<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (June 16, 1998) -- Several readers have asked for my opinion on what to do about Minnesota Mining & Manufacturing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>. As you undoubtedly know, 3M has been downgraded by analysts and has issued an earnings warning that dropped the stock significantly this week.

It's quite possible that if you're holding 3M as part of an 18-month Dow portfolio, you're sitting on a loss in the stock. And yet, while 3M is still among the top ten yielding stocks on the Dow, its share price is high enough that it's not going to be in the Foolish Four rankings anytime soon.

What should a Foolish Four investor do?

Too often, investors sitting on a loss want to hang on to their stock because of a desire to break even. But that's a decision made on emotion rather than reason and can often compound one's losses.

The real issue is whether or not the stock is a good investment for the coming year (or two years, whatever), regardless of whether you're sitting on a loss or a gain. If the stock's a weak prospect for the coming year, then you'd be better off taking the loss (which will offset a gain on your taxes anyway) and moving those funds into a better prospect. What does it matter whether your recovery comes in the original holding or in another stock? What's important is that at the time you evaluate, you choose the best prospects for tomorrow, regardless of yesterday's returns.

So, what about 3M? I'll make no predictions about the company's short-term prospects, just as I have consistently refused to predict Philip Morris' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> short-term future. 3M remains one of the Dow High-Yield 10, so if you're buying the entire group of ten, you'd simply hold it. If you're holding 3M as part of a Foolish Four portfolio, however, you would sell it if your anniversary is here and replace it from among the current Foolish Four stocks.

I don't believe in trying to second-guess the rankings. You're not going to be right every time following them rigidly, and there will be times you'll kick yourself for a mistake, but the track record for this approach is lengthy and impressive. You should feel good about aligning yourself with such a success story.

For those of you who have been putting off ordering a copy of my book, The Unemotional Investor, in hopes of getting an autographed copy, here's your opportunity. Thursday night at 9:00 (Eastern), I'll be doing a combination chat and online book signing in The Motley Fool's America Online auditorium. Stop by and join the discussion and we'll fix you up with an autographed copy, if you like. If you can't make the chat but still want an autographed copy of the book, we'll have a special order form available beginning sometime tomorrow. Please check back here or in my Workshop column for a link to that special form tomorrow. 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   +1  9/16  46.88 
 IP   -   3/8   43.56 
 MO   -   5/16  36.63 
 EK   -   9/16  67.38 
  
 
 
                    Day   Month    Year 
         FOOL-4   +0.29%  -4.93%   1.27% 
         DJIA     +0.43%  -2.64%   9.57% 
         S&P 500  +0.98%  -0.30%  12.07% 
         NASDAQ   +2.18%  -1.45%  11.64% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  206 Eastman Ko    60.56     67.38    11.25% 
  12/31/97  291 Union Carb    42.94     46.88     9.17% 
  12/31/97  289 Int'l Pape    43.13     43.56     1.01% 
  12/31/97  276 Philip Mor    45.25     36.63   -19.06% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  206 Eastman Ko 12475.88  13879.25  $1403.38 
  12/31/97  291 Union Carb 12494.81  13640.63  $1145.81 
  12/31/97  289 Int'l Pape 12463.13  12589.56   $126.44 
  12/31/97  276 Philip Mor 12489.00  10108.50 -$2380.50 
  
  
                              CASH    $415.96 
                             TOTAL  $50633.90