<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (April 30, 1998) -- In the Foolish Four rankings, it's important to remember that we use a dual-screening process to determine the stocks each day. The first screen is strictly by dividend yield, where we choose the ten stocks sporting the highest yields. It doesn't matter how high they are in raw terms, only the ten highest yielders compared to the others in the index. It also doesn't matter if the eleventh stock is real close to #10. Only the ten highest get it.

It's only once we've identified those ten stocks that we can re-rank them by share price to pick the Foolish Four. But when we re-rank those ten, the yield no longer matters. The second test is stock price only, so a stock barely in the top ten yielders may score quite well in the Foolish Four rankings (by price). And then a day or two later, it may well fall to #11 on the high-yield list and drop out of consideration altogether.

Today, DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DD)") else Response.Write("(NYSE: DD)") end if %> rejoins that high-yield group after raising its annual dividend to $1.40 per share. That pushes its yield just high enough to place it in the High-Yield 10 (although at $74 a share, it's not going to be in the Foolish Four).

Let's say you owned a stock, however, that was in the Final Four yesterday but got bumped from the current ranking today because of something totally unrelated to your company's business (like DuPont raising its dividend a few pennies a share). Should you dump your stock in favor of DuPont now? Of course not!

These models don't work with the precision of microprocessors (no Pentium calculation jokes necessary), and a minor rankings adjustment like this, while it may seem major on the surface because of the quirky dual screen, is no cause to upset your plans to hold your stock the full cycle.

Keep things simple and stick to the plan, even when it may look odd to you. With seven decades of success behind such a ranking system, some short-term blips in the rankings aren't terribly crucial. Fool on!

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   +   5/16  48.50 
 IP   -   3/16  51.81 
 MO   -   1/4   37.44 
 EK   +1  9/16  71.56 
 
 
                    Day   Month    Year 
         FOOL-4   +0.40%   2.62%   9.60% 
         DJIA     +1.25%   3.00%  14.61% 
         S&P 500  +1.57%   0.91%  14.56% 
         NASDAQ   +0.91%   1.78%  18.98% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  289 Int'l Pape    43.13     52.19    21.01% 
  12/31/97  206 Eastman Ko    60.56     72.19    19.20% 
  12/31/97  291 Union Carb    42.94     48.50    12.95% 
  12/31/97  276 Philip Mor    45.25     37.38   -17.40% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  289 Int'l Pape 12463.13  15082.19  $2619.06 
  12/31/97  206 Eastman Ko 12475.88  14870.63  $2394.75 
  12/31/97  291 Union Carb 12494.81  14113.50  $1618.69 
  12/31/97  276 Philip Mor 12489.00  10315.50 -$2173.50 
  
  
                              CASH    $415.96 
                             TOTAL  $54797.77