The Daily Dow
FOOL GLOBAL WIRE
by Robert Sheard
LEXINGTON, KY. (January 2) -- Welcome to
the new thrill ride at Wall Street Theme Park 1997! I suspect more than one
park visitor had to use the sickness bags provided for their convenience
at all local trading stations.
I'm happy today because for the most part, I was
toiling away on tasks that didn't include watching the market, so it was
only an hour or so ago when I first noticed the wild gyrations today. Down
100, recover 60 of that, drop again, soar back up, and finish the day virtually
where you started. The designers of the Disney roller coasters couldn't have
planned a ride any more perfectly to give you thrills and put you right back
where you were to start the odyssey. And isn't it nice to know that with
this approach, those moon bounces and gut punches are irrelevant to your
long-term strategy?
For all of you watching the Foolish Four updates
with interest, here's how the new portfolio looks going into 1997 (remember,
this is Fool's money, not real currency like the other portfolios, so spreads
aren't figured into the mix):
We sold 142 shares of DuPont at $94.125, giving
us $13,365.75.
We sold 148 shares of Kodak at $80.25, giving us
$11,877.00.
We sold 14 shares of Imation at $28.125, giving
us $393.75.
Deduct $60 for the three trades (at $20 each).
With the $1,942.85 in cash already on hand from
dividends and left over from last year's purchases, that gives us $27,519.35
in cash, and positions carried over in Chevron and 3M.
To figure out how much should be in each position
for 1997, I took that cash figure, added the current value of the Chevron
and 3M holdings and got a total portfolio value of $64,586.35. Let's allow
for four more trades yet to be made (two adjustments and two new purchases),
so reduce that amount by $80, and the number we'll work from is
$64,506.35.
In the Foolish Four approach, we hold five positions:
two positions in the #2 stock and one each in the numbers 3, 4, and 5 stocks
in the current Beating the Dow rankings. So, each of those five positions
should be worth $12,901.27.
Let's adjust the two we already own, Chevron and
3M. We have held 380 shares of Chevron, but at the current price of $65,
our new value will only let us keep 198 shares, so we must sell 182 shares.
That sale raises $11,830.00 minus $20 for the commission.
Our 3M position is pretty close to what we want,
but since I'm trying to be precise, I'll go ahead and buy the 6 shares necessary
to bring the stock in line. So, at $83 a share, we'll spend $498.00 plus
the $20 fee on 3M.
That leaves our two new purchases. We can afford
231 shares of GM, which cost us $55.75 a pop, or a total of $12,878.25 plus
the $20 fee.
And our doubled-up position for 1997 is AT&T.
We can afford 618 shares of AT&T (this is without the NCR spin-off which
was completed Tuesday). At $41.75 a piece, we spent $25,801.50, plus the
$20 commission.
So, the new portfolio contains a new 618-share position
in AT&T, a new 231-share position in General Motors, a carried-over 198-share
position in Chevron, and a carried-over position in 3M plus a small addition,
totaling 155 shares.
After all commissions, we also have $91.60 left
in cash, for a portfolio total of $64,506.35, exactly $140 below Tuesday's
final tally. That $140 is the cost of the seven trades. If you were doing
the same update, you might have ignored the update of 3M to save a trade
there, and you may already have dumped your Imation when the company offered
to buy it back. So for many of you, it may only have been five trades, and
most of you are familiar with brokers who charge even less than the $20 a
trade we factor in for this model.
Even so, the $140 spent here comes to less than
a quarter of one percent of the portfolio value. If you're keeping your own
commissions under 2.5% each year, you're doing fine. And we're off. Stay
Foolish and may 1997 be yet another market-beating year for the Dow
Approaches. |