Ken Deen's THE AGGRESSIVE TRADER(tm) "Seeking double-digit gains in one to four months" STATUS REPORT 1339 Virginia Rd. Vol. 1, No. 85 Montecito, CA 93108 September 14, 1992 (805) 565-2039 CompuServe: 72020,2050 August 1992: Overview August was an uneventful month for my Model Portfolio (up 0.6% - see Table 3), a very disappointing month for the volatile Stock+Options Account (down 11.0% - see Table 5), and a great month for the DESI Trading System(tm). It was a tough month for the market in general. The NASDAQ Composite fell 3.0%, and the S&P 500 fell 2.4%. Next month, I hope to include graphs showing the complete performance history of my Model Portfolio/Stock-Only Account, my Stock+Options Account, and the DESI Trading System. DESI(tm) stocks have been outperforming my other stock picks, on average, for some time. This has never been more dramatically clear than now. I have some big winners right now, and they are all DESI stocks. In fact, my DESI stocks are emerging as leaders in the current bull market. I also have some losers, and none of them are DESI stocks. This suggests that my computerized system is often better at picking stocks than I am! My plan for the future, then, is to focus more heavily on DESI trades with my own money. I will still publish buy alerts for non-DESI stocks I recommend (as I did last Sunday, when I recommended IFMX, WFLT, and ERTS), but with my own money I am waiting for the next DESI buy signal. A New Bull Market in Growth Stocks The growth-stock-led bull market I have been predicting in recent weeks is here. Today, Monday Sept. 14, the NASDAQ Composite surged 1.9% to its highest level in five months as an upward trend dating from late June gathered momentum. Volume was a very heavy 221 million shares, the heaviest trading day since April. This is the most bullish market scenario I have seen since December 1991. I expect a resumption of Monday's explosive rally before the end of the month. This bull market should last at least through December, regardless of who wins the election. The reversal of monetary policy in Germany on Monday put an end to the dollar crisis, which had been a major source of uncertainty for the market. The DESI Trading System(tm) -- Trades That Count The DESI Trading System, described in detail in last month's Status Report, is doing spectacularly well. Table 1 tells part of the story: three completed trades and three stocks still held. Let's look first at the three completed trades. Ben & Jerry's was up 38.9%, Ohio Art was up 6.0%, and Lannet Data Comm was down 20.8%. Details, including stock charts, are on page 2. The average of all three trades is a gain of 8.0%. 8% in three months is 36% on an annualized basis. An interesting footnote on LANTF, the sole loser: On July 30, prior to the sell date, the low for the day was 31, a 9.7% gain over the buy price. Then the company released a surprisingly weak earnings report and the stock sold off sharply. Such an earnings disappointment on a DESI stock is atypical. DESI(tm) stocks tend to have earnings momentum, and one positive surprise tends to be followed by another. Now let's look at the three stocks still held by the DESI system. I also own these stocks, having purchased them on the dates of the DESI buy signals. These three stocks, United Wisconsin Services (UWSI), PacifiCare Health Systems (PHSYA), and Nature's Bounty (NBTY), are emerging as leaders in the current bull market. I purchased PHSYA and UWSI on July 31, and NBTY on August 3. Table 1 shows the status of these stocks on Aug. 31, and they were doing very well as of that date. But the big news has been breaking in September. As I write this on Sept. 14, some six weeks after buying, I am up 35.4% on UWSI, up 11.8% on PHSYA, and up a whopping 52.5% on NBTY. With spectacular results like these, it is clear why I plan on focusing most of my future personal trading on this very promising computerized system! Goodbye Model Portfolio; Hello Stock-Only Account With the sale of Cabletron Systems stock on August 6, the hypothetical Model Portfolio contains exactly the same stocks, in exactly the same quantity, as my personal Stock-Only Account which is registered in the Stock Division of the US Investing Championship. The only difference between the Model Portfolio and my Stock-Only Account, then, is the amount of cash. As of August 31, I have retired the Model Portfolio and replaced it with my personal Stock-Only Account. Table 3 gives the final, closing, August 31 status of the Model Portfolio, and also the initial status of the Stock-Only Account. Table 1. DESI Trading System(tm) Stocks -- Trades That Count** DESI-buy* DESI-sell* Aug31 Gain/ Symbol Company Name Date High Date Low Close Loss OAR Ohio Art Co. 4/28 50.00 8/13 53.00 +6.0% LANTF Lannet Data Comm. Ltd. 5/8 28.25 8/12 22.38 -20.8% BJICA Ben & Jerry's Homemade 5/11 22.50 8/17 31.25 +38.9% PHSYA PacifiCare Health Sys. 7/31 35.50 *** 34.25 -3.5% UWSI United Wisconsin Svcs 7/31 39.50 *** 45.75 +15.8% NBTY Nature's Bounty Inc. 8/3 20.00 *** 21.25 +6.3% Statistics (completed trades only): Number of winners . . . . . 2 Number of losers. . . . . . 1 Percentage of winners . . . 67% Best trade. . . . . . . . . +38.9% Average winning trade . . . +22.4% Worst trade . . . . . . . . -20.8% Average losing trade. . . . -20.8% Overall Average . . . . . . +8.0% * Stocks are assumed to be bought at the day's high and sold at the day's low. This more than accounts for the bid/ask spread and slippage. ** 'Trades That Count' refers to trades which were not used in the design of the System. *** These stocks are currently held by the System. Table 2. Model Portfolio Transaction Log Sym- B/ # Pro- Cash Date bol Company Name S Shrs Price Cost** ceeds** Balance From previous month . . . . . . . . . . . . . . . . . . . . . $5,225 8/6 CS Cabletron Systems S 165 54.13* $8,886 $14,111 8/18 IFMX Informix Corp. S 200 38.00* $7,562 $21,673 Model Portfolio: Final cash balance . . . . . . . . . . . . . $21,673 * In cases where I actually bought or sold a model portfolio stock, I have shown my transaction price and marked the price with an asterisk. In cases where I did not trade the stock, the day's closing price is shown. This applies to Tables 2 and 3. ** Includes transaction cost of 0.5% Table 3. Model Portfolio Status Sym- Purch # Purch Orig Aug31 Aug31 Gain/Loss bol Company Name Date ShrsPrice Cost** Price Value $$ % CLCDF Clearly Canadian 5/12 500 18.00* $9,045 14.50 $7,250 ($1,795)-19.8% CFFS Columbia 1st Bank 7/15 350 14.75* $5,188 14.00 $4,900 ($288) -5.6% PHSYA PacifiCare Health 7/31 140 35.00* $4,925 34.25 $4,795 ($130) -2.6% UWSI United Wisconsin 7/31 190 36.75* $7,017 45.75 $8,693 $1,675 +23.9% Total value of stocks held . . . . . . .$26,175 $25,638 ($538) -2.1% End-of-month cash balance. . . . . . . . . . . . . . . $21,673 One-month portfolio gain. . . . . . . . $47,028 $47,311 $283 +0.6% Year-to-date portfolio gain . . . . . . $50,000 $47,311 ($2,689) -5.4% Introducing the Stock-Only Account***: Initial cash balance August 31 1992 . . . . . . . . . . . . . . $7,954 Value of stocks held Aug 31 (same as Model Portfolio) . . . . . $25,638 Initial account value August 31 1992. . . . . . . . . . . . . . $33,592 * See footnote, Table 2. ** Includes transaction cost of 0.5% *** This is an actual, personal account of the editor. Table 4. Stock+Option Account* Transaction Log Sym- B/ # Pro- Cash Date bol Company Name S Shrs Price Cost ceeds Balance Long Transactions and Covered Shorts: Cash balance from last month (excl. cash from open shorts). . . ($9,726) 7/17 USS US Surgical S 100 98.00 $9,772 $46 8/3 USS US Surgical B 100 91.25 $9,153 ($9,107) 8/3 NBTY Nature's Bounty Inc. B 200 20.00 $4,029 ($13,136) 8/6 CS Cabletron Systems S 110 54.13 $5,925 ($7,211) 8/7 MDB Professional Bancorp S 400 10.13 $4,013 ($3,198) 8/12 UWSI United Wisconsin Svcs B 100 42.00 $4,227 ($7,425) Net interest charges $20 ($7,445) 8/25 CSFCB CSF Holdings Inc. S 250 29.50 $7,345 ($100) End-of-month cash balance (excl. cash from open shorts). . . . . ($7,445) Open Short Positions: - None - * This is an actual, personal account of the editor. Table 5. Stock+Options Account* Status Sym- Orig # Orig Orig Aug31 Aug31 Gain/Loss bol Company Name Date Shrs Price Cost Price Value $$ % Long Positions: CSFCB CSF Holdings Inc. 6/9 250 22.00 $5,529 27.25 $6,813 $1,284 +23.2% CCR Countrywide Credit 7/6 150 25.92 $3,916 26.13 $3,919 $3 +0.1% ARW Arrow Electronics 7/17 300 21.50 $6,484 20.75 $6,225 ($259) -4.0% RUS Russ Berrie & Co. 7/29 150 28.50 $4,305 25.38 $3,806 ($498)-11.6% C Chrysler Corp. 7/29 200 22.00 $4,431 19.75 $3,950 ($481)-10.9% NBTY Nature's Bounty Inc. 8/3 200 20.00 $4,029 21.25 $4,250 $221 +5.5% UWSI United Wisconsin Svcs 8/12 100 42.00 $4,227 45.75 $4,575 $348 +8.2% Total value of long positions held. . . . . . . . . . . $33,538 End-of-month cash balance, excl. cash from open shorts. ($7,445) Portfolio value, long portion . . . . . . . . . . . . . $26,092 Short Positions: - None - Account Summary: Total portfolio value (long portion+net gain on shorts) $26,092 One-month portfolio gain. . . . . . . . . . $29,310 $26,092 ($3,217)-11.0% Portfolio gain since inception (3/31/92). . $33,001 $26,092 ($6,909)-20.9% * This is an actual, personal account of the editor. ---------------------------------------------------------------------------- The Aggressive Trader(tm) is edited and published at irregular intervals, but at least monthly, by Kenneth L. Deen ("Ken Deen"), 1339 Virginia Road, Montecito, California 93108, (805) 505-2039, and is distributed free of charge to all interested parties. Ken Deen reserves the right to begin charging a subscription fee at any time. Ken Deen, his employees, affiliates, and/or clients may have positions in securities recommended herein and may make additional purchases and/or sales in these securities. Ken Deen frequently reveals in this publication the holdings, trading activity, and performance of certain of his personal brokerage accounts. However, he reserves the right to discontinue this practice at any time without notice. Recommendations made in this publication involve risk and may result in losses. Readers should not assume that recommendations will be profitable or will equal past performance. Neither The Aggressive Trader(tm) nor Ken Deen shall be liable in any manner for losses of any kind. The information in this publication is collected from sources believed to be reliable, but neither the accuracy nor the completeness of this information can be guaranteed in any way. Reporduction in whole or in part without the express written consent of the editor is strictly prohibited. The Aggressive Trader, Deen Earnings Surprise Index, DESI, DESI-3, and DESI Trading System are all trademarks of Kenneth L. Deen. Copyright (c) 1992 Kenneth L. Deen. -END-