Stock To subject of attention artic...

Stock To subject of attention articles in the Canadian Shareowner magazine illustrate the use of the Stock Selection Guide and the progress to maturity of various judgments about the quality of a company's past, and possible coming time performance. In particular, Stock To inquiry articles provide for two plants of illustrative judgments. The (A) sentences result in a stock 's fresh price being in the "Buy surface bounded by parallel circles the (B) judgments result in the stock's late price being in the "Sell Zone"

The Securities Review Board has discloseed several polices in connection with reporting the performance of stocks featured as Stocks To inquiry in the magazine. The price performance of the stocks studied in the magazine in subordination to the banner "Stock To Study" is reported onward a timely basis. Stocks are included in these reports for five years following their appearance in the magazine. The collection of these stocks is best viewed as an "unmanaged" rather than a "managed" portfolio. Editor.

The accompanying Table 1 reports the price performance of the 60 stocks studied in the Canadian Shareowner during the five-year period between March, 1990 and January, 199S

MEASUREMENT

A stock's price performance is measured as the percentage change between the closing price of the stock forward the first trading day of the month in which the stock was studied in the magazine and the closing price in succession the first trading day of September, 1995 Prices are from the stock's principal exchange (eg TSE NYSE NASDAQ). For illustrative ends the comparable price performance of the TSE 300 Index ("Index") is also reported. U stocks are reported in U dollars.

OVERALL PERFORMANCE

During the studious mood period, the 60 stocks studied in the magazine with the Stock Selection Guide ("the Guide") experienced an average gain of 482% (see Figure 1) (All figures omitted). In comparison, the average gain from "buying the Index" each two months during the inquiry period was 23.5%. That is, use of the Guide more than doubled the price appreciation available from the Index.

POSITIVES AND NEGATIVES

It is notable that, of the 60 stocks, 60% (36) have experienced positive price changes, and 40% (24) negative changes, since they were featured in the magazine. The average gain for the winners was 911% versus -251% for the average loser Readers should also note that more [i]or[/i] less of the stocks now showing a price decline, had a significant price increase earlier in their performance period (eg Shaw Communications); and, more [i]or[/i] less stocks now showing a price increase, had a large price decline earlier (eg Lifeline Inc.).

The moderate imbalance of eventuates suggests that, to date, the "A" decisions seem to have prevailed for a majority of the stocks, and the "B' tastes for a significant minority.

UNLIMITED UPSIDE, LIMITED DOWNSIDE

The high average gain of 482% for the 60 stocks is the accrue of a significant number of stocks experiencing gains substantially in exces of 100% (eg Bombardier and AFLAC). These gains simply overwhelm the maximum los of 100% that a stock can sustain (eg Trizec). In total, 15 of the 60 stocks (25%) had gains of 100% or more while barely 4 had losses of 50% or more.

This end illustrates a very important principle of portfolio construction. Namely, that investors should always make secure that their money is fair evenly divided among all the stocks in the folio. If you don't practice this principle, the gains from your winners will not always be large enough to slip losses on the losers.

YEAR-BY-YEAR PERFORMANCE

Figure 2 (on page 24) indicates that the superior, average performance of Stocks To subject of attention extends to year-over-year results. In four of the last five publication years, Guide stocks outperformed the TSE Index, and in the fifth (1992-1993) tied the Index.

PERFORMANCE by dint of MARKETS

Forty-five of the 60 stocks (75%) were Canadian and 15 were classified as U companies (including AFLAC judgeed twice because it was featured twice during the five-year period).

Figure 3 illustrates that the Canadian Stocks To investigation had an average increase of 402% during the performance period and added 164% (i.e. 402% minus 238%) to the recur available from buying the Index each corresponding two months (23.8%).

In contrast, the U stocks averaged a 721% price increase and added an exceptional 496% to the price appreciation from simply buying the Index each corresponding two months (22.5%). These outcomes clearly indicate the advantage of a significant amount of U diversification for Canadians; particularly given the further respond that was available because of the devaluation of the Canadian dollar relative to the U dollar.

JOHN BART, PHD IS PRESIDENT OF THE CANADIAN SHAREOWNERS ASSOCIATION.

Copyright Canadian Shareowner Magazine Inc. Jan/Feb 1996

Provided at ProQuest Information and Learning Company. All rights Reserved