<FOOLISH FOUR PORTFOLIO>
Instant Foolish Four
by Ann Coleman (TMF AnnC)
Reston, VA (April 30, 1999) -- Ta-dah! Today I am very pleased to announce a new Fool's Tool -- Strategy Stocks Live! If you liked how the Foolish Four list changed from day to day, now you can watch it change from hour to hour!
Fools Wanted: Apply Within.
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Strategy Stocks Live (go on, don't be afraid, click that link) is our Foolish version of the stock list generator that Tom Smith (a.k.a. in cyberland as Yotommy) created some time ago, the same one we told you about as a late Christmas present. Let's hear it for Yotommy! Tom offered to let us link to his nifty stock generator or bring it onto our site. For various arcane technical reasons, we had to recreate it and are now making it available to you within the hallowed halls of Fooldom.
Right now, it is in beta test mode, meaning please, play with it, pound it -- try to break it or catch it in a lie. If you note errors or omissions, we want to hear about it. If you find any bugs, just drop me an e-mail at TMFAnnC@aol.com and I will call out the SWAT team in the person of Jason Stevens, a new Fool with a very deft touch when it comes to programming (and no, he's not looking for a job, so forget it all you desperate IS managers -- he's OURS!).
A few words of explanation may be in order. First, if you are comparing our numbers with Yotommy's or Today's Stock Lists, the first thing you will notice is that the RP numbers are different but the stocks are in the same order. Strategy Stocks uses the formula RP = yield/square root of price. You can also use a different formula to calculate the RP = yield squared/price. Since one formula is simply the square (or square root) of the other, the order in which the stocks are ranked will be the same for either formula. However, the formula that uses square root of price is more expressive of the reasoning behind the RP, so that is why we are using it now. For more on the various ways to calculate the RP and why we like this one, see RP Variation Math.
Second, the lead paragraph up there is totally tongue-in-cheek. The fact that the stock list changes as prices change is more annoying than interesting. It's also a bit confusing, and I wrote about that a couple of weeks ago in Moving Targets. The bottom line is that the formula helps you buy your stocks at the best price relative to the other Dow stocks, so getting a "fresh list" just before you buy should be to an investor's advantage.
On the other hand, it's pretty obvious that some of the stocks picked will do better than others, so there is an element of luck at work here. Your actual return will reflect the stocks chosen, which, when it comes to the final fraction of a dollar, is pretty much a coin toss.
For example, there might be two stocks with similar dividends and prices that are switching back and forth between the 5th and 6th position on the list. At the end of the year, one is likely to have done better than the other, but there's no way to tell which one it will be at this point. So if Stock A happens to be up in price at the time you make your choice (and thus is off the list), and it eventually turns out to be the better stock, your return won't be as high as it would have been if you had waited until the next day (or hour), when its price dropped and it appeared on the list. (Or vice versa -- you could avoid a bad one in the same way.)
Since this is a random phenomenon, you just have to trust that it will work in your favor as often as not and remember that this is a long-term strategy. It all comes out in the wash.
Here's that link again: Strategy Stocks Live. Try it! Not only can you get a Fresh Foolish Four, you can also generate a High Yield (Dogs of the Dow) list or a High Yield/Low Price list (the Beating the Dow order). And Beating the S&P followers can generate the same lists using the S&P 30.
All of the lists copy quite nicely into Excel or Word and probably other programs as well. Just highlight the table, including the header row, hit Control-C, switch to Excel or Word and hit Control-V. (Or use Edit/Copy and Edit/Paste if you're not a Control key freak.)
An example of how this feature might be used would be someone who was planning to buy the High Yield 10 but wanted to exclude a certain stock. Use List All Stocks, copy the table into Excel or Word and sort by the Yield column. Just be sure the sort is in reverse order -- you don't want to be buying the Low Yield 10! That will let you see which stock is in 11th place and substitute it. (If you are using another program and the list doesn't come in formatted as a table, you can try putting a paragraph mark in front of each rank number to make the data easier to view, but I can't offer personal support for such a situation.)
Send all notes of praise or problems to me at TMFAnnC@aol.com.
Fool on and prosper!
Recent Foolish Four Portfolio Headlines 12/28/00 Modifying Mechanical Strategies 12/27/00 Beating the S&P Year 2000 Recap 12/26/00 After-Hours Quotes 12/22/00 Why Include the Foolish 4 Port? 12/21/00 The Value of Community Input Foolish Four Portfolio Archives »
Stock Change Last
CAT -1 1/8 64.38
JPM -3 1/4 134.75
MMM +3 3/8 89.00
IP -2 15/16 53.31
Day Month Year History
FOOL-4 -1.39% 25.38% 28.94% 30.86%
DJIA -0.82% 10.25% 17.90% 17.43%
S&P 500 -0.57% 3.79% 8.94% 9.20%
NASDAQ +0.57% 3.29% 15.97% 17.56%
Rec'd # Security In At Now Change
12/24/98 24 Caterpillar 43.08 64.38 49.43%
12/24/98 9 JP Morgan 105.51 134.75 27.71%
12/24/98 22 Int'l Paper 43.55 53.31 22.42%
12/24/98 14 3M 73.57 89.00 20.97%
Rec'd # Security In At Value Change
12/24/98 24 Caterpillar 1034.00 1545.00 $511.00
12/24/98 9 JP Morgan 949.62 1212.75 $263.13
12/24/98 14 3M 1030.00 1246.00 $216.00
12/24/98 22 Int'l Paper 958.12 1172.88 $214.76
Dividends Received $29.45
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