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The Daily Dow LEXINGTON, KY. (September 26): Despite some news that the economy may be slowing down after all (and the Fed may have been correct to leave interest rates unchanged earlier this week), the Blue Chip Dow Jones Industrial Average slipped ever-so-slightly today.
But that didn't hold back Foolish Four component DuPont. DuPont jumped more than 2% on a positive outlook made public this morning. Because of strength at Conoco, DuPont expects to beat analyst earnings estimates of $1.45 for the third quarter by at least 10%. The company attributed the strong performance to its petroleum exploration and production operations, which are expected to do some 40% better than last year's results.
The other Foolish Four stocks held their own for the day. Chevron gave up a half point, 3M gained a fraction, Imation (3M's recent spin-off) was flat, and Kodak tacked on a half point.
Continuing with my piece on the Unemotional Value approach, here are some historical numbers to consider.
Since 1961, Michael O'Higgins' one-stock strategy (known as the PPP) has compounded at 16.74% annually. That would have turned $10,000 into $2.25 million (excluding trading costs and taxes).
The UV2 approach I outlined yesterday (taking the first two stocks on the UV list) compounded at 21.17% annually during those 35 years. That same $10,000 would have grown to $8.29 million. (There were only four losing years during the thirty-five using this approach, the worst by far being a 21.47% loss in 1990.)
The Beating the Dow 4 (dropping the #1 stock automatically and buying the next four) compounded at 16.33% during that period, turning $10,000 into $1.99 million.
The UV4 (taking the first four UV stocks) compounded at 17.72%, turning $10,000 into $3.02 million.
Now the Foolish Four was built upon the BTD4, but doubles the weight of the PPP stock. This approach compounded at 16.82% since 1961, turning $10,000 into $2.31 million. So the UV4 actually performs better than the Foolish Four, even without doubling up on any UV stocks.
If one were to use the UV4, though, and double up on the first two stocks (like the Foolish Four doubles the PPP), the compound growth rate since 1961 was 18.97%, turning that same $10,000 into $4.37 million.
If you start with 1971 instead of 1961, all of the compound growth rates are increased (the 60s weren't the best decade for the Dow approach) and the differences among the various strategies are lessened, but similar total return results occur. The UV2 beats the PPP. The UV4 beats the BTD4. And the UV4 (when doubling the first two) beats the Foolish Four (with its doubled PPP).
And from what MF Sandy has mentioned, the UV approaches haven't just done better than our other Dow Approaches, they have also done so with less risk.
Since this write-up disappears into the ether after tomorrow's is written. I'll boil these results down into a Fribble for tomorrow so we can have a permanent site for the discussion. Fool on!
Transmitted: 9/26/96 Today's Dow Numbers
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