FOOLISH FOUR PORTFOLIO

Tuesday, December 16, 1997


The Daily Dow
by Robert Sheard

LEXINGTON, KY. (Dec. 16, 1997) -- Because of the U.S. focus of the Dow Jones Industrial Average stocks, I don't often have occasion to write about foreign stock markets in this column, but today I want to go international. Specifically, I want to Beat the World. (Okay, at least North America.)

As many of you know, the High-Yield Approach has been used on markets around the world. Basically, anywhere there is a group of large-capitalization, dividend-paying industrial stocks, the high-yield approach should work well over time. This has been demonstrated by the success of the various Unit Investment Trusts offered for this approach on foreign markets.

In fact, if you haven't already visited it, you might be happy to learn that we have a branch of The Motley Fool open now on American online in the United Kingdom, with a section of it devoted to Beating the Footsie.

A little closer to home, however, many Canadian investors have been curious about whether the approach would work on the Toronto Exchange, specifically with the TSE35. Canada's tax laws make investing in Canadian stocks a must for citizens north of the United States, so the question is an important one for our Canadian readers.

Last summer a three-part series was published in the Canadian Money Saver Magazine that outlined the approach and its back-tested history on the Toronto Exchange. And just this week, one of our own Foolish readers from Canada, Gino Gualtieri (ggualt@po-box.mcgill.ca) forwarded me his back-testing results for Beating the TSE.

Because of its shorter history, the approach on the Toronto Exchange can only be tested back a decade, but once again, the results demonstrate that investing in high-yield stocks generally outperforms the market indices. In Mr. Gualtieri's study since 1988, the ten-stock high yield version returned 15.2% a year versus 11.0% for the TSE35. (Interestingly, this version outperformed even the more concentrated four- and five-stock approaches.)

Granted, it is not quite as strong a performance as the Dow equivalent over the last decade, but that's a result of the Toronto market's overall weaker performance, not the result of the model's weak performance.

So for our American readers, it's another confirmation of the success of high-yield investing. For our Canadian investors looking to take advantage of the retirement tax laws, Beating the TSE is a viable possibility. Fool on, eh!

Postscript: Sears (NYSE: S) and DuPont (NYSE: DD) swapped spots in the rankings again today, dropping DuPont out of the top ten.


TODAY'S NUMBERS
Stock  Change   Last
--------------------
T    -   5/16  56.94
GM   +   7/8   64.69
CHV  -   7/16  75.75
MMM  +1  3/16  93.88
           
                  Day   Month    Year
        FOOL-4   +0.13%   0.12%  26.23%
        DJIA     +0.68%   1.96%  23.70%
        S&P 500  +0.48%   1.32%  30.69%
        NASDAQ   +1.07%  -2.97%  20.29%

    Rec'd   #  Security     In At       Now    Change

   1/2/97  479 AT&T          41.75     56.94    36.38%
   1/2/97  153 Chevron       65.00     75.75    16.54%
   1/2/97  179 Gen. Motor    55.75     64.69    16.03%
   1/2/97  120 3M            83.00     93.88    13.10%


    Rec'd   #  Security     In At     Value    Change

   1/2/97  479 AT&T       19998.25  27273.06  $7274.81
   1/2/97  153 Chevron     9945.00  11589.75  $1644.75
   1/2/97  179 Gen. Motor  9979.25  11579.06  $1599.81
   1/2/97  120 3M          9960.00  11265.00  $1305.00


                             CASH   $1409.35
                            TOTAL  $63116.23