<THE FOOLISH FOUR>

Performance Checkup
by Chris Rugaber
(TMF RFK)

Alexandria, VA. (September 24, 1998) -- As the third quarter of 1998 winds down, it's worth taking a quick look back at what may be a year that vindicates the Fool Four strategy (if any such vindication was needed). After trailing the Standard & Poor's 500 Index in two of the past three years, and for most of this year, the Fool Four currently leads most market indices. Its performance also holds up well against the managed portfolios here in Fooldom. Of course, who knows how it will turn out by year's end, but things certainly look different now than they did earlier in the year.

During the spring and summer, the Fool Four lagged behind the S&P 500, and many Fools on the message boards seemed to have beads of sweat on their brows as they posted anxious messages about all the red on their spreadsheets. Former Dow Master Robert Sheard even felt compelled to address whether the Dow Approach "worked" anymore in a mid-May column (though of course he rightly concluded that it did).

By June 15, for example, the Fool Four had gained precisely 0.98% while the S&P 500 was up 10.98%, the overall Dow 9.1%, and the Nasdaq 9.26%. The Fool Portfolio was up 21.08%. Of course, this was at the Dow's high point, but even as late as August 17th, the Fool Four still trailed the S&P (slightly) and the Nasdaq.

Now, however, the Fool Four is pounding the Dow Jones (13.15% vs. 3.11%) and is ahead of the S&P (9.86%). This adds another piece of evidence in support of the theory that the Fool Four frequently does best, relative to market indices, in flat or declining markets.

In addition, the Fool Four is not only beating the S&P, but it is also ahead of the Boring and Cash-King Portfolios and neck-and-neck with the Drip Portfolio (though it's a bit behind the Fool Port's 43.60% gain). Given the mechanical nature of the Fool Four, the fact that it is beating not only other market indices but also holding its own against, or surpassing, three of the four managed portfolios here at the Fool is not too shabby, given the time and effort that go into those portfolios.

Much of the gain has come from Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %>, which is up about 40% so far. This is not unusual -- while gains in the '90s have been fairly evenly spread, in the '70s and '80s there frequently was an outlier stock responsible for most of the Fool Four's yearly gains, if there were any. Examples from previous years can be seen here. As a result, if other Fool Four stocks don't do so well, whether they be Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %> or International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>, it's not necessarily a big concern.

So, as of this writing, the Fool Four is on track to another above average year! But who knows what will happen in the final three months, so watch this space.... Fool on!

Current Dow Order | 1998 Dow Returns

What Happened to Robert Sheard?

09/24/98 Close

Stock Change Last -------------------- UK -1 3/8 40.94 IP +1 9/16 46.88 MO -1 1/8 46.31 EK -1 11/16 82.38

Day Month Year FOOL-4 -1.07% 10.49% 11.93% DJIA -1.87% 6.14% 1.19% S&P 500 -2.19% 8.90% 7.45% NASDAQ -2.27% 14.75% 9.55% Rec'd # Security In At Now Change 12/31/97 206 Eastman Ko 60.56 82.38 36.02% 12/31/97 289 Int'l Pape 43.13 46.88 8.70% 12/31/97 276 Philip Mor 45.25 46.31 2.35% 12/31/97 291 Union Carb 42.94 40.94 -4.66% Rec'd # Security In At Value Change 12/31/97 206 Eastman Ko 12475.88 16969.25 $4493.38 12/31/97 289 Int'l Pape 12463.13 13546.88 $1083.75 12/31/97 276 Philip Mor 12489.00 12782.25 $293.25 12/31/97 291 Union Carb 12494.81 11912.81 -$582.00 CASH $754.73 TOTAL $55965.92