Fool.com: The Envelope, Please... (Foolish Four) October 6, 1999

Foolish Four Portfolio
The Envelope, Please... Announcing the treasure hunt winners

The dusky night rides down the sky,
and ushers in the morn;
The hounds all join in glorious cry,
The huntsman winds his horn:
And a-hunting we will go.
--Henry Fielding, Don Quixote in England

BALTIMORE, MD (Oct. 6, 1999) -- There are two things that bring out the best in us Fools -- a mind-stretching challenge and the promise of free stuff. The response to last week's treasure hunt was overwhelming, with more than 200 readers correctly supplying the winning Phoolish Phrase: THINK LONG TERM.

Since we at Fool Headquarters almost always keep our promises, 10 lucky winners were drawn at random to receive the Grand Prize of either the literary masterpiece The Foolish Four or the Fool ballcap, a must for the fall fashion season. And we added one more for full measure, so 11 "grand" prizes are going out. Those less lucky (who actually included a mailing address), will get a paper copy of the new Motley Fool Monthly's next edition, featuring the Foolish Four. To paraphrase my father-in-law, that's better than a swift kick in the pants.

And the losers? There really are none around here, for any meager attempt to find the treasure was rewarding in its own way, knowledge being its own reward. (Yeah, right....)

Our hats off to these Foolish Grand Prize Winners. What amazes me is the geographical diversity of these Fools. They cover nine states -- from Georgia to Washington -- as well as France and Japan. Congratulations to all, including the other winning entrants who must remain anonymous due to space considerations.

The Grand Prize Winners: bkhFool, Chuck O'Neil, [email protected], Hugh Ruebush of Morenci, AZ; [email protected], Michael R. Davis of Des Moines, IA; James P. Beard of Atlanta, GA; Scott Bjorlin of Ridgefield, CT; marm0t of Vancouver, WA.; [email protected], Suzanne Reid aka Jewlie of Showa-ku, Nagoya, Japan. Ann will forward all prizes shortly.

Now, class, let's go over last week's "test." We'll take a quick drive around our Foolish Four neighborhood, and might just learn a thing or two... or three?

1. As of the beginning of this year, which Dow stock was ranked second by RP ratio?

  PO  Dupont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DD)") else Response.Write("(NYSE: DD)") end if %>
  SO  Sears <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %>
  NO  Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %>
  LO  Caterpillar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %>

The answer is LO Caterpillar. To find the answer, click on 1999 Dow Returns. This remarkable page contains all the various Dow Dividend stock strategies, with their year-to-date returns, along with the returns for all 30 Dow stocks.

2. In 1998, which of the following strategies gave the highest return?

  RM  S&P 500
  RT   Dow Jones Industrial Average
  RE   Foolish Four (F4.2)
  RS   RP2

The answer is RM S&P 500. Yes, the Fool Four had a mediocre year last year, earning 15.99%, compared with the S&P 500's return of 28.70%. To confirm this, start with Fool Four Stats to the right of this page, then find the Performance History of the Foolish Four, 1961-1998. On this page you'll find most of the Dow RP strategies compared to the Dow and the S&P 500, year-by-year for 38 years. You'll also see the 38-year composite returns for these strategies, the Sharpe ratios, and 5-, 10-, and 20-year rolling returns. All for one low admission price!

3. Which stock of all the Beating the S&P 30 stocks currently has the highest RP Ratio?

  PH  Ford Motor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>
  CH  Pepsico <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %>
  TH   Bank One <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %>
  SH  Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>

The answer is TH Bank One. To get this one, check out Today's Stock Lists, again to the right of this column. You'll be magically transported to Strategy Stocks Live!, a wondrous calculator that finds the current Beating the S&P (BSP) and Foolish Four stocks, calculated any number of ways. Just dial in a universe of stocks, the strategy you're looking for, and... presto, you have your stocks. (One word of warning for BSP investors: The calculator hasn't yet been updated to indicate which stocks have split within the previous year, an important refinement we've made to the BSP strategy.)

4. In this decade, which Foolish Four stock (of those chosen at the beginning of the calendar year and officially followed) gave the best return during the year it was held?

  SE   Merck <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %>
  RE   IBM  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %>
  ME   Union Carbide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UK)") else Response.Write("(NYSE: UK)") end if %>
  TE   Philip Morris  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>

The answer is TE Philip Morris. Click on Fool Four Stats to the right of this page, then Foolish Four Stock History, 1961-1998. There we're treated to the performance of each and every stock ever to grace the Foolish Four Portfolio, along with comparison returns for the S&P 500 and Dow 30. You'll notice that, even though Philip Morris has stunk up the joint lately, in 1995 it treated the portfolio to a 65.79% gain, the best of any stock for the 1990s to date.

5. What was the title of the Foolish Four report that ran on June 2, 1999?

  EG  Introduction to IP
  OG  Retirement Needs, Part 3
  NG  Investing with Rube
  RD  In Deo Speramus

The answer is NG Investing with Rube. First click to the right on Fool Four Archives, then find the date of every Fool Four Article since 1996, along with the title. If you're interested in Robert Sheard's first archived article of March 22, 1996, you can find it here. It discusses the weather in Lexington, General Motor's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> "new" agreement with the United Auto Workers, and Chevron's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHV)") else Response.Write("(NYSE: CHV)") end if %> "new" oil discovery off Australia. A little bit of Foolish history -- great for perspective. While you're there, notice the "D" and "S" following the article title. Clicking there will give you the Foolish Four or BSP stocks that were the current buys on that date. (For those wondering, an incorrect answer to question 5, In Deo Speramus, is the motto of my alma mater. Brownie points go to fellow alums who recognized it.)

6. As of yesterday, how much has the Beating the S&P Portfolio outperformed the S&P 500, measured by annual growth rate?

  E  1.3%
  A  3.3%
  O  5.3%
  I   7.3%

The answer is I 7.3%. Here's an easy answer to find, as it's right on this very page. Every week, at the bottom of the page, we list the performance of the BSP portfolio stocks for the year, along with the performance since 1987.

7. From 1994 to 1998, $10,000 invested in a hypothetical portfolio would have earned the most if invested in which of the following?

  NK  S&P 500
  SK  Dow Jones Industrial Average
  LK  Foolish Four
  RK  Ear Wax Futures

The answer is NK S&P 500. To get this one, click first on our old friend, Fool Four Stats, to the right. Then scroll down to Cumulative Returns: $10,000 becomes..., where you'll find what $10,000 (theoretically) would have become if invested in the Foolish Four for periods ranging from one to 35 years, compared with the Dow 30 and the S&P 500. Many Fools might be surprised to learn that, from 1994 through 1998, the Foolish Four actually came in second to the S&P 500. However, we sure deserve the blue ribbon for the long-run returns race. For the past 35 years, that same $10,000 invested in the Fool Four outearned the S&P 500 by... about $5 million. Think long term, baby!

So, taking the corresponding letters from each of our correct answers, we get:

LO   RM   TH   TE   NG   I   NK

Shake the letters up, and you have your answer: THINK LONG TERM.

Thanks again to everyone who participated in our treasure hunt. I had a lot of fun and hopefully you did too. We'll have to do it again sometime. Y'all come back now, hear?

Beating the S&P year-to-date returns (as of 10-05-99):

Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %>      +27.0%
Kimberly-Clark <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %>     +0.7%
Campbell Soup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPB)") else Response.Write("(NYSE: CPB)") end if %>     -27.3%
Ford Motor Co.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>      -9.4%
Bank of America  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %>   -1.7%
Beating the S&P                -2.1%
Standard & Poor's 500 Index    +5.9%

Compound Annual Growth Rate from 1-2-87:
Beating the S&P               +24.5%
S&P 500                       +17.3%

$10,000 invested on 1-2-87 now equals:
Beating the S&P             $160,100
S&P 500                      $75,400

Today's Stock Lists | 1999 Dow Returns