<FOOLISH FOUR PORTFOLIO>

Dull Day in the Markets
Sticking with 3M

by Ann Coleman (TMF [email protected])
and Chris Rugaber (TMF [email protected])

Alexandria, VA (Dec. 30, 1998) -- It was a dull day on Wall Street. The Dow closed a bit lower today than yesterday, and our Foolish Four portfolio gave back some of its gains. I guess if we celebrate the moves up, we should get all depressed over the moves down. But I'd rather not.

Boy, will I be glad next Monday, when we can move the new, real money portfolio into the spreadsheet area and I won't have to write about it every day! These last few days have really brought home the value of our mechanical system that doesn't require careful watching. Sure, it's fun when the stocks go up, but really, the point of the Foolish Four is that you don't have to worry about the day-to-day price movements.

Basically what we have here is International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %> and 3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %> down a bit and Caterpillar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> and J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> up a bit but not up enough to offset the loss. We ended down $30. I guess that dinner and a movie in 2015 may have to be a Blockbuster's night. See below for the numbers.

I do have to apologize for some confusion on our website. (AOL readers can skip this paragraph, unless you like watching me squirm.) The Top 10 Dow Stocks list to the right has had the asterisks on the wrong stocks for the last two days. (It was a Christmas vacation thing, we're sorry.) The asterisks should have been on stocks 2-5, but instead they were floating around stuck to the stocks that made up the Foolish Four last Thursday when we selected our portfolio. We have corrected it now. My thanks to everyone who wrote in. The Today's Stock Lists page has been correct all along, by the way.

Hey, 3M, you bum! You lost almost $2 a share today on no news that I can find. What's up?

Most likely what is up is some realigning of mutual fund portfolios. When more people sell than buy, the price drops. I suspect that today's drop is just one of those things that happens in a dynamic system -- as yesterday's rise may have been. Let's look at 3M's prospects.

3M (also known as Minnesota Mining and Manufacturing, but who wants to type that much?) makes adhesives and many other products, its most popular being Post-It Notes (invented by a 3M engineer who wanted something to mark pages in his hymn book), Scotch tape, and Scotchgard Fabric Protector. 3M has a very different business from Caterpillar and JPM, but all three have been hit hard by the global financial crisis. Fifty-two percent of 3M's revenue comes from international sales. The essential question in my mind is: Could the office workers of the world be content with glue after a decade of Post-its? I say no! Emerging markets will undoubtedly emerge covered with little yellow squares.

Meanwhile, 3M warned that its fourth-quarter earnings will come in at about 10% below the year-ago quarter, its fifth consecutive quarterly earnings decline. The company's 1998 earnings, which were pegged at about $3.95 this summer, are now more likely to be in the $3.70 range. Currency conversion is projected to cost the company about $0.35 a share this year. In addition, factory production has been slowed in order to reduce inventory.

3M has already announced and implemented a restructuring program to restore earnings growth, with 4,500 jobs expected to be cut by the end of 1999. It also plans on closing about 10% of its factories and is ending some unprofitable product lines. It expects EPS growth of 8% in 1999 and potentially double-digit growth in the subsequent two years. Sounds good -- stick to the plan, 3M.

Fool on and prosper!

Here are the portfolio numbers, as promised. (AOL readers, please expand your window to make the chart below line up.) 

                               Pur.  %Gain/
Symbol  Shares  Close   Change  Price  Loss    Value
CAT     24      45.69    +1/16  43.08  +6.05   1,096.50      
IP      22      43.75   -13/16  43.55  +0.459    962.50        
JPM      9     107.25  +1 1/2  105.54  +1.62     965.25        
MMM     14      73.19 -1 15/16  73.57  -0.5199 1,024.62        
Cash                                              28.26
TOTAL                                         $4,077.13

Initial Position
Total invested:   $3,971.74 (includes commissions paid)
Cash in account:     $28.26
Account total:    $4,000.00

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Today's Stock Lists | 1998 Dow Returns

12/30/98 Close
Stock  Change   Last
--------------------
UK   -   3/4   42.81
IP   -  13/16  43.75
MO   +   5/16  54.50
EK   -   1/4   72.00

                   Day   Month    Year
        FOOL-4   -0.74%  -1.75%  12.14%
        DJIA     -0.50%   1.73%  17.28%
        S&P 500  -0.79%   5.87%  26.95%
        NASDAQ   -0.68%  11.15%  37.99%

    Rec'd   #  Security     In At       Now    Change

 12/31/97  276 Philip Mor    45.25     54.50    20.44%
 12/31/97  206 Eastman Ko    60.56     72.00    18.89%
 12/31/97  289 Int'l Pape    43.13     43.75     1.45%
 12/31/97  291 Union Carb    42.94     42.81    -0.29%


    Rec'd   #  Security     In At     Value    Change

 12/31/97  276 Philip Mor 12489.00  15042.00  $2553.00
 12/31/97  206 Eastman Ko 12475.88  14832.00  $2356.13
 12/31/97  289 Int'l Pape 12463.13  12643.75   $180.63
 12/31/97  291 Union Carb 12494.81  12458.44   -$36.38


               Dividends Paid YTD  $1092.81
                            TOTAL  $56069.00

</FOOLISH FOUR PORTFOLIO>