The Dow Approach

Dow Dividend Strategy | What's Here | The Statistics Center | Spin-Off Help | The Archives
Thursday, February 6, 1997
The Daily Dow FOOL GLOBAL WIRE by Robert Sheard LEXINGTON, KY. (February 6) -- "How can a stock that was number two or three on the current Beating the Dow list disappear overnight?," I hear you cry in anguish. "I bought CATERPILLAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> yesterday, and now it's not even on the list? What gives?" If you're asking that question, the first thing I must say is that you've jumped the gun and invested in something you didn't fully understand. That's not the Foolish way. Rule #1 is that you must understand what you're buying and why, even with something as simple as the Dow Approach. So, if you're unsure of the reasons why this approach works, or how to make it work, do some homework before taking the plunge. Pick up a copy of Michael O'Higgins' Beating the Dow; read the chapters on the Dow Approach in The Motley Fool Investment Guide; run the numbers yourself a few times to understand how the process works. We're glad to provide the current data as a guide, but that doesn't absolve anyone of the responsibility of understanding the approach and double-checking the numbers individually. On to the question at hand! The Beating the Dow rankings incorporate two screens. The first is simply the dividend yield. Step one includes the ten stocks from the 30 DJIA components with the highest dividend yields. But once you have identified those ten stocks, the yield figure isn't important any longer. Then you focus solely on the second screen -- stock price. The Beating the Dow order is determined by re-ranking those ten stocks in ascending order by stock price, nothing else. So it's not unusual for a stock ranked fairly highly on the Beating the Dow list to suddenly disappear. That happens in cases where the stock also happens to be low on that list of ten high yielders. If a stock slips from tenth to eleventh on the high-yield list, even if it's very high on the Beating the Dow order, it disappears altogether since only the top ten yielders are considered for that set of rankings. In these times of rapid rankings shifts, hope this helps clear up the confusion. Just keep the screens in order and you'll be fine. First screen is the top ten high yielders. The second screen re-ranks those ten by stock price. Fool on! (c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.	The Current BTD 10 1. AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:T)") else Response.Write("(NYSE:T)") end if %> 2. *International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IP)") else Response.Write("(NYSE:IP)") end if %> 3. *Goodyear <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GT)") else Response.Write("(NYSE:GT)") end if %> 4. *General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GM)") else Response.Write("(NYSE:GM)") end if %> 5. *Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %> 6. Minnesota Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> 7. Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:XON)") else Response.Write("(NYSE:XON)") end if %> 8. J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JPM)") else Response.Write("(NYSE:JPM)") end if %> 9. Texaco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:TX)") else Response.Write("(NYSE:TX)") end if %> 10. Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MO)") else Response.Write("(NYSE:MO)") end if %> ***NOTE: FOOLISH FOUR STOCKS ARE PRECEDED BY AN ASTERISK AND ARE ITALICISED Last Update: 02/05/97
Today's Dow Numbers Stock Change Last -------------------- T --- 38.38 GM - 7/8 56.38 CHV - 3/8 65.25 MMM - 1/4 83.88 Day Month Year History FOOL-4 -0.50% -2.28% -2.75% 25.73% DJIA +0.39% -0.59% 5.04% 32.36% S&P 500 +0.24% -0.76% 5.32% 26.66% NASDAQ -0.15% -2.42% 4.29% 27.97% Rec'd # Security In At Now Change 1/2/96 155 3M 64.50 83.88 30.03% 1/2/96 198 Chevron 52.38 65.25 24.58% 1/2/97 231 Gen. Motor 55.75 56.38 1.12% 1/2/97 618 AT&T 41.75 38.38 -8.08% Rec'd # Security In At Value Change 1/2/96 155 3M 9998.09 13000.63 $3002.54 1/2/96 198 Chevron 10370.25 12919.50 $2549.25 1/2/97 231 Gen. Motor 12878.25 13022.63 $144.38 1/2/97 618 AT&T 25801.50 23715.75 -$2085.75 CASH $207.10 TOTAL $62865.60

Main Page Fool Wire Hall of Portfolios Fool's School Daily News Fool Mart Foolish Games Copyright©1997, The Motley Fool, All Rights Reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool, Inc. Legal Disclaimer, in fine print of course! Questions or Comments? Please contact Ted Verrill at [email protected]