The Daily Dow
Friday, September 12, 1997
by Robert Sheard

LEXINGTON, KY. (Sept. 12, 1997) -- We experienced a slight tide shift yesterday and today in our current Dow rankings. As you probably know, the Foolish Four approach automatically skips the cheapest stock of the ten high yielders and chooses numbers two through five.

The reason for this maneuver? On occasion, the cheapest stock is in real trouble and skipping it has improved the returns over many years compared to the straight five-stock approach popularized by Michael O'Higgins in Beating the Dow.

The Unemotional Value variation I developed over the past year, however, takes a somewhat different approach. In examining the annual data since 1961, I found that a slightly more accurate way to determine whether to skip that cheapest stock can be linked to the yield itself. In other words, when the cheapest stock of the High Yield 10 also sports the highest yield, that is a danger signal and warrants skipping the stock. In other years, though, the cheapest stock is often a perfectly good holding that you wouldn't want to overlook.

Yesterday, with the price gain in AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, Ma Bell climbed out of that cheapest slot, dropping PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> into the hot seat. And because Philip Morris also sports the highest dividend yield of all the Dow stocks, it would be skipped not just by Foolish Four practitioners, but also by Unemotional Value investors.

An important point to remember is that these rankings are obviously fluid, and a stock that's in the position we drop one day may well swap with its neighbor the next. That's simply part of any ranking system and a vagary we must live with to use such a simple system for knocking the market. If you'd like more information on the Unemotional Value variation of the Dow Approach, visit our Foolish Workshop where we track it and many other screens.

On a final note, for the next two weeks I'll be off-line, taking a sabbatical from the Motley Fool in order to work on my book manuscript. There will be a series of guest writers for my daily columns during my absence. If you have questions during my absence, I hope you'll try the message board folder rather than sending them to me via e-mail. I'll only be signing on to put out any forest fires for the next two weeks so you'll have a better chance of a timely response on the boards from our many readers. 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. ________________________________

Stock  Change   Last
--------------------
T    +1  1/16  43.13
GM   -  15/16  66.38
CHV  -   5/16  80.81
MMM  ---       90.06

               Day   Month    Year
        FOOL-4   +0.52%   7.11%  13.44%
        DJIA     -0.76%   0.51%  18.81%
        S&P 500  -0.70%   1.46%  23.20%
        NASDAQ   +0.04%   3.32%  27.02%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     80.81    24.33%
   1/2/97  179 Gen. Motor    55.75     66.38    19.06%
   1/2/97  120 3M            83.00     90.06     8.51%
   1/2/97  479 AT&T          41.75     43.13     3.29%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  12364.31  $2419.31
   1/2/97  179 Gen. Motor  9979.25  11881.13  $1901.88
   1/2/97  120 3M          9960.00  10807.50   $847.50
   1/2/97  479 AT&T       19998.25  20656.88   $658.63


                             CASH   $1009.44
                            TOTAL  $56719.25