The Daily Dow
Monday, September 9, 1996
by Robert Sheard

LEXINGTON, KY. (September 9): The party that cranked up Friday after worries about a steep interest rate hike faded a bit continued in full swing today. The Dow soared through the 5700 mark, still keeping the possibility alive of a Dow at 6000 before the end of the year, and closed up 1.3% on the day at 5733.84. The S&P 500 and Nasdaq Composite also enjoyed healthy advances for the session.

Unfortunately, the party wasn't attended by all of our stocks, with Kodak actually slipping a bit and Imation remaining flat on the day.

Kodak's blip was the result of the announcement that it's agreed to sell to Danka Business Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DANKY)") else Response.Write("(NASDAQ:DANKY)") end if %> its sales, marketing and equipment services functions of the Office Imagine business as well as the facilities management business known as Kodak Imaging Services.

Kodak will retain and continue to operate the manufacturing and research and development operations supporting Office Imaging. After taking an initial book loss of roughly $250 million after-tax, Kodak believes the transaction will help ongoing earnings.

As you probably know if you read this column regularly, on Friday, Merck knocked Int'l Paper out of the top ten yielders, shaking up the whole Dow Approach current rankings. And just as I warned in the message folder, today's action flipped-flopped the rankings right back again as Merck had a big gain and IP only rose a fraction.

Any time the numbers 10 and 11 stocks are very close to each other in yield, we're likely to see these fluctuations. They're nothing to panic about, though. They're a perfectly natural part of the dynamics of the rankings. Keep holding your Dow stocks the full year and ignore the rankings changes in the interim.

It does raise a few good questions, though. If a stock is the #2 Beating the Dow stock on Friday (and therefore the doubled position for the Foolish Four), and shifts to #1 on Monday (the stock the Foolish Four skips), isn't there a pretty hefty amount of chance associated with this doubled-up position?

I think there is, and if you read this column frequently, I've often suggested my preference for not doubling up. The recent back-and-forth for GM is a good example of why I feel that way. In addition, as I've outlined in my fribble "Another Dow Acronym?," skipping the #1 stock automatically isn't the best policy anyhow.

I prefer to use the straight Beating the Dow approach (selecting as many stocks as you wish down the list) with one minor variation. Skip the #1 stock ONLY when it also happens to be the highest yielder. That signal has been a good tip-off in the past to when the #1 stock might be a real big loser. That approach also eliminates the chance factor associated with doubling up on certain positions and the vagaries of rapidly changing rankings in cases like GM and IP. Stay Foolish and keep it simple.

Transmitted: 9/9/96

THE FOOLISH FOUR MODEL (9/9/96)  

          Day   Week   Quarter  Year  History
Fool-4   0.49%  0.49%   2.17%  15.51%  15.51%
DJIA     1.31%  1.31%   1.40%  12.05%  12.05%
S&P 500  1.23%  1.23%  -1.02%   7.77%   7.77%
NASDAQ   0.82%  0.82%  -3.06%   9.18%   9.18%


Bought  #    Stock     In At   Now   Change

1/2/96  142  DuPont    69.88  84.75  21.29%
1/2/96  380  Chevron   52.38  60.63  15.75%
1/2/96  149  3M        63.76  68.38   7.24%
1/2/96  148  E. Kodak  67.00  71.75   7.09%
7/16/96  14  Imation   26.16  25.13  -3.95%

Bought  #    Stock          Cost       Value      Change

1/2/96  142  DuPont      $9,922.25  $12,034.50  $2,112.25    
1/2/96  380  Chevron    $19,902.50  $23,037.50  $3,135.00    
1/2/96  149  3M          $9,500.09  $10,187.88    $687.78   
1/2/96  148  E. Kodak    $9,916.00  $10,619.00    $703.00   
7/16/96  14  Imation       $366.21     $351.75    $(14.46)  

      CASH      $1,524.50      
      TOTAL    $57,755.13      



Transmitted: 9/9/96 

      
      

      
      

        

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