The Daily Dow
Tuesday, August 5, 1997
by Robert Sheard

LEXINGTON, KY. (August 5, 1997) -- Much gnashing of teeth has afflicted the Dow Area recently as investors ponder their ethical stances on investing in PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>, currently the favored #2 stock in the Beating the Dow rankings.

Reader Michael Rasmussen ([email protected]) took a different look at the dilemma recently. Michael examined the results from our Dow Spreadsheet, building the following scenario. Let's assume our investor (call him Mr. Fussy) found something wrong with one stock each year throughout the history of our model. And as bad luck would have it, the stock he skipped each year turned out to be the best of the Foolish Four.

For example, in 1973, Mr. Fussy skipped Allied Chemical and passed up the 72% gain for a 16% loss in Texaco. In 1980, Mr. Fussy skipped Texaco, with a gain of 84% and picked American Can, with a 3% loss.

Amazingly, the long-term results if Mr. Fussy did this every year would have been an annualized return of just over 14%, beating the market. Sure it's not 23% (you didn't expect a miracle, did you?), but even with the worst luck imaginable, the returns were still better than the overall index's return. That's some margin of error!

So if you're agonizing over Philip Morris. Don't. You're placing the odds on your side with any of the ten high yielders, so simply replace MO with another stock from that group if you can't bring yourself to buy it. Keep it simple and don't sweat every decision. The joy of this approach is that the thinking was done in developing the system; it's not a brain-intensive task in implementing it. How else do you think we Fools can use it? Thanks, Michael, for your number-crunching.

(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. ________________________________


1997 Foolish Four Model
Stock  Change   Last
--------------------
T    +   5/8   38.06
GM   +   5/16  63.00
CHV  +   3/8   79.88
MMM  +   3/8   95.56

           Day   Month    Year
        FOOL-4   +0.86%   1.91%   7.93%
        DJIA     -0.13%  -0.43%  26.97%
        S&P 500  +0.22%  -0.20%  28.57%
        NASDAQ   +1.00%   1.74%  25.60%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     79.88    22.88%
   1/2/97  120 3M            83.00     95.56    15.14%
   1/2/97  179 Gen. Motor    55.75     63.00    13.00%
   1/2/97  479 AT&T          41.75     38.06    -8.83%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  12220.88  $2275.88
   1/2/97  120 3M          9960.00  11467.50  $1507.50
   1/2/97  179 Gen. Motor  9979.25  11277.00  $1297.75
   1/2/97  479 AT&T       19998.25  18231.94 -$1766.31


                             CASH    $767.60
                            TOTAL  $53964.91