<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (April 24, 1998) -- A number of readers have written me, asking for a more accessible link to the Current Dow Order file (which we update each afternoon) and the 1998 Year-to-Date Dow Returns file (which is updated weekly). I'm hoping to revamp the layout of the Dow area later this year to make the most important files more accessible, but as a stop-gap measure I've added links to these two files to the bottom of this daily column. At any time, you can zip to the bottom of the current column and find the links.

One more point about the Dow returns files: I update those returns every Friday, but that update only includes data through Wednesday. Don't get confused by the dates. I've listed the relevant date of the actual data in the file headings.

Today's update of the year-to-date returns brings us a mixed group of results for the Dow Approach models. The Dow Jones Industrial Average (the index itself) has registered a 16.04% gain through April 22. But the average Dow stock has actually done slightly better with a 17.08% return. The index is price-weighted, so it favors the higher-priced stocks. A more accurate "average" is to weight all thirty stocks equally and include dividends. That's what we call the Dow30 in our many reports and is our real benchmark for these approaches.

Against this benchmark so far (17.08%), only one of the three major approaches is ahead of the mark. The RP Variation is currently ahead by 18.78% this year, but the Foolish Four is only up 13.74% while the High Yield 10 is up 14.98%. (Again, these results are through Wednesday, April 22.)

The culprit for the Foolish Four (and high Yield 10) so far in 1998 has been tobacco giant Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>, down 13.44% so far. Although big MO has been in the #1 yield and #1 low-price position for a couple of months now (the one situation where the Foolish Four method would skip the stock as a potential danger signal), unfortunately that dual #1 position for Philip Morris wasn't in effect at the very beginning of the year. So while the indicator seems to be working yet again (suggesting that Philip Morris should be skipped for now), it wasn't quite quick enough to let us escape the weak stock in our 12/31/97 group of stocks.

The year is only 114 days old, however, and it's not time to proclaim the Foolish Four or high-yield approaches dead, as so many bears are wont to do. It's not that unusual for the Dow Approaches to slump early in the year and then recover strongly. Whether it happens again this year as it did last year when AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> soared is anyone's guess.

In terms of individual stocks, the winners so far include a number of the cyclical companies. (Aren't cyclicals supposed to do well at the beginning of market cycles, not the end? So much for my career as an economist.) The top performer so far is United Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UTX)") else Response.Write("(NYSE: UTX)") end if %>, with retailers Wal-Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %> and Sears <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> close behind. Also among the top stocks are two of the Foolish Four components: International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %> and Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %>. Philip Morris is the only Dow component down for the year.

And one final note. Yesterday, Dow newcomer Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> raised its dividend to 25 cents a quarter. With a yield of less than 1.5%, though, it won't be challenging for a spot in the High Yield 10 anytime soon. Have a Foolish weekend!

Current Dow Order | 1998 Dow Returns

[Robert Sheard is the author of The Unemotional Investor (Simon & Schuster, 1998) available now at Amazon.com and soon at your local bookseller.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   -   5/8   49.31 
 IP   -  13/16  53.06 
 MO   -   1/4   38.25 
 EK   -   9/16  72.19 
 
 
                    Day   Month    Year 
         FOOL-4   -1.07%   3.98%  11.06% 
         DJIA     -0.86%   3.01%  14.62% 
         S&P 500  -1.04%   0.56%  14.17% 
         NASDAQ   -0.66%   1.81%  19.01% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  289 Int'l Pape    43.13     53.06    23.04% 
  12/31/97  206 Eastman Ko    60.56     72.19    19.20% 
  12/31/97  291 Union Carb    42.94     49.31    14.85% 
  12/31/97  276 Philip Mor    45.25     38.25   -15.47% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  289 Int'l Pape 12463.13  15335.06  $2871.94 
  12/31/97  206 Eastman Ko 12475.88  14870.63  $2394.75 
  12/31/97  291 Union Carb 12494.81  14349.94  $1855.13 
  12/31/97  276 Philip Mor 12489.00  10557.00 -$1932.00 
  
  
                              CASH    $415.96 
                             TOTAL  $55528.59