<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (March 17, 1998) -- It's time once again to update our Dow Dozen portfolio model, a simple system designed to help investors get started slowly with the Foolish Four stocks and add new money to the stock market each month. Here's how it works:

Each month the Dow Dozen portfolio adds $1,000 (play money for now) to the portfolio and buys the highest-ranked Foolish Four stock that's not already in the portfolio. By the end of the first year, the portfolio will hold a full slate of twelve stocks. At that point, we'll start adjusting the oldest holding each month (as it becomes a year old) if necessary so we're always rotating to the best stock at the time, just as you would do if you bought all your stocks at one time.

To make this a little clearer, here's the example portfolio I'm tracking for 1998. On 12/31/97, the top-ranked Foolish Four stock was Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %>. With our initial $1,000 investment, then, we picked up 23 shares of UK at $42.9375, and paid an imaginary $8 commission. The total cost of the 23 shares was $995.56, leaving us a few bucks in cash.

At the end of January, the top-ranked stock was International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>. With our new $1,000 (and the few bucks left over from last month), we were able to add 21 shares of IP at $45.6875 each.

At the end of February, our next $1,000 entered the portfolio and we picked up 16 shares of AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> at $60.875 per share.

Currently, the portfolio has those three stocks and $55.00 in cash. At today's close, here's how we're doing: 

Date Added Shares  Stock  Quote      Value  Return 
 12/31/97       23     UK  45.75  $1,052.25    5.7% 
 1/30/98        21     IP  51.75  $1,086.75   12.3% 
 2/27/98        16      T  65.50  $1,048.00    6.7% 
  
                Cash                        $55.00 
                Total                    $3,242.00

Although it's very early in the year, the portfolio is on an unbelievable annualized pace of 82.4% versus the Standard & Poor's 500's pace of 67.5%. In total return terms so far, that's 13.3% for the Dow Dozen versus 11.3% for the S&P 500. If only it could always be this sweet. (Don't get too excited; it can't.) These returns will mean much more as the portfolio approaches its first birthday. Keep watching, won't you?

If you're looking for an approach to add money every month, you might consider looking over our "Dozens" models for an idea. I write frequently about four other such models in our Workshop area. Stop by and see how they're doing from time to time. I'll be doing an update on them all tomorrow in the Workshop. Fool on!

[Robert Sheard is the author of the forthcoming book, The Unemotional Investor, due out from Simon & Schuster on May 12. To pre-order your copy, please visit Amazon.com, where it's available at a discounted price.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   -   3/8   45.69 
 IP   -  13/16  51.75 
 MO   -   3/8   42.69 
 EK   -1  1/2   60.94 
 
 
                    Day   Month    Year 
         FOOL-4   -1.42%   0.17%   5.33% 
         DJIA     +0.00%   2.03%  10.25% 
         S&P 500  +0.00%   2.85%  11.22% 
         NASDAQ   +0.00%   1.00%  13.87% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  289 Int'l Pape    43.13     51.75    20.00% 
  12/31/97  291 Union Carb    42.94     45.69     6.40% 
  12/31/97  206 Eastman Ko    60.56     60.94     0.62% 
  12/31/97  276 Philip Mor    45.25     42.69    -5.66% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  289 Int'l Pape 12463.13  14955.75  $2492.63 
  12/31/97  291 Union Carb 12494.81  13295.06   $800.25 
  12/31/97  206 Eastman Ko 12475.88  12553.13    $77.25 
  12/31/97  276 Philip Mor 12489.00  11781.75  -$707.25 
  
  
                              CASH     $77.19 
                             TOTAL  $52662.88