Wednesday, December 03, 1997


The Daily Dow
by Robert Sheard

LEXINGTON, KY. (Dec. 3, 1997) -- Michael O'Higgins, author of Beating the Dow and popularizer of the approaches we collectively call the Dow Dividend Approach, has been vocal for months about his bearishness on stocks in general and Beating the Dow in particular.

Obviously when an author recants, it can throw a curve for readers and investors who are using or are considering the approach. But in this case, I'm firmly of the notion that you should listen to O'Higgins the author and completely ignore O'Higgins the market timer.

O'Higgins has a new book coming out that reportedly advocates market-timing techniques to choose among BTD, bonds, and t-bills each year. In his pre-release literature he claims that his returns for this approach would have been 24% or so since the beginning of the 1970s.

And that may be. Without seeing his book, I have no idea how to evaluate such an approach, but market timing always sends up red flags in my fort. As Peter Lynch maintains, market timing is futile.

What I was amazed about, however, was a comment in one of O'Higgins's recent interviews that stated that he grew out of BTD in 1990 (the year before his book was published) and kind of passed it along to us slobs as a philanthropic gesture, even though he no longer believed in it.

The hypocrisy of such a comment (or action) aside, I have to wonder how well his market timing in bonds has done since he gave up on BTD in 1990. We do know how BTD has done, though. Since the end of 1990, the five-stock approach O'Higgins advocates in his 1991 book has returned an annualized 27.5%. If that's a broken strategy, sign me up.

To change topics entirely, how about that AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>? In anticipation of new top dog Michael Armstrong's proposals to slash costs, Ma Bell's stock continues to soar. What looked like a complete bowser a few months ago has turned out to be one of the best-performing Dow stocks for 1997. Fool on!

TODAY'S NUMBERS
Stock  Change   Last
--------------------
T    +   3/4   57.00
GM   -1        61.00
CHV  +   1/16  78.56
MMM  -2        96.31

           
                  Day   Month    Year
        FOOL-4   -0.08%   0.26%  26.42%
        DJIA     +0.16%   2.67%  24.56%
        S&P 500  +0.52%   2.24%  31.86%
        NASDAQ   +0.54%   0.91%  25.10%

    Rec'd   #  Security     In At       Now    Change

   1/2/97  479 AT&T          41.75     57.00    36.53%
   1/2/97  153 Chevron       65.00     78.56    20.87%
   1/2/97  120 3M            83.00     96.31    16.04%
   1/2/97  179 Gen. Motor    55.75     61.00     9.42%


    Rec'd   #  Security     In At     Value    Change

   1/2/97  479 AT&T       19998.25  27303.00  $7304.75
   1/2/97  153 Chevron     9945.00  12020.06  $2075.06
   1/2/97  120 3M          9960.00  11557.50  $1597.50
   1/2/97  179 Gen. Motor  9979.25  10919.00   $939.75


                             CASH   $1409.35
                            TOTAL  $63208.91