Personal Equity Selections (9/6/98-12/31/98)

By Robert Schiener

Nothing fascinates me more than the greed, fear, and fundamentals of stocks, bonds, options, and money market funds. These latter vehicles of finance can allow for growth in individual wealth over both the short and long run. I say the short run with high correlation to greed and fear and the long run to sound economic fundamentals. Put another way, the inference here is that the high variance of stock prices in short periods of breath are a result of both "irrational exuberance" and volatile emotions on the part of professional traders. The second inference might state that long periods of breath have a high probability of general increases in market capitalizations of corporations and investor portfolios.

Regardless if investors are day traders or stringent market fundamentalists, I think it appropriate to start Hoosier Review with a personal forecast of which stocks I believe will outperform the S&P 500 Index and return solid fortunes from the closing prices of Friday, September 4, 1998 through the closing prices of December 31, 1998.

As a hypothetical, yet quite serious plot, let us assume that I am in charge of a large-capitalization mutual fund which invests mostly in major corporations familiar to most American citizens. Although most certainly more stable than small-caps, large caps are less volatile than start-ups and mid-caps and will either return more in down times (albeit negative) or return less in bull markets (based strictly on historical trends and beta measurements). Let us further assume that my fund starts with $1,000,000, which is small relative to the mean of large-cap mutual funds. Once again, the minimal objective is to return a positive cash flow. The intermediate goal is to at least match returns on the aggregate market. By returning more than the latter index, we encounter a very successful investment to be sure!

Hence, as of the close of September 4, 1998, I am choosing the following four stock picks:

  • Bristol Myers Squibb Company (NYSE: BMY), (25% allocation)
  • Dell Computer Corporation (NASDAQ: DELL), (25% allocation)
  • Compaq Computer Corporation (NYSE: CPQ), (25% allocation)
  • Irwin Financial Corporation (NASDAQ: IRWN), (25% allocation)
In terms of the prices of my stocks and our target's index, that being the S&P 500, the following is relevant when we assess future performance:

  • BMY=104 3/16
  • DELL=54 3/4
  • CPQ=29 11/16
  • IRWN=25
  • S&P 500 Index=973.89
So, by allocating $1,000,000 equally among the four aforementioned equities, our fund will own the following quantity of shares of each corporation, respectively:

  • BMY=2399.5201
  • DELL=4566.2100
  • CPQ=8421.0526
  • IRWN=10000.0000
Well, now that the particulars are in law, I will update this fund's performance on an absolute percentage basis and on a relative one (against S&P 500) in regular intervals.

Finally, I will offer my personal upgrades and downgrades of other stocks during the same time I update the performance of my hypothetical mutual fund. If you would request a rationale for my stock picks don't hesitate to contact me via a letter to Hoosier Review.

Eric Seymour

Robert Schiener

Joel Corbin