The Dow Approach

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Monday,  March 24, 1997
The Daily Dow FOOL GLOBAL WIRE by Robert Sheard LEXINGTON, KY. (Mar. 24, 1997) -- Ah, confusion reigns and all is right with the world. It may take us a year or two, or three, to figure things out around here, but sooner or later we catch on. What am I talking about? The Foolish Four model, of course. The purpose of this model is to show how the approach works throughout an annual cycle, buying the four stocks and holding them through an entire year, then updating them to hold a new list for the following year. And we've tried to make it as realistic as possible by accounting for a generic $20 commission on each trade and adding in dividends and so on. But by maintaining it over more than a single year, it gets more confusing to many readers than it is helpful. Why, for instance, are we showing a double-digit percentage gain in CHEVRON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHV)") else Response.Write("(NYSE: CHV)") end if %> and 3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>? (It's because they were held over from 1996's portfolio and the purchase price is from 15 months ago, not this January.) Why the heck does the return since 1996 matter? (It doesn't, other than the fact that we began following this mock portfolio then.) And most importantly, is it helping new Dow investors understand the model or make the process more confusing? (That one's a toss up.) In order, then, to make the model a little clearer for new and veteran readers alike, we're simplifying it by getting rid of the carry-over process each year. We're going to adjust the model to begin fresh each calendar year so anyone joining our discussions in mid-stream will have a chance of making sense of it as we go along. In the next day or so, then, you'll see a few adjustments to the numbers for this model. I'll back my way into the numbers that you would have used had you begun fresh on January 2, 1997. The year-to-date returns for 1997, of course, will be virtually identical to what we've been tracking (subject to the slight variations of a share here or there). When we come to the end of 1997, we'll start all over again with a new model for 1998. Same approach, same educational purpose, same annual returns, but without the confusion of what stock was purchased when and goes for what cost basis. After all, wasn't keeping it simple the whole point of the Beating the Dow approach to investing? My deep thanks to MF Shrimp and MF Miel for sitting in here for these columns while I was away last week. Even bad golf and a saturated course is better than no golf at all. And it was a joy to know I had wonderful Fools covering this area. (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 Tire <% 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. Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:EK)") else Response.Write("(NYSE:EK)") end if %> 7. Minnesota Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> 8. Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:XON)") else Response.Write("(NYSE:XON)") end if %> 9. J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JPM)") else Response.Write("(NYSE:JPM)") 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 Updated Daily
Today's Dow Numbers Stock Change Last -------------------- T + 1/2 35.00 GM + 7/8 57.88 CHV +1 1/4 70.50 MMM +1 1/2 88.63 Day Month Year FOOL-4 +1.60% -3.59% -2.41% DJIA +1.48% 0.40% 7.09% S&P 500 +0.87% 0.01% 6.77% NASDAQ -0.91% -5.07% -3.75% Rec'd # Security In At Now Change 1/2/96 155 3M 64.50 88.63 37.39% 1/2/96 198 Chevron 52.38 70.50 34.61% 1/2/97 231 Gen. Motor 55.75 57.88 3.81% 1/2/97 618 AT&T 41.75 35.00 -16.17% Rec'd # Security In At Value Change 1/2/96 155 3M 9998.09 13736.88 $3738.79 1/2/96 198 Chevron 10370.25 13959.00 $3588.75 1/2/97 231 Gen. Motor 12878.25 13369.13 $490.88 1/2/97 618 AT&T 25801.50 21630.00 -$4171.50 CASH $396.17 TOTAL $63091.17

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]