<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (June 19, 1998) -- It hasn't been a stellar beginning to 1998 for the Dow High Yielders. That's been documented right and left by the Wise trying to discredit the approach. But as we saw last year, the returns in June aren't what matter most; the returns at the end of the year are.

Often these Dow "Dogs" languish early in the year and then begin to rebound later in the annual cycle -- and once a Dow heavyweight does start to rumble, it can be an awe-inspiring sight.

Nonetheless, here are the less-than-cheery results for the December 31 high yield group, updated through Wednesday, June 17 (including dividends): 

 
 Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> -13.34 
 Morgan (J.P.) <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %>  6.84 
 Gen'l Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>   16.49 
 Chevron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHV)") else Response.Write("(NYSE: CHV)") end if %> 10.34 
 E. Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %>       13.97 
 Exxon Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XON)") else Response.Write("(NYSE: XON)") end if %>   17.46 
 3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>             2.34 
 Int'l Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>     4.36 
 AT&T Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>       3.27 
 Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %>  13.23

Some of you have DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DD)") else Response.Write("(NYSE: DD)") end if %> as your tenth stock on this list (and are undoubtedly happy as a result with its 25.72% return), but according to our rules, Union Carbide and DuPont were tied for the tenth slot and because of Union Carbide's lower price, we included it. Them's the breaks.

The whole group is up only 7.50%, largely because of Philip Morris's documented woes. The Dow Jones Industrial Average is up 11.65% in contrast, and an equally balanced basket of all thirty Dow stocks is up 12.96%. (Keep in mind that the DJIA is a price-weighted index, so frequently an equally weighted comparison of all thirty stocks will result in a different return.)

When I developed my Keystone Growth approach (which we track in the Workshop area), I chose three benchmarks to track alongside it: the Standard & Poor's 500 Index, Beating the Dow (five stocks), and the Dow Dogs (10 high yielders). Over a long period of time, the Beating the Dow approach has recorded the best historical returns of the three, followed by the Dow Dogs and then the S&P 500. But in the period from 1986 through today (the length of the Keystone history), the High Yield 10 approach has actually outperformed the Beating the Dow approach ever so slightly (18.6% versus 18.5% a year). So a lot has to do with what period one measures, and shorter comparisons can be deceiving.

Have a Foolish weekend as we gear up towards the second half of the year.

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.]

06/19/98 Close
Stock  Change   Last 
 -------------------- 
 UK   -   5/8   47.44 
 IP   -   1/4   44.00 
 MO   -  11/16  38.88 
 EK   -   5/8   67.13 
  
 
 
                    Day   Month    Year 
         FOOL-4   -1.10%  -3.32%   2.99% 
         DJIA     -1.14%  -2.10%  10.17% 
         S&P 500  -0.52%   0.90%  13.42% 
         NASDAQ   +0.48%   0.14%  13.43% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  206 Eastman Ko    60.56     67.13    10.84% 
  12/31/97  291 Union Carb    42.94     47.44    10.48% 
  12/31/97  289 Int'l Pape    43.13     44.00     2.03% 
  12/31/97  276 Philip Mor    45.25     38.88   -14.09% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  206 Eastman Ko 12475.88  13827.75  $1351.88 
  12/31/97  291 Union Carb 12494.81  13804.31  $1309.50 
  12/31/97  289 Int'l Pape 12463.13  12716.00   $252.88 
  12/31/97  276 Philip Mor 12489.00  10729.50 -$1759.50 
  
  
                              CASH    $415.96 
                             TOTAL  $51493.52