<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (Feb. 20, 1998) -- I recently wrote about a scenario where a new investor, with limited means, could begin building a Fool-of-the-Month portfolio by selecting one new stock each month based on the simple rules we teach here online.

But rather than simply talk about it in the abstract, let's go ahead and follow it with a paper model to see some numbers as we go.

Here's the scenario. Our Dow Dozen (as I'll call it, to go along with the Keystone Dozen model I watch in the Workshop) begins 1998 with $1,000 and buys the highest ranked Foolish Four stock available. On 12/31/97, that was Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %>.

The investor pays $8 per trade through an Internet broker, so he could buy 23 shares of UK at $42.9375 per share, for a total cost of $995.56.

At the end of January, he's got another $1,000 to add to his portfolio. (If in your case it would take longer to put together the additional $1,000, that's fine. Add your next stock in whatever month you get $1,000 saved.) The highest ranked stock he doesn't already own is International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>. With the leftover cash from last month ($4.44), he can afford 21 shares of International Paper at $45.6875 a piece.

After paying his commission and buying the 21 shares, he's got $37.00 in cash. Late this afternoon, then, here's how the Dow Dozen Portfolio stands: 

23 UK @ $46.88  =  $1,078.13 
 21 IP @ $47.69  =  $1,001.44 
 Cash                  $37.00 
 ---------------------------- 
 Total              $2,116.56

It's early in the year yet, but the portfolio is off to a terrific start. The profit of $116.56 gives the portfolio an annualized projected profit of 77.1%. Completely ridiculous, of course, but a good start, you must agree.

At the end of February and March, the Dow Dozen Portfolio will pick up two more Dow stocks from the Foolish Four rankings. But starting at the end of April, the portfolio can begin complementing these high-yield value selections with growth-oriented stocks from the Keystone Model.

Follow along with us and have a tremendously Foolish weekend!

[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.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   +   5/8   46.94 
 IP   +   3/8   48.13 
 MO   +   7/16  41.88 
 EK   +1 11/16  66.94 
 
            
                    Day   Month    Year 
         FOOL-4   +1.45%   4.05%   5.98% 
         DJIA     +0.46%   6.42%   6.39% 
         S&P 500  +0.58%   5.50%   6.57% 
         NASDAQ   +0.06%   6.72%  10.05% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  289 Int'l Pape    43.13     48.13    11.59% 
  12/31/97  206 Eastman Ko    60.56     66.94    10.53% 
  12/31/97  291 Union Carb    42.94     46.94     9.32% 
  12/31/97  276 Philip Mor    45.25     41.88    -7.46% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  289 Int'l Pape 12463.13  13908.13  $1445.00 
  12/31/97  206 Eastman Ko 12475.88  13789.13  $1313.25 
  12/31/97  291 Union Carb 12494.81  13658.81  $1164.00 
  12/31/97  276 Philip Mor 12489.00  11557.50  -$931.50 
  
  
                              CASH     $77.19 
                             TOTAL  $52990.75