By Ethan Haskel (TMF Cormend)

BALTIMORE, MD (Jan. 5, 2000) -- Does anyone remember that hokey situation comedy from the early 1970s called Love, American Style? I suspect the show is still floating around in cable land somewhere. It's depressing to realize that many Fools reading this article weren't even alive then, or were too young to digest the onscreen vignettes wherein actors ran around pretending to fall gaga over each other.

Don't ask me why, but that show popped into my head on news of the recent merger of oil giants Exxon and Mobil to form ExxonMobil <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XOM)") else Response.Write("(NYSE: XOM)") end if %>. In a wonderful high-profile wedding ceremony, yet another Dow and a Beating the S&P (BSP) company tied the knot.

We've seen quite a few of these hitchings lately. Just over a year ago, Dow component Travelers Group wooed BSP's Citicorp, to form Citigroup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %>. The list of BSP companies falling under Cupid's spell include Chrysler, Amoco, NationsBank, and BankAmerica, to name a few. Meanwhile, other couples like MCI WorldCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> and Sprint <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %> or Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> and Warner Lambert <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLA)") else Response.Write("(NYSE: WLA)") end if %> are actively courting (some with real lawyers).

Will such corporate marriages continue to thrive, in perpetual matrimonial bliss? Or will family squabbles and internal distention eventually lead to "irreconcilable differences?" Will Ann Landers soon be writing a regular column for Barron's?

Only time will tell. In a toast to past and future Wall Street nuptials, let's dress up this column in a bride's traditional wedding day wardrobe. We'll discuss a potpourri of issues, including something old, something new, something borrowed and, of course, something blue.

Something Old

What's old is last year's official BSP Portfolio returns. Remember, the BSP Portfolio, unlike that of the Foolish Four which uses real money, is a paper portfolio. It represents the theoretical returns if one were to invest in the current BSP stocks as of the first market trading day of the year.

As noted a few weeks ago in our letter to Warren Buffett, BSP underperformed the S&P 500 for the first time in the past seven years. (Mr. Buffett's Berkshire Hathaway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.a)") else Response.Write("(NYSE: BRK.a)") end if %> ended the year with almost a 20% loss.)

Here are the final numbers for the 1999 returns:

Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %>       +36.7%
Kimberly-Clark <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %>     +22.0%
Campbell Soup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPB)") else Response.Write("(NYSE: CPB)") end if %>      -28.0%
Ford Motor Co.  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>       -6.0%
Bank of America  <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %>   -13.5%
Beating the S&P                 +2.3%
Standard & Poor's 500 Index    +19.5%

Obviously the lack of those high-flying "tech" stocks in our portfolio hurt in a year when the Nasdaq Composite Index rose 86%. A significant majority of stocks on the New York Stock Exchange (the home of every BSP Portfolio stock since 1987) lost money last year, so we've been swimming upstream the entire year. We'll see next year if the Nasdaq can keep up its torrid pace.

Something New

Speaking of next year, here are our five spanking new BSP Portfolio stocks for the upcoming year, based on price and yield data at the end of 1999. They're listed in order from least expensive to most (as of the beginning of the year). I've also included last year's return for each stock (excluding dividends).

Bank One <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %>           -37.3%
PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %>            -13.8%
Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>        -9.2%
Bank of America <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %>    -16.5%
Fannie Mae <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNM)") else Response.Write("(NYSE: FNM)") end if %>         -15.6%

Ford and Bank of America, two of our losing stocks last year, are repeaters. I've shown previously that stocks that remain in the portfolio for a second year tend to do quite well that year.

The Y2K BSP Portfolio contains more than its share of "dogs." These stocks averaged more than an 18% loss last year, excluding dividends. That's music to my ears.

Not surprisingly, this year's list is chock-full of financial companies, which took a hit last year in the wake of concerns about rising interest rates. The BSP history shows that the last time two banks were included in the list they both did extraordinarily well that year. In 1996, NationsBank and BankAmerica gained 43.8% and 57.4% respectively, compared with the S&P 500's gain of 22.9%.

Both Fannie Mae and PepsiCo have never been official BSP Portfolio stocks before. Ford is a perennial BSP favorite. Not including the upcoming year, Ford has been an official BSP stock for 6 years since 1987. Despite last year's poor showing, Ford has performed quite well for us, outperforming the S&P 500 on average by 8.1%.

Something Borrowed

Last year's BSP portfolio benefited from a little New Year's Eve bonus, the result of Schlumberger's spin-off of SedcoForex. The very next day Sedco merged with Transocean Offshore Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIG)") else Response.Write("(NYSE: RIG)") end if %>. Talk about shotgun weddings!

Something Blue

No, it's not big blue, Dow component IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %>. Instead, I'll point you to the most enjoyable book I've read this year, whose cover is arctic blue. If you've ever for a split second dreamed of chucking it all and doing something wild and crazy, check out Gary Paulsen's Winterdance: The Fine Madness of Running the Iditarod.It's a wonderful piece of storytelling, with guaranteed laugh-out-loud chuckles.

Beating the S&P year-to-date returns (as of 01-04-00):

Bank One <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %>           -5.1%
PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %>            +2.0%
Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>       -5.0%
Bank of America <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %>    -9.2%
Fannie Mae <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNM)") else Response.Write("(NYSE: FNM)") end if %>         -7.7%
Beating the S&P                -5.0%
Standard & Poor's 500 Index    -4.8%

Compound Annual Growth Rate from 1-2-87:
Beating the S&P               +23.7%
S&P 500                       +17.5%

$10,000 invested on 1-2-87 now equals:
Beating the S&P             $159,500   
S&P 500                      $81,000