<FOOLISH FOUR PORTFOLIO>

Beating the S&P 500
For fun and diversification

by Ann Coleman
(TMF [email protected])

Reston, VA (March 24, 1999) -- Good news for those who are interested in diversifying their investments. In today's Foolish Workshop column, Ethan Haskel announces the new list of 30 stocks for his intriguing Beating the S&P (BSP) strategy.

Beating the S&P is a parallel strategy to our Dow strategies. It starts with the 500 stocks pared down to a list of 30 stocks -- companies that closely match the Dow stocks except that they are not members of the Dow. The same criteria we use for picking Foolish Four stocks can then be applied to this list (high dividend yields and low relative price) to select companies with potential for above-average price appreciation over the next year or two.

Should you invest in Beating the S&P stocks? That depends. As we have seen for the last two years, the returns of the Dow and the Standard & Poor's 500 Index don't always move in lockstep, although over long time periods they are almost identical. Investing in alternative stocks may be a way to profit from the years when the S&P pulls ahead, and it certainly helps diversify your investments.

On the other hand, it is more complicated, and one of the beauties of the Foolish Four is that it is very simple. If you are looking for diversification and want to stick with a mechanical approach, Beating the S&P might be a good strategy to investigate.

Start by reading today's Workshop column and then check out the workshop archives for the column of March 17, which discusses timing of the BSP approach, and March 3, which lists some good resources for the BSP approach. Ethan writes the Workshop column every Wednesday, and his work is well worth reading whether he is discussing BSP or Lampposts.

You can find a current listing of the BSP stocks that one would invest in if starting a portfolio today at this website. The RP method (second choice) will give you a list comparable to our Foolish Four. Ignore the first stock on the list and select the next 4 stocks.

In other news, it looks like our Foolish Four Portfolio has fallen along with the broad market in response to earnings fears and the threat of instability. It's not PC to think of the US as the Global Cop, but when a bully brings weapons to school, someone has to take them away. In the long run (the only run that counts!) I expect we will have more stability if the bullies are kept in line.

Fool on and prosper!

Today's Stock Lists | 1998 Dow Returns

03/24/99 Close
Stock  Change   Last
--------------------
CAT  +  13/16  45.94
JPM  -   7/16  122.44
MMM  -   5/16  71.31
IP   -   5/8   44.63




                   Day   Month    Year   History
       FOOL-4   -0.06%   3.10%   4.15%   5.70%
        DJIA     -0.05%   3.87%   5.67%   5.25%
        S&P 500  +0.51%   2.44%   3.52%   3.77%
        NASDAQ   +1.83%   3.38%   7.87%   9.35%

    Rec'd   #  Security     In At       Now    Change

 12/24/98    9 JP Morgan    105.51    122.44    16.04%
 12/24/98   24 Caterpillar   43.08     45.94     6.63%
 12/24/98   22 Int'l Paper   43.55     44.63     2.47%
 12/24/98   14 3M            73.57     71.31    -3.07%


    Rec'd   #  Security     In At     Value    Change

 12/24/98    9 JP Morgan    949.62   1101.94   $152.32
 12/24/98   24 Caterpillar 1034.00   1102.50    $68.50
 12/24/98   22 Int'l Paper  958.12    981.75    $23.63
 12/24/98   14 3M          1030.00    998.38   -$31.63

              Dividends Received      $15.04
                             Cash     $28.26
                            TOTAL   $4227.86

</FOOLISH FOUR PORTFOLIO>