<FOOLISH FOUR PORTFOLIO>
Foolish Four History
Year-by-year returns
by Ann Coleman (TMF [email protected])
Alexandria, VA (February 9, 1999) -- Yesterday we considered the possibility that the Foolish Four might be becoming a victim of its own success, and I presented the annual returns for the last 5 years for our Foolish Four, the Dow, and the Standard & Poor's 500 Index. The news that the Foolish Four has not beaten the S&P 500 over the last two years or, on average, over the last 5 years, was greeted with amazing calm. Good for you.
I confess, I had been afraid to check my e-mail!
There was no storm of protest, no recriminations or accusations. Apparently, you all really understand that this is a long-term strategy and that it cannot be expected to beat the market every year. You guys are great!
You were so nice that today I have a little gift for you. I made it myself, with help from Bob Price who writes in this space occasionally but has been away lately revising the spreadsheet that tracks the Foolish Four and related strategies. The 1998 version will be available in FoolMart in a few weeks, but today we'll take a sneak peek at the last 25 years of returns for the Foolish Four (RP) vs. the Dow and the S&P 500. I think the chart below shows pretty clearly why I am not about to give up on this strategy just because it has a few years that are below the market.
The table below presents the year-by-year returns for 1974 through 1998 followed by rolling 5-, 10- and 20-year compounded average annual returns. If you are, or plan to be, a Foolish Four investor, I recommend that you study these numbers and notice that, while the Foolish Four usually comes out ahead, it doesn't always win every year.
Notice in particular the rolling returns. Rolling returns demonstrate how one could have started at any time and, in spite of market volatility, achieved close to the average we quote during any 10 year period. Notice especially the "worst" line. That is the worst performance from the group above and gives you some idea of what to expect when things go wrong.
Assumptions and caveats: These numbers assume that the stocks were selected according to the RP method on the first trading day of 1974 and that the portfolio was renewed annually on the first trading day of each year thereafter. Returns include dividends. Multiple year averages are based on the Compound Average Growth Rate formula. The CAGR will be somewhat lower than an arithmetic average, but it accurately reflects the average annual return you would have received following this strategy in real time.
Foolish Four History
Annual Returns 1974-1998
Dow 30 S&P 500 Foolish 4
1974 -15.64% -26.47% 20.00%
1975 44.25% 37.20% 68.71%
1976 29.36% 23.84% 37.93%
1977 -12.58% -7.18% -2.96%
1978 2.53% 6.56% 9.89%
1979 11.34% 18.44% 17.70%
1980 25.29% 32.42% 24.20%
1981 -3.30% -4.91% 9.66%
1982 19.80% 21.41% 56.88%
1983 35.35% 22.51% 36.72%
1984 -0.12% 6.27% 10.30%
1985 30.98% 32.16% 49.82%
1986 21.87% 18.47% 29.67%
1987 15.72% 5.23% 17.89%
1988 13.78% 16.81% 22.08%
1989 31.95% 31.49% 47.35%
1990 -9.14% -3.17% -17.61%
1991 30.36% 30.55% 34.81%
1992 11.00% 7.67% 29.94%
1993 17.91% 9.99% 30.26%
1994 3.73% 1.31% 7.59%
1995 36.69% 37.43% 47.05%
1996 24.32% 23.07% 26.56%
1997 22.33% 33.36% 19.49%
1998 15.99% 28.70% 15.64%
Worst -15.64% -26.47% -17.61%
25 Year Compound average annual returns
Dow 30 S&P 500 Foolish 4 1974-1998 15.03% 14.93% 24.55%
5 Year Rolling compound average annual returns
Dow 30 S&P 500 Foolish 4 1974-1978 7.13% 4.32% 24.39% 1975-1979 13.24% 14.76% 23.91% 1976-1980 10.10% 13.95% 16.55% 1977-1981 3.87% 8.08% 11.32% 1978-1982 10.63% 14.05% 22.55% 1979-1983 16.95% 17.27% 28.02% 1980-1984 14.43% 14.76% 26.37% 1981-1985 15.45% 14.71% 31.20% 1982-1986 20.92% 19.87% 35.67% 1983-1987 20.08% 16.49% 28.13% 1984-1988 15.99% 15.38% 25.26% 1985-1989 22.63% 20.40% 32.73% 1986-1990 13.98% 13.14% 17.77% 1987-1991 15.53% 15.36% 18.69% 1988-1992 14.57% 15.89% 21.02% 1989-1993 15.39% 14.51% 22.60% 1990-1994 9.96% 8.69% 15.13% 1991-1995 19.32% 16.57% 29.27% 1992-1996 18.20% 15.20% 27.65% 1993-1997 20.52% 20.24% 25.52% 1994-1998 20.12% 24.08% 22.57% (Last 5 years) Worst: 3.87% 4.32% 11.32%
10 Year Rolling compound average annual returns
Dow 30 S&P 500 Foolish 4 1974-1983 11.93% 10.61% 26.19% 1975-1984 13.84% 14.76% 25.13% 1976-1985 12.74% 14.33% 23.65% 1977-1986 12.07% 13.82% 22.89% 1978-1987 15.26% 15.26% 25.31% 1979-1988 16.47% 16.33% 26.63% 1980-1989 18.46% 17.55% 29.51% 1981-1990 14.72% 13.93% 24.30% 1982-1991 18.19% 17.59% 26.90% 1983-1992 17.29% 16.19% 24.53% 1984-1993 15.69% 14.94% 23.93% 1985-1994 16.12% 14.40% 23.62% 1986-1995 16.62% 14.84% 23.39% 1987-1996 16.85% 15.28% 23.09% 1988-1997 17.51% 18.05% 23.25% 1989-1998 17.73% 19.20% 22.59% (Last 10 years) Worst: 11.93% 10.61% 22.59%
20 Year Rolling compound average annual returns
Dow 30 S&P 500 Foolish 4
1974-1993 13.79% 12.76% 25.05%
1975-1994 14.98% 14.58% 24.37%
1976-1995 14.67% 14.59% 23.52%
1977-1996 14.44% 14.55% 22.99%
1978-1997 16.38% 16.65% 24.28%
1979-1998 17.10% 17.75% 24.59% (Last 20 years)
Worst: 13.79% 12.76% 22.99%
The full spreadsheet covers the last 38 years, by the way. That was a bit much for this space, but in the interest of full disclosure, I want to mention that while the strategy worked quite well in the early '70s, it did not do as well in the '60s. It beat the market, but not as consistently and by a much lower margin.
Fool on and prosper!
Today's Stock Lists | 1998 Dow Returns
02/09/99
Close
Stock Change Last -------------------- CAT - 3/16 47.06 JPM +1 1/4 100.50 MMM -1 1/4 75.25 IP - 3/4 42.44 |
Day Month Year History
FOOL-4 -0.67% 1.89% -0.25% 1.23%
DJIA -1.70% -2.41% -0.38% -0.77%
S&P 500 -2.22% -4.96% -0.75% -0.51%
NASDAQ -3.91% -7.79% 5.39% 6.83%
Rec'd # Security In At Now Change
12/24/98 24 Caterpillar 43.08 47.06 9.24%
12/24/98 14 3M 73.57 75.25 2.28%
12/24/98 22 Int'l Paper 43.55 42.44 -2.55%
12/24/98 9 JP Morgan 105.51 100.50 -4.75%
Rec'd # Security In At Value Change
12/24/98 24 Caterpillar 1034.00 1129.50 $95.50
12/24/98 14 3M 1030.00 1053.50 $23.50
12/24/98 22 Int'l Paper 958.12 933.63 -$24.50
12/24/98 9 JP Morgan 949.62 904.50 -$45.12
Cash $28.26
TOTAL $4049.39
</FOOLISH FOUR PORTFOLIO> |