FOOL PLATE SPECIAL
An Investment Opinion by MF Templar

How Now, Dow?

Dow Jones & Co. attempted to bring the Dow Jones Industrial Average into the present tense last night by ejecting four of its most tired components and replacing them with four fresh horses. As of last night, broken steel-maker BETHLEHEM STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BS)") else Response.Write("(NYSE: BS)") end if %>, retreaded retailer WOOLWORTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %>, soon-to-split-in-two WESTINGHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WX)") else Response.Write("(NYSE: WX)") end if %>, and the third of three oil companies TEXACO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TX)") else Response.Write("(NYSE: TX)") end if %> are all off of the blue chip index. In their place, the folks at Dow Jones have added HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>, JOHNSON & JOHNSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %>, WAL-MART <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %>, and TRAVELERS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %> in an effort to make the index reflect the underlying economy a wee bit better.

Probably the largest impact of this reshuffling on Fools involves the Dow Dividend Approach, a time-tested strategy for buying high-yielding Dow stocks and outperforming the market. The Dow Dividend Approach is also known as the Dogs of the Dow or "Beating the Dow" due to Michael O'Higgins splendid 1992 book that introduced Fools around the world to the concept. Because of the ejection of Texaco from the average, investors who purchase the top ten yielding stocks as dictated by the most conservative Dow Dividend Approach strategy will be buying shares of CATERPILLAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> this morning instead of TEXACO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TX)") else Response.Write("(NYSE: TX)") end if %>. Other than that, the introduction of four relatively low-yielding stocks to the Dow has not altered any of the other strategies a hair.

Investors who own Texaco through the Dow Dividend Approach should not lose any sleep over it. Although this is one of the largest changes to the Dow ever, a similar move in 1992 dumped NAVISTAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NAV)") else Response.Write("(NYSE: NAV)") end if %>, USX and Primerica (a company that later merged to form Travelers and is now back on the darn Index). During that change, like all other changes, Dow investors who might have bought any of the ejected companies held on and prospered, continuing to rack up the market beating returns possible with all of the strategies. So Dow Dividend investors should not panic at the change, they should rejoice at the inclusion of four great dividend-paying companies that can be purchased in the future when they have fallen out of favor. (Investors interested in learning more about how the various Dow Approaches have been affected by changes in the Index over the last 36 years might want to check out the Dow Dividend Spreadsheet.)

UPS

Surgical device company UROHEALTH SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UROH)") else Response.Write("(Nasdaq: UROH)") end if %> gained $1 to $10 7/8 on announcing the acquisition of privately held Microsurge, which makes instruments for minimally invasive surgical procedures.

OXIGENE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OXGN)") else Response.Write("(Nasdaq: OXGN)") end if %> rose $1 3/8 to $34 7/8 after the biotech company announced research progress with compounds that may inhibit inflammation in patients undergoing chemotherapy and possibly for those suffering rheumatoid arthritis or other ailments.

Call-center equipment company ASPECT TELECOMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASPT)") else Response.Write("(Nasdaq: ASPT)") end if %> picked up $1 3/8 to $24 5/8 after saying it will "vigorously contest" patent infringement allegations against the company from LUCENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %>.

HUNTCO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HCO)") else Response.Write("(NYSE: HCO)") end if %> rolled out a $1 gain to $12 after Goldman Sachs raised its rating on the steel processor to "market outperform" following an upgrade to "buy" yesterday from Deutsche Morgan Grenfell.

Keds and Top-Sider shoe company STRIDE RITE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SRR)") else Response.Write("(NYSE: SRR)") end if %> gained $1 1/4 to $14 after Morgan Stanley raised its rating to "strong buy" from "neutral."

CROMPTON & KNOWLES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNK)") else Response.Write("(NYSE: CNK)") end if %> rose $1 5/8 to $21 3/4 after Goldman Sachs added the specialty chemicals company to its "priority list."

COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VNT)") else Response.Write("(NYSE: VNT)") end if %>, or the Venezuelan national telephone company, gained $1 5/8 to $28 7/8 after Credit Lyonnais started coverage of the company with a "buy" rating despite the intention of its labor union to walk out on an indefinite strike today.

DOWNS

YAHOO! INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> slipped $2 1/4 to $23 3/8 after AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> introduced its NetFind, which comes out of its collaboration and investment in EXCITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %>.

Computer telephony integration equipment company ACTIVE VOICE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACVC)") else Response.Write("(Nasdaq: ACVC)") end if %> fell $1 5/16 to $12 after announcing that it expects a slight increase in Q4 earnings per share (EPS) from last year's results, below the doubling in EPS forecasted in the analysts' mean estimate.

GREAT ATLANTIC & PACIFIC TEA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAP)") else Response.Write("(NYSE: GAP)") end if %>, better known as A&P Supermarkets, fell another $1 1/4 to $27 7/8 as Q4 EPS of $0.60 reported on Monday missed estimates of $0.65.

Biopharmaceutical company BIOCHEM PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BCHXF)") else Response.Write("(Nasdaq: BCHXF)") end if %> fell $3 3/4 to $53 3/8 after reporting yesterday Q4 EPS of $0.28 (in U.S. dollars), beating estimates of $0.21.

CONFERENCE CALLS

CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
To Discuss Networked Multimedia Connection with
MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> and INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
(800) 683-1535
Available through 3/14

GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %>, GENZYME TRANSGENICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GZTC)") else Response.Write("(Nasdaq: GZTC)") end if %>
(402) 220-4884 -- replay available through 3/12

GENZYME TISSUE REPAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %>
Re: Carticel
(402) 220-4882 -- replay available through 3/14

TRO LEARNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TUTR)") else Response.Write("(Nasdaq: TUTR)") end if %>
(402) 220-2139 (code: 3137) -- replay until 3/19

FOOL PORTFOLIO STOCKS

FOOL PORTFOLIO                  BORING PORTFOLIO
ATCT down $1/4 at $7 3/4       ATLS unch. at $24
        AOL up $1/2 at $44 3/4         BGP down $3/4 at $41 3/8
        CHV down $3/4 at $66 1/8       CSL unch. at $30 7/8
       COMS up $7/8 at $35 3/8        CSCO up $1 at $51 7/8  
         GM up $3/8 at $58 1/8         GNT down $1/2 at $37 1/2
        IOM unch. at $14 3/4          ORCL up $2 1/8 at $36 1/4
       KLAC up $1/2 at $40 5/8        OXHP down $7/8 at $64 3/8
         LU down $3/8 at $56 1/8      PMSI up $1/8 at $11 1/8
        MMM down $1 3/8 at $89 5/8     SLR down $1/8 at $48 7/8
          T down $1/4 at $35 5/8       TDW down $1/4 at $43 3/4