62.53%
Owens & Minor (NYSE: OMI)          -37.70%
IBP Inc. (NYSE: IBP)               -31.33%
Amer. Stores (NYSE: ASC)            -9.64%
TRICON Global Rest. (NYSE: YUM)     35.54%
SCI Systems (NYSE: SCI)            -47.62%
Genovese Drug 'A' (AMEX: GDXA)     -14.47%
Bindley Western (NYSE: BDY)         -9.81%
Apple Computer (Nasdaq: AAPL)      -18.78%
Eagle Hardware (Nasdaq: EAGL)       24.62%
FDX Corp. (NYSE: FDX)                6.17%
Bergen Brunswig (NYSE: BBC)         -39.43%
Kroger Co. (NYSE: KR)                 3.10%
Fred Meyer (NYSE: FMY)                1.45%
Scholastic Corp. (Nasdaq: SCHL)      -7.23%
Ruby Tuesday (NYSE: RI)             -18.82%
Union Camp (NYSE: UCC)                1.21%
Park Electrochemical (NYSE: PKE)    -13.32%

                            Top 5         -23.80%
                            Top 10        -14.54%
                            Top 15        -11.31%
                            All Twenty     10.32%

Station Casinos  (NYSE: STN)     142.05%
VLSI Technology (Nasdaq: VLSI)      130.15%
Nine West Group (NYSE: NIN)         128.85%
Safeguard Scientifics (NYSE: SFE)   113.68%
Circuit City Group (NYSE:CC)        107.54%
Park Electrochemical (NYSE: PKE)     92.26%
FDX Corp. (NYSE: FDX)                87.13%
Aeroquip-Vickers (NYSE: ANV)         84.53%
Lands' End (NYSE: LE)                78.72%
Amer. Freightways (Nasdaq: AFWY)     74.63%
Dayton Hudson (NYSE: DH)            71.49%
Georgia-Pacific Group (NYSE: GP)     71.35%
Costco Cos. (Nasdaq: COST)           63.72%
USFreightways (Nasdaq: USFC)         62.85%
NCR Corp. (NYSE: NCR)                62.15%
IKON Office Solution (NYSE: IKN)     59.46%
Consol. Freightways (Nasdaq: CFWY)   58.82%
Navistar Int'l (NYSE: NAV)           57.71%
Office Depot (NYSE: ODP)             57.14%
Smith Int'l Inc. (NYSE: SII)         51.02%

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