The Dow Approach

Dow Dividend Strategy | What's Here | The Statistics Center | Spin-Off Help | The Archives
Friday, February 14, 1997
The Daily Dow FOOL GLOBAL WIRE by Robert Sheard LEXINGTON, KY. (Feb. 14, 1997) -- The February issue of Money Magazine includes a ten-year survey of more than 3,400 mutual funds (although not all of them have ten-year histories). I love surveys like this because in one place you can put actual numbers side-by-side and see just how well or poorly any specific fund (or group of funds) has done. But it's also helpful to compare these funds to the Dow Approaches. We talk so often about how poorly the vast majority of funds do compared to the S&P 500 Index. But in fact, the record of funds compared to the Dow approaches is even more dismal. From 1987 - 1996, the Unemotional Value approach recorded a compound growth rate of 20.5% (actually nearly 3% a year lower than its much longer-term historical record). This includes the nearly 19% loss in 1990 and a period from 1987 - 1990 when the approach was mediocre. Yet of all the funds included in the survey, you can count the number of funds that achieved better returns over the same period on your fingers. That's right, only nine mutual funds managed to beat Unemotional Value over the last decade. Even the basic high-yield ten-stock approach managed to best 92.5% of all mutual funds, according to the survey. Now we'd all like to think, of course, that our mutual fund was one of those nine, but obviously somebody was investing in the other thousands that didn't beat the approach. So cheer or jeer, here are the nine funds that beat the Unemotional Value approach over the past decade: Seligman Commun. & Info. A (22.5%) Fidelity Select - Home Finance (21.9%) Am. Century - 20th Cent. Giftrust (21.8%) FPA Capital (21.4%) PBHG Growth (21.3%) Invesco Strategic Health Science (21.3%) Fidelity Select - Regional Banks (20.9%) Hancock Regional Bank B (20.9%) PIMCo Advisors Oppor. C (20.6%) Of course the real test is predicting which funds will outperform the Dow Approaches over the next decade. It's possible to do better in mutual funds than in the Dow stocks, but it's highly improbable based on these results. In five minutes you can discover what four or five stocks to own for the next year using the Dow Approach. How do you determine which handful of funds might outperform the Dow Approach over the next decade? And is the guesswork involved worth the effort? (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.	The Current BTD 10 1. AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:T)") else Response.Write("(NYSE:T)") end if %> 2. *International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IP)") else Response.Write("(NYSE:IP)") end if %> 3. *Goodyear Tire <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GT)") else Response.Write("(NYSE:GT)") end if %> 4. *General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GM)") else Response.Write("(NYSE:GM)") end if %> 5. *Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %> 6. Minnesota Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> 7. Texaco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:TX)") else Response.Write("(NYSE:TX)") end if %> 8. Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:XON)") else Response.Write("(NYSE:XON)") end if %> 9. J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JPM)") else Response.Write("(NYSE:JPM)") end if %> 10. Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MO)") else Response.Write("(NYSE:MO)") end if %> ***NOTE: FOOLISH FOUR STOCKS ARE PRECEDED BY AN ASTERISK AND ARE ITALICISED Last Update: 02/13/97
Today's Dow Numbers Stock Change Last -------------------- T + 1/8 39.50 GM - 5/8 58.63 CHV - 1/2 68.38 MMM -1 1/4 85.00 Day Month Year Since 1996 FOOL-4 -0.55% 0.84% 0.35% 29.75% DJIA -0.48% 2.58% 8.39% 36.58% S&P 500 -0.41% 2.84% 9.14% 31.26% NASDAQ -0.26% -0.92% 5.90% 29.94% Rec'd # Security In At Now Change 1/2/96 155 3M 64.50 85.00 31.78% 1/2/96 198 Chevron 52.38 68.38 30.55% 1/2/97 231 Gen. Motor 55.75 58.63 5.16% 1/2/97 618 AT&T 41.75 39.50 -5.39% Rec'd # Security In At Value Change 1/2/96 155 3M 9998.09 13175.00 $3176.91 1/2/96 198 Chevron 10370.25 13538.25 $3168.00 1/2/97 231 Gen. Motor 12878.25 13542.38 $664.13 1/2/97 618 AT&T 25801.50 24411.00 -$1390.50 CASH $207.10 TOTAL $64873.73

Main Page Fool Wire Hall of Portfolios Fool's School Daily News Fool Mart Foolish Games 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, Inc. Legal Disclaimer, in fine print of course! Questions or Comments? Please contact Ted Verrill at [email protected]