JABIL CIRCUIT
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	Jabil Circuit Stock Price, 9/4/97-12/17/97
Source: Dow Jones News Retrieval

A FUNNY

thing happened when we ran our CANSLIM screen this week. Normally we turn up around 25 companies, but only 11 stocks made the latest screen. And that number dwindled to six once we applied some additional filters we've designed to weed out the marginal performers. Of the companies that made the cut, we had already profiled one,

Encore Wire

see recipe. And unfortunately, the momentum, at least for the past few weeks, has been in the wrong direction. With the tech-heavy Nasdaq -- where many CANSLIM stocks lurk -- in retreat, it's no wonder that very few companies can clear the hurdles of two key CANSLIM criteria: 52-week price momentum in the top 15% of all companies, and a current share price within 15% of its 52-week high. Add to that list companies that have share prices greater than $15, earnings up 35% for the last reported quarter, estimated earnings gains for the current fiscal year of 30% or more and average annual five-year growth greater than 25%, and you can see why so few companies are making the cut these days.

These unusual market conditions made us want to go back and take a look at how our past CANSLIM screen stocks have performed -- and the results, as you can see from the table below are very sobering. But you can't judge CANSLIM stocks as you would one of SmartMoney's long-term recommendations or even some of our value-based screens. The momentum stocks CANSLIM is designed to uncover can fall as fast if not faster than they rise. That's why William O'Neil, the founder of Investors Business Daily and the creator of the CANSLIM method, recommends selling stocks that fall by more than 8% or rise more than 25%. Judged on that basis, some of our screen stocks fared very well.

Jabil Circuit is almost a textbook case. When we first wrote about the electrical components manufacturer back in September, its stock was trading at 56. A month later, Jabil's shares appreciated 27% to 71 1/2. Following the CANSLIM guidelines, an investor should have sold the shares a couple of days before. Ignoring the rules in this case would have been very costly: The following day, Jabil's stock dropped to 66 3/4; the next day it closed at 59 7/32. Had you followed the discipline of the CANSLIM system, you would have avoided the fall.

Two other companies also had more modest, yet still significant gains before their stock prices fell. Shares of Theragenics, a medical devise company, rose 10% in just two weeks. And Orbotech, a small Israeli manufacturer of testing machines for the printed-circuit-board industry, rose 7% in a few weeks as well.

One stock in our group -- Analytical Surveys -- has already passed the CANSLIM benchmark on the positive end. Shares of the company are up 28% since we wrote about it in October. If you followed the rules to the letter, you should sell. There may be other reasons to stay in the stock, but don't say we didn't warn you.

For investors who still want to gamble on momentum stocks, we did turn up one company worth looking at. Fairfield Communities is a vacation ownership company that sells timeshares. The Arkansas-based firm has increased earnings at a compounded annual growth rate of 30% the past few years. Its shares have soared 164% this year alone.

Fairfield has differentiated itself from other timeshare companies by selling its properties in a unique manner. Rather than selling its customers a week-long vacation at a certain property, Fairfield's members are sold a number of points, which can be used as currency, allowing owners to customize their vacations. The system is at least partly responsible for a 43% surge in Fairfield's sales during the first nine months of this year alone.

One concern we had about the company surfaced in other reports that accused Fairfield of questionable accounting because it recognizing revenue from financed sales before the money was actually collected. But the company contends that it is following standard industry accounting rules. "We follow the same accounting as Disney, Hilton, Marriott," John McConnell, president and chief executive officer of Fairfield Communities says.

The real issue investors should be concerned about, McConnell says, is a company's reserve levels. And McConnell insists that Fairfield's reserves are higher than the industry average. "We are very conservative," says McConnell. He goes on to explain that the company has 8% reserves and the industry average is just 3% to 4%. We couldn't independently verify McConnell's assertion.

It's hard to say how long investors will remain enamored by this company. If the economy starts to slow and investors worry that fewer people will be taking vacations, it's possible the momentum buyers may flee. But if you invest in momentum stocks, that danger is part of the game.