Wednesday, March 11, 1998

The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (Mar. 11, 1998) -- Yesterday I featured the Dow Dozen portfolio, which selects the highest-ranking Foolish Four stock each month. Today I want to feature its first cousin, the Dow Racers.

The Dow Racers simply buys the "hottest" Dow stock each month (as measured by past 26-week total return). Unfortunately, at least for the first 10 weeks or so of 1998, hot is not.

At the end of December, the top Dow Racer was AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, and the portfolio used its first $1,000 of play money to buy 16 shares. Since then, though, AT&T has lagged the market, gaining an anemic 3.5%.

At the end of January, AT&T still had the best 26-week return, so we dropped a spot down the list and added 9 shares of Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> with the new $1,000. Once again, the choice hasn't yet borne fruit and Disney is sitting on a 2.7% loss for the portfolio.

And most recently, the Dow Racers portfolio picked up 8 shares of Merck <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %>. So far this month, the mammoth drug maker is up 1%.

So it's been a weak start for the Dow Racers. Up only 1.12% year-to-date, the portfolio's $3,000 investment has only returned $19.50 so far. If it were to keep up this pace all year, it would score a whopping 6.0% return (ouch). Compare that to the S&P 500, which is on a blistering 65% pace.

Obviously, it's very early in the game and with only three stocks filled in of the twelve, the returns today aren't a comparison I'd base any decisions on. Let me repeat my caution that these Dozens portfolios are too young to be judged yet, and probably won't be giving us very meaningful numbers until late this year or early next year. Nevertheless, we'll keep watching.

If you're interested in the current rankings for the Dow Racers, not much has changed. Through March 4, here are the top ten and their past 26-week returns:

57% AT&T Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>

35% Disney (Walt) <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %>

31% Merck & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %>

28% Wal-Mart Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %>

27% Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %>

22% Travelers Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %>

21% Procter & Gamble <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %>

17% Coca-Cola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %>

15% Amer. Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %>

15% McDonald's Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %>

Fool on!

[Want to be the first Fool on your block to get a copy of Robert Sheard's forthcoming book? Click here to pre-order your copy of The Unemotional Investor.]