<THE FOOLISH FOUR>
Hit the Short Grass
by Robert Sheard
LEXINGTON, KY. (June 25, 1998) -- It's summer, so a regular hazard you'll face in reading my columns is that you're going to have to put up with some references (subtle and not-so-subtle) to my favorite sport, one that I feel is so much like investing. I refer, of course, to that most noble of pursuits -- golf.
Given that I don't play all that regularly, I've convinced myself to be happy with my handicap of 11.0, but I still enjoy going in the evenings to the practice range to relax and work out the kinks from sitting all day. And this summer it's an extra pleasure, because my son's taking an interest and often goes with me to whack his fair share of my bucket's worth alongside of me. (When he was still in diapers, he used to call the game "whack-whack.")
One thing I learned after many hours of frustration working with my driver is that I needed to do three things to be a successful driver of the ball. First, I had to face the fact that the Biggest Big Bertha isn't for everyone, and I switched to a King Cobra offset driver (the best club purchase I've ever made). Second, I had to swallow a little golfer's ego and grip down on the club a little bit. I didn't have nearly the control over my swing when I gripped it all the way on the butt end. And third, and perhaps most important, I stopped swinging so bloody hard.
Amazingly, however, all of these elements, which are more conservative than my previous method, have worked so much better than the way I used to drive the ball that I shaved five or six strokes off of my old handicap in a matter of two months. Why? First, I'm no longer so well acquainted with the flora and fauna. That is, I'm hitting a whole lot more fairways than I even have in the past. Second, by swinging more smoothly and less maniacally, I'm actually hitting the ball just as far as I used to, even giving up the few yards the Bertha purportedly enjoys over the King Cobra. But I'm hitting the ball where I aim it now (at least most of the time). It's amazing how much more fun golf is hitting off of the short grass. (For you non-golfers
Now all of this preamble about my driving isn't just the result of my having Spring/Summer Fever. It's directly related to the Dow approach. The Dow Approach is a lot like my new driving style. It's not flashy. It's not glamorous. You're not going to smash the ball 300 yards (see your stocks double in a month).
But you'll be in the fairway most of the time, which means that you'll be able to find your drive rather than hiking through poison ivy and rain forests for it. Your returns are more stable and consistent with this kind of investment approach, but that means living with the fact that you're not going to be buying the next Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> while it's screaming off the tee box. (It also means you're not going to be owning it when it comes splashing down in a hazard.)
For the vast majority of us, golf and investing are best enjoyed without brute force. I've been whipped soundly on the links by many cagey veterans who didn't look like they could hit the ball 200 yards. Invariably, though, these guys are in the fairway and chipping up close for birdies or pars on every hole while the big hitter is lying six or seven in the green-side bunker after hitting two trees, a golf cart, and the greenskeeper's shed.
Being conservative in golf and investing doesn't mean giving up good results. In fact, for all but the most talented golfers, conservative simply equates to smart course management. The same is true for investing. Adopting a game plan that you know you can control and sticking to it when the temptation to cut the corner (over water) on that par five creeps into your mind is the key to a successful round.
So I'll stick to my 240-yard drives in the fairway, even while my competitors are booming their drives 270 or 280 yards. You'll recognize me easily, though. I'll be the one walking down the fairway, not the one on his cell phone ordering a chain saw to clear a path to his ball. Fool on!
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| 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.]
06/25/98
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Stock Change Last
--------------------
UK +4 1/4 52.25
IP - 5/16 43.25
MO - 1/16 39.06
EK +1 1/16 69.44
Day Month Year
FOOL-4 +2.60% -0.10% 6.41%
DJIA +0.13% 0.40% 12.99%
S&P 500 -0.32% 3.53% 16.37%
NASDAQ -0.77% 4.74% 18.65%
Rec'd # Security In At Now Change
12/31/97 291 Union Carb 42.94 52.25 21.69%
12/31/97 206 Eastman Ko 60.56 69.44 14.65%
12/31/97 289 Int'l Pape 43.13 43.25 0.29%
12/31/97 276 Philip Mor 45.25 39.06 -13.67%
Rec'd # Security In At Value Change
12/31/97 291 Union Carb 12494.81 15204.75 $2709.94
12/31/97 206 Eastman Ko 12475.88 14304.13 $1828.25
12/31/97 289 Int'l Pape 12463.13 12499.25 $36.13
12/31/97 276 Philip Mor 12489.00 10781.25 -$1707.75
CASH $415.96
TOTAL $53205.34