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The Daily Dow LEXINGTON, KY. (October 29): Based on weaker-than-expected wage inflation news, the bond market and blue chip stocks forget their election worries for the day and sailed ahead, posting a gain of 34 points. During parts of the afternoon, trading curbs were in effect as the Dow was up more than 50 points. All four of our Foolish Four Dow stocks joined the fun, with recent powerhouse 3M having the best day by far. Since its fine earnings last week, 3M has vaulted out of our Foolish Four basement into third place for the year, sitting now on a 20% gain for 1996. Just as a reminder for those of you asking about the differences between the Beating the Dow Approach, the Foolish Four, and my new variation, the Unemotional Value approach, here's the simple steps to follow for each. Beating the Dow - Take the ten highest yielders among the 30 Dow Jones Industrial Average stocks and sort them by stock price, from least expensive to most expensive. Buy the five cheapest and update a year later. From 1965 through 1995, this approach has compounded at 15.75% annually. Foolish Four - Do everything exactly as you would have for Beating the Dow to generate the list of five stocks. Now, throw out #1 (the cheapest stock) and buy a double helping of #2. So, 40% of your money goes into #2 and 20% each goes into numbers 3, 4, and 5. Since 1965, this approach has compounded at 16.82% annually. Unemotional Value - For this variation you start with the same Beating the Dow order. But you would keep the number 1 stock unless it happens to be the highest yielding stock as well as the lowest-priced stock of the ten. Pick the first four on the list after performing this test. Then (and this part is optional), you would double the weighting of the first two stocks on the list so that each one gets one-third of your money and the third and fourth stocks each get one-sixth of your money. Since 1965, this approach has compounded annually at a rate of 18.97%. Potential rankings change ahead? As of today's close, International Paper and Caterpillar have identical dividend yields and are tied for the tenth spot. By virtue of its lower stock price, International Paper wins the tie-breaker, but the order could flip-flop easily tomorrow, which would shake up the entire Beating the Dow order. If you're about to invest in one of the Dow approaches, keep abreast of these two stocks with us over the next few days. If you'd like to see past Dow Reports, Historical Numbers, Current Rankings, or order a copy of MF Templar's 35-year Dow Spreadsheet, head to our Fool's School area and click the Dow Dividend Approach button. We have a full-blown area for the approach, primed and ready for your use.
Transmitted: 10/29/96 Today's Dow Numbers
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