Lowest Relative Return

The Utilities sector was the worst-performing sector (24.64%), followed by the Consumer/Non-Cyclical sector (26.24%), as shown in Table 8.6.

Comparison with Strongest Large Cap Results

The two strongest large cap sectors were Technology (70.77%) and Capital Goods (54.36%). For medium caps, the Technology sector performance was 82.13% (a 16% improvement in relative performance), and for Capital Goods the performance was 69.61% (a 28% improvement in relative performance). This is summarized in Table 8.7.

In summary, large caps returned a geometric mean of 62.02%, where the return for medium caps was 75.61%: 21.22% greater than for large caps.

TABLE 8.6 Medium Cap: Lowest Relative Return

Stock Type

Strongest

Weakest

Large Cap

Technology (70.77%)

Consumer/Non-Cyclical (11.36%)

Capital Goods (54.36%)

Transportation (28.29%)

Medium Cap

Energy (188.61%)

Utilities (24.64%)

Healthcare (89.82%)

Consumer/Non-Cyclical (26.24%)

TABLE 8.7 Highest Relative Return (Comparing Medium and Large Cap)

Strongest

Large Cap

Medium Cap

Change

Technology

70.77%

82.13%

16.05%

Capital Goods

54.36%

69.61%

28.05%

Averages

62.02%

75.61%

21.22%

TABLE 8.8 Lowest Relative Return (Comparing Medium and Large Cap)

Weakest Large Cap Medium Cap Change

Consumer/Non-Cyclical 11.36% 26.24% 130.99% Transportation 28.29% 49.14% 73.70%

Comparison with Weakest Large Cap Results

If an investor invested in the two weakest large cap sectors but in medium cap stocks, the returns would have been incrementally better. For example, the worst-performing large cap sector was Consumer/Non-Cyclical, with an 11.36% return. In medium caps, the performance of this sector was 26.24% (a 130.99% improvement in relative performance). The Transportation sector had an aggregate return of 28.29%. For the medium caps, the return was 49.14% (a 73.70% improvement in relative performance). This is summarized in Table 8.8.

In summary, medium caps returned a geometric mean of 17.93% for the weakest sectors, where the return for medium caps was 35.91%: 98.25% greater than for large caps.

ANALYZING SMALL CAPS

On the 30th of December, 2003, there were 1500 large caps out of a total of 8103 firms (18.51%). In Tables 8.9 and 8.9a, it is assumed that an investor has $1,500,000 to invest in shares. As the investor is unaware of what shares will increase in value, the investor invests $1,000 in each small cap stock.

The aggregated returns are listed in column [2], the "Medium Cap Return on $1 k" column. As the investor invests $1,000 in each firm, the gross profit or loss (measured by column [3]) is determined by this logic: {[2] — ([1]*1000)}. The gross return or loss (column [4]) is determined by {[3] / ([1]*1000)}, expressed in percentage terms. The net profit or loss (column [5]) adjusts column [3] for transaction costs. It is assumed that total transaction costs of $22 are required to enter and exit individual stocks. The net return column measures the percentage increase or decrease on the investment of $1 k per stock after transaction costs.

TABLE 8.9 intMgtOS® Small Cap Report (intMgtOS® 5003.iR23a)

Number

Small Cap

Gross

Net

of Small

Return from

Profit or

Gross

Profit or

Net

Sector

Caps

$1k

Loss

Return

Loss

Return

Basic Materials

138,319

52,319

60.84%

50,427

58.64%

Capital Goods

85

151,244

66,244

77.93%

64,374

75.73%

Conglomerates

4

5,191

1,191

29.77%

1,103

27.57%

Consumer Cyclical

ö4

87,ö13

23,613

36.90%

22,205

34.70%

Consumer/Non-Cyclical

80,2ö2

34,262

74.48%

33,250

72.28%

Energy

ö5

115,699

50,699

78.00%

49,269

75.80%

Financial

24ö

351,ö49

105,649

42.95%

100,237

40.75%

Healthcare

173

348,139

175,139

101.24%

171,333

99.04%

Services

322

2,023,660

1,701,660

528.47%

1,694,576

526.27%

Technology

350

877,144

527,144

150.61%

519,444

148.41%

Transportation

51,219

15,219

42.28%

14,427

40.08%

Utilities

23

32,166

9,166

39.85%

8,660

37.65%

Grand Total

1,500

4,262,304

2,762,304

184.15%

2,729,304

181.95%

TABLE 8.9a intMgtOS® Small Cap Report

Notes

Values intMgtOS Report Created By

Data Date intMgtOS®5003.iR23a

Dr Ken Standfield, Certified intMgtOS® Intangible Analyst

(111291-AKS01) Tuesday December 30th 2003

This report was compiled in strict accordance with intangible management operating standards and is deemed as being intMgtOS®5003 (International Intangible Reporting Standard) Certified.

IntMgtOS® Certification Number intMgtOS®-1001412

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