FOOLISH FOUR PORTFOLIO

Wednesday, December 17, 1997


The Daily Dow
by Robert Sheard

LEXINGTON, KY. (Dec. 17, 1997) -- Whoosh! That's the sound of the air going out of one of our model portfolio stocks today. Minnesota Mining & Manufacturing (NYSE: MMM) warned Wall Street that its earnings are going to fall well short of predicted levels, coming in about even with last year's level of $1.00 per share. And did the stock ever pay for it. 3M stock plunged 9.45% on the day, a fairly major one-day move for a stock of this size.

3M listed a number of reasons for the impending weak performance, among them the negative impact from a strong dollar and the Asian economic crisis. But the real blow as far as Wall Street was concerned is the fact that sales are slowing down.

The currency translation is perhaps responsible for a couple of cents per share in earnings, but 3M is talking about missing estimates by some eight or nine cents a share. Obviously, the sales slowdown is the real troublesome aspect here and hiding behind the Asian problem is a bit of a smoke screen.

This inevitably brings up the question: Should I sell 3M now? I have no way of predicting its movement in the short term, but often the reaction to this kind of news is exaggerated and selling now means you may well be selling at the bottom of this correction. If you're following the Dow Dividend Approach, my sense is that you should always follow the guidelines and hold 3M until your portfolio is due for evaluation.

A couple of other points today: First, I botched the e-mail address in yesterday's Dow Report regarding using the Dow strategy with the Toronto Exchange index (TSE35). Mr. Gualtieri's e-mail address is ggualt@po-box.mcgill.ca. Sorry about that.

Second, if you don't watch CNBC all day (and there's probably no reason for you to do so with the Dow Approach), you may have missed the gang discussing this morning the fact that 90% of all actively managed mutual funds are losing to the S&P 500 again. This should come as no surprise to you. In a survey I performed in February, I discovered that 82% of all stock mutual funds in existence for a full decade had trailed the S&P 500. The mediocre beat goes on.

And finally, if you are looking for additional large-cap stocks to supplement your Dow high-yielders, check out today's Workshop column, which includes a list of the 100 largest American companies, sorted by market capitalization. Fool on!


TODAY'S NUMBERS
Stock  Change   Last
--------------------
T    +1        57.94
GM   -   1/2   64.19
CHV  -   7/8   74.88
MMM  -9        84.88
           
                  Day   Month    Year
        FOOL-4   -1.31%  -1.19%  24.58%
        DJIA     -0.24%   1.72%  23.40%
        S&P 500  -0.26%   1.06%  30.35%
        NASDAQ   -0.36%  -3.32%  19.86%

    Rec'd   #  Security     In At       Now    Change

   1/2/97  479 AT&T          41.75     57.94    38.77%
   1/2/97  153 Chevron       65.00     74.88    15.19%
   1/2/97  179 Gen. Motor    55.75     64.19    15.13%
   1/2/97  120 3M            83.00     84.88     2.26%


    Rec'd   #  Security     In At     Value    Change

   1/2/97  479 AT&T       19998.25  27752.06  $7753.81
   1/2/97  153 Chevron     9945.00  11455.88  $1510.88
   1/2/97  179 Gen. Motor  9979.25  11489.56  $1510.31
   1/2/97  120 3M          9960.00  10185.00   $225.00


                             CASH   $1409.35
                            TOTAL  $62291.85