<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (May 12, 1998) -- Today's gain for the Dow was chiefly driven by cyclical stocks. Strong consumer confidence, good earnings for retailers, a dropping yield on the long bond, and positive analyst comments on paper stocks all conspired to boost prices higher for the Blue Chip Dow today.

Wal-Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %> posted better-than-expected earnings today and the stock of both it and Dow retailing cousin Sears <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> led the charge. But Caterpillar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %>, International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>, and General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> also posted gains of better than a dollar per share.

Computer peripheral giant Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> was the point leader after Credit Suisse First Boston raised its rating from a "hold" to a "buy." Hewlett had been going sideways for months until recently starting to gather some momentum as the stock climbed above the mid-$60s. Today it continued soaring toward the $80 mark. I'm no market technician, but even I can tell the last month has been a terrific one for Hewlett-Packard!

As far as the 1998 Foolish Four goes, May has begun as a strong month after a moderately weak first four months. The portfolio is still trailing the Dow slightly on a year-to-date basis because 25% of the portfolio is burdened by the Dow's worst stock this year so far -- Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>. But with Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %> and now International Paper both sporting better than 25% returns, and Eastman Kodak around 17% for the year, it's quite possible that the momentum the Foolish Four has started this month (up roughly 4% already in May) will be the start of an extended push towards another market index-beating year for the model.

If the three winning stocks can maintain a good pace throughout the rest of 1998 (as is often the case when a Dow Dog turns around) and Philip Morris recovers even a bit, it will be another typical year for the Dogs approaches, where patience and bargain hunting are generally rewarded. There's a long time to go in 1998, of course, but the pattern we've seen for the first 132 days is very familiar. Fool on!

Current Dow Order | 1998 Dow Returns

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

TODAY'S NUMBERS

Stock Change Last -------------------- UK + 13/16 54.63 IP +1 1/4 54.25 MO - 3/8 37.88 EK - 7/8 71.06

Day Month Year FOOL-4 +0.55% 4.17% 14.16% DJIA +0.77% 1.09% 15.85% S&P 500 +0.83% 0.36% 14.98% NASDAQ +0.66% -0.44% 18.45% Rec'd # Security In At Now Change 12/31/97 291 Union Carb 42.94 54.63 27.22% 12/31/97 289 Int'l Pape 43.13 54.25 25.80% 12/31/97 206 Eastman Ko 60.56 71.06 17.34% 12/31/97 276 Philip Mor 45.25 37.88 -16.30% Rec'd # Security In At Value Change 12/31/97 291 Union Carb 12494.81 15895.88 $3401.06 12/31/97 289 Int'l Pape 12463.13 15678.25 $3215.13 12/31/97 206 Eastman Ko 12475.88 14638.88 $2163.00 12/31/97 276 Philip Mor 12489.00 10453.50 -$2035.50 CASH $415.96 TOTAL $57082.46