<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (May 22, 1998) -- Last week, current Dow high yielder DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DD)") else Response.Write("(NYSE: DD)") end if %> started a makeover process that seems to be continuing rapidly. The first big announcement was that DuPont is shedding its Conoco energy business over the next year or so. Then earlier this week, DuPont agreed to buy out Merck's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %> half of their joint pharmaceutical venture for $2.6 billion.

Today a rumor hit the market that DuPont is considering buying out bio-tech giant Amgen <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %>. According to Business Week magazine, the two companies have been discussing such an acquisition, and DuPont may make a $25 billion cash offer ($95 a share) for Amgen.

Be very careful in reacting to such rumors because they are still just that -- rumors. But given DuPont's recent announcements, such a deal would not be a total surprise, and the Street seems to be smiling favorably on the prospects. Even in a down market DuPont stock is up slightly today and Amgen's stock jumped 7%.

Switching topics: Several new readers have asked recently how much one needs to really make the plunge into investing in stocks directly. There's really no minimum. If one wishes to use Dividend Reinvestment Plans, the cost of a single share of your intended stock and a fee to use a DRiP service is all it takes; less than $100 gets you in the door.

If you intend, however, to use one of the many deep-discount brokers, I suggest starting with $1,000 as the minimum investment per stock. The reason for that is many of our strategies call for replacing your stocks once a year, which means each position will require two trades. If you pay $8 to $10 per trade, that means 1.6% to 2.0% of your original $1,000 will go in trading costs for the year. That's about as high as one should go. Mutual funds average 1.4% to 1.5% a year in costs, so trying to keep your costs in that range or lower is a good goal.

So for investors just starting out, I suggest adding another position to your portfolio with each new $1,000 saved until you've fleshed out a portfolio with fifteen to twenty stocks. Then new savings can be spread around the positions you already hold as you make your regular adjustments.

So getting started doesn't require a huge wad of cash, and it's important to get started as soon as possible in order for time and compounding to work most effectively for you. Have a Foolish holiday weekend!

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   -   1/4   52.63 
 IP   -1  1/16  50.75 
 MO   -   1/8   37.31 
 EK   +   9/16  70.56 
 
 
                    Day   Month    Year 
         FOOL-4   -0.54%   0.79%  10.46% 
         DJIA     -0.20%   0.56%  15.25% 
         S&P 500  -0.37%  -0.12%  14.43% 
         NASDAQ   -0.88%  -3.39%  14.94% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  291 Union Carb    42.94     52.63    22.56% 
  12/31/97  289 Int'l Pape    43.13     50.75    17.68% 
  12/31/97  206 Eastman Ko    60.56     70.56    16.51% 
  12/31/97  276 Philip Mor    45.25     37.31   -17.54% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  291 Union Carb 12494.81  15313.88  $2819.06 
  12/31/97  289 Int'l Pape 12463.13  14666.75  $2203.63 
  12/31/97  206 Eastman Ko 12475.88  14535.88  $2060.00 
  12/31/97  276 Philip Mor 12489.00  10298.25 -$2190.75 
  
  
                              CASH    $415.96 
                             TOTAL  $55230.71