Messages: What Members Are Asking On-Line

AAII Stock Screens Queries

I would like some information on the Shadow Stock screen and how it differs from the Shadow Stock Portfolio.

—C.S.

CI Staff Response: The AAII Model Shadow Stock Portfolio (www.aaii.com/aaiiportfolios/stockportfolio/) is a real-money portfolio dating back to 1993. On a quarterly basis, AAII’s chairman, James Cloonan, updates the portfolio, selling stocks meeting the portfolio’s sell criteria and adding new stocks as needed using the Shadow Stock screen. The Shadow Stock Portfolio area of AAII.com provides a detailed description of how the Shadow Stock Portfolio is managed.

Also at the Shadow Stock Portfolio area, we list the companies that pass the Shadow Stock screen each month using AAII’s Stock Investor Pro screening and database program. The companies on this monthly listing may or may not be in the actual Shadow Stock Portfolio. Further, stocks added to the portfolio during the quarterly review may not pass the month-end screen, as Dr. Cloonan does not necessarily use the same periodic data when performing his quarterly review.

Unlike the performance we report for the Shadow Stock Portfolio, the performance data at the AAII Stock Screens area of AAII.com are hypothetical in nature. Therefore, the hypothetical stock screen performance does not take into account such factors as commissions, bid-ask spreads, dividends, etc. Hypothetical Shadow Stock screen data in our performance spreadsheets at the Stock Screens area only date to 2004, when Dr. Cloonan adjusted the screen to reflect market changes over the years.

The performance spreadsheet you provide at the Stock Screens area of the Web site has data for “All Exchange-Listed Stocks.” What is this and why does it differ so greatly from the performance of the other indexes?

—B.F.

CI Staff Response: The “All Exchange-Listed Stocks” designation refers to an equal-weighted “index” of all stocks traded on the American, New York, and NASDAQ exchanges found in AAII’s Stock Investor Pro database. It is a “total market” index, but the key difference from other market indexes such as the Dow Jones Wilshire 5000 is that it is equal-weighted. Most of the popular indexes—S&P 500, Dow Jones Wilshire 5000, etc.—are market-cap weighted. This means that the indexes’ performance is driven primarily by the largest companies, which make up a very small percentage of the overall stock membership in the respective index. As of the end of April, the 10 largest companies by market cap accounted for almost 15% of the cap-weighted Dow Jones Wilshire 5000 index, which has over 5,000 companies. According to the index calculator at the Wilshire Web site (www.wilshire.com), the Dow Jones Wilshire 5000 cap-weighted index has had an average annual return of 3.59% over the 10-year period ending June 30. By comparison, the equal-weighted Dow Jones Wilshire 5000 has had an average annual return of 12.87% over the same period. Based on this data over this particular 10-year period, the gap in performance between the cap-weighted and equal-weighted Dow Jones Wilshire 5000 index is over 140%.

FOLIOfn Portfolio Service

CI Staff Response: FOLIOfn is a unique type of on-line broker, allowing investors to buy baskets or folios of stocks, mutual funds, and exchange-traded funds. You can also buy incremental shares. For $29 a month, you can place an unlimited number of trades, with certain restrictions. Account holders can create their own folios or choose from a number of pre-made “Ready–to–Go” folios focusing on various indexes, geographic areas, sectors and industries, and investment styles. Go to www.foliofn.com for more details.

Because of its focus on portfolio investing, FOLIOfn is unlike the “traditional” brokers we cover in CI’s annual on-line discount broker guide or the Discount Broker Guide that runs annually in the AAII Journal. Furthermore, it is much more difficult to rate individual brokers than it is a software package or Web site. The sheer number alone makes it all but impossible.

Total Return Charts On-Line

CI Staff Response: Both the Morningstar Web site (www.morningstar.com) and MSN Money Web site (www.investor.com) offer free total return charts for stocks and mutual funds.

Morningstar users go to the Charts page for their desired ticker, click the Price tab of the Java chart and then check off the Total Return box at the top-right of the chart area. You can then specify various periods over which to calculate the total return.

The MSN Money charting system uses technology that is not Mac compatible: Windows users must use the Internet Explorer browser and download the Money Investment Toolbox applet. At the Historical charts page for a ticker, click on the Chart menu at the top of the chart area and select Investment Growth. You can also specify the period over which the chart is drawn.