The Daily Dow
Monday, October 6, 1997
by Robert Sheard
LEXINGTON, KY. (Oct. 6, 1997) -- The beauty of having a strategy that you have faith in is that whether you're in a good or bad stretch, you can rely on it with confidence... that most of the time, it'll come through for you. This holds true not just for investing with the Dow Approach, but in most things in life. Nowhere was this more evident than Saturday night here in the Bluegrass.
After 75 years of humiliation at the hands of the Alabama Crimson Tide, the Kentucky Wildcat football team finally broke through and beat a Top Twenty team. The Wildcats fended off last-minute charges by Alabama to win 40-34 in overtime. Time and again it looked as though Kentucky would find a way to let the game slip away, but the faith the players demonstrated in the new system installed by rookie coach Hal Mumme carried them through the tense final minutes of the game to a major win in Wildcat football history. (Nobody beats Kentucky 76 years in a row!) Mumme's philosophy has been analyzed, criticized, scrutinized and publicized because it's a contrarian approach to coaching. (No big hitting in practice?) Yet the players believe in it, and so far, he's had remarkable results from a team that had become accustomed to getting embarrassed every Saturday.
Yes, I know I've taken a cheap opportunity to hold a pep rally for my guys in blue, but my point about having faith in a strategy is indeed a crucial one. Whenever things begin to look bleak for the Dow stocks -- bad news for one, an earnings downgrade for another, whatever -- the doubters flock into the message folders with their doubts about the strategy. Those investors who buy a stock when no one else wants it will be rewarded handsomely. Buy your kennel full of dogs, and then feed and groom them patiently.
Changing topics a bit, the first Dow stock reported third-quarter earnings today, as ALCOA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AA)") else Response.Write("(NYSE: AA)") end if %> posted profits of $1.32 per share, a 71% increase over last year's third-quarter result of 77 cents per share. First Call estimates called for a gain of only $1.19.
The market didn't reward the results, however. Why? Possibly because the performance was boosted by the sale of securities rather than by a dramatic improvement in the shipment of aluminum products, which only rose 3.5% in the quarter, and the fact that prices declined from last year's levels. Alcoa commented, however, that the results "indicate continued world-wide growth and improved cost performance, which more than offset a decline in overall prices when compared with 1996."
Nevertheless, that's the first of our Dow 30 earnings reports, and it beat the Street's estimate. If most of Alcoa's 29 Dow cousins follow suit, it could be a strong fourth quarter for the stock market. 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 + 11/16 43.94 GM + 11/16 68.50 CHV +1 15/16 87.81 MMM +1 1/16 96.00
Day Month Year
Day Month Year
FOOL-4 +1.50% 2.32% 18.86%
DJIA +0.77% 1.95% 25.62%
S&P 500 +0.79% 2.68% 31.31%
NASDAQ +0.35% 2.15% 33.37%
Rec'd # Security In At Now Change
1/2/97 153 Chevron 65.00 87.81 35.10%
1/2/97 179 Gen. Motor 55.75 68.50 22.87%
1/2/97 120 3M 83.00 96.00 15.66%
1/2/97 479 AT&T 41.75 43.94 5.24%
Rec'd # Security In At Value Change
1/2/97 153 Chevron 9945.00 13435.31 $3490.31
1/2/97 179 Gen. Motor 9979.25 12261.50 $2282.25
1/2/97 120 3M 9960.00 11520.00 $1560.00
1/2/97 479 AT&T 19998.25 21046.06 $1047.81
CASH $1167.51
TOTAL $59430.39