The Daily Dow
Monday, September 15, 1997
by Paul Larson (TMF Parlay)
CHICAGO, IL. (Sept. 15, 1997) -- Robert Sheard will be away for the next two weeks, so you will see a motley variety of Fools penning the daily Fool Four updates over these next ten trading days. Robert is taking the time away to lock himself in a little room somewhere in order to put the finishing touches on his book. The highly anticipated tome is tentatively titled, "The Unemotional Investor." Sounds like it will be a good read when the ink hits the paper.
I'm sure you are wondering what happened in the world of the Fool Four today. The main pieces of interest lately have been the rise of AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> and the softness in PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>. Philip Morris had held the highly coveted number two spot in the Beat the Dow rankings for some time. However, that all changed on Thursday when Ma Bell closed fractionally higher than Philip Morris. After closing a mere eighth of a point apart on Friday, the chasm widened greatly today. AT&T is now solidly in the number two slot after rising $1 3/8 to $44 3/16, and Philip Morris remains square on the hotseat at $41 3/16 after today's $1 7/16 tumble.
What is the big deal about differentiating between the lowest and second lowest priced stocks among the ten highest yielding Dow stocks? Well, in many of the mechanical approaches, such as the Fool Four, the lowest priced stock of the ten is skipped over while the second highest ranked (second lowest price) is often given special attention. In the case of the Fool Four, this "special attention" would mean a double weighting. A Fool starting a Fool Four portfolio last week would have a large position in Philip Morris and no position in AT&T. Someone starting today would have exactly the opposite.
The reason for skipping the numero uno stock is quite simple. Not only do the historical numbers prove it to be a good one to pass on (which should be argument enough), but I think it can be explained by one simple saying. The cliche goes, "If it's too good to be true, it probably is." In other words, a stock with an extremely high yield and a low price is more likely to have real problems than to be simply out of favor. Does Philip Morris have real problems? Time will tell. We'd love to hear your thoughts on this topic in the Beating the Dow message board.
Speaking of historical numbers, I thought I would rerun a chart that Tom Gardner ran in his Fool Portfolio update of last Thursday. I think the numbers speak for themselves.
Fool- Total The Total
Four Returns Dow Returns
197122.98% 23% 9.06% 9%
197217.58% 45% 16.70% 27%
197332.09% 91% -10.86% 13%
19742.67% 96% -16.91% -6%
197582.20% 257% 44.24% 36%
197653.23% 447% 31.28% 79%
19771.98% 458% -13.44% 55%
19788.12% 504% 2.52% 58%
19795.43% 536% 11.34% 76%
198046.63% 833% 25.31% 121%
1981-1.56% 819% -3.26% 114%
198247.88% 1259% 19.59% 156%
198335.20% 1737% 35.63% 247%
19847.40% 1873% 0.51% 249%
198538.20% 2626% 29.77% 352%
198628.43% 3401% 21.69% 450%
19872.28% 3481% 11.96% 516%
198814.46% 3999% 14.64% 606%
19899.04% 4369% 31.97% 832%
1990-15.06% 3696% -9.17% 747%
199189.34% 7088% 31.48% 1013%
199228.77% 9156% 10.96% 1135%
199337.80% 12655% 17.96% 1357%
1994-6.70% 11800% 3.73% 1412%
199537.61% 16276% 36.66% 1966%
199630.47% 21265% 24.34% 2469%
26-Year Total Returns
Fool-Four + 21,265%
The Dow + 2,469%
Pretty cool set of numbers, no? Of course, past performance is no guarantee of future results (blah blah blah). But considering that the Fool Four has historically blown away the Dow Industrials, which have in turn blown away the majority of the mutual funds. I find it amazing that this simple, mechanical approach does not receive more attention than it does.
Thanks for tuning in, and check back tomorrow when the Fool's conference call wizard Debora Tidwell (TMF Debit) will be your substitute columnist and will give the latest on the AT&T/Philip Morris race. 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 3/8 44.19 GM +1 5/16 68.00 CHV + 3/16 82.56 MMM -2 1/2 89.25
Day Month Year
FOOL-4 +1.09% 8.94% 15.38%
DJIA -0.28% 1.30% 19.74%
S&P 500 -0.45% 2.26% 24.17%
NASDAQ -0.87% 3.00% 26.64%
Rec'd # Security In At Now Change
1/2/97 153 Chevron 65.00 82.56 27.02%
1/2/97 179 Gen. Motor 55.75 68.00 21.97%
1/2/97 120 3M 83.00 89.25 7.53%
1/2/97 479 AT&T 41.75 44.19 5.84%
Rec'd # Security In At Value Change
1/2/97 153 Chevron 9945.00 12632.06 $2687.06
1/2/97 179 Gen. Motor 9979.25 12172.00 $2192.75
1/2/97 479 AT&T 19998.25 21165.81 $1167.56
1/2/97 120 3M 9960.00 10710.00 $750.00
CASH $1009.44
TOTAL $57689.32