FOOLISH FOUR PORTFOLIO
Good News for Sears
Is the stock finally turning around?

By Ann Coleman (TMF AnnC)

RESTON, VA (Dec. 2, 1999) -- All of a sudden, Sears is looking good. Several analysts have upgraded their ratings on Sears, and a whole passel of positive stories have hit the wires.

Sears gets brownie points for selling energy-efficient appliances.

Sears starts Christmas shopping season off with a strong Thanksgiving weekend.

And the biggie -- Sears expands its website with online gift cards, online credit applications, instant processing, and my favorite: Tool Territory. It sounds like Sears is playing to its strengths. (See below for some other interesting links.)

Meanwhile, the stock has bounced back at least part of the way from that dread moment when it was kicked off the Dow. It dropped as low as $27 after the Dow announcement, but closed today at $34.50 -- up 28% in six weeks. It still has a long way to go before it gets back to the price range of $40 to $50 where many Foolish Four investors bought it last spring, but at least it's going in the right direction, at the moment anyway. More important than the stock price may be the more positive attitude I seem to detect about the company's future.

If I may be permitted a small sermon -- O, Ye of little faith! Six weeks ago Sears was the dog that would never bark again.

The whole point of the Foolish Four strategy is to find the companies that people think are on death's door. Because we deal only with blue-chip stocks, the chances are good that most of the weeping and wailing is over-reaction. Sure, these companies are having a hard time, but in most cases the problem is temporary (as in, it goes away in a year or two, but usually not in a month or two).

The discipline of the Foolish Four strategy helps us pick those stocks when no one else wants them. Naturally, they are not going to turn around the day we buy them, and some will never turn around. But you buy them, you wait a year or two, sometimes three, and at some point management wakes up, or the economy changes, or the rest of the investing world discovers that undervalued gem, and your patience is rewarded.

The problem with Sears isn't that it didn't turn around soon enough, but that it continued to drop after a lot of folks in this community bought it. When they made their actual purchase will ultimately affect how this stock does for them.

That's one of those unfortunate truths, and the basic underlying reason why investing in stocks pays better in the long run than investing in sure things.

By the way, now that I have called Sears a "turnaround," you can expect it to start another decline beginning right... about... now. But I'm not worried. I'm heading over to Tool Territory!

One final note: Interested in being on The Motley Fool Radio Show this week? Drop an e-mail to Macg@fool.com with a question or comment on investing and a daytime phone number.

Fool on and prosper!

Related Links:
Research Alert -- Sears Upgraded to Buy
Banc of America Upgrades Sears to Buy
Sears Estimates Raised

Read More Foolish Four Reports


Top Dow Stocks
( RP Order )

12/2/99

1. Philip Morris
   (NYSE:MO)
2. * Caterpillar
   (NYSE:CAT)
3. * Eastman Kodak
   (NYSE:EK)
4. * General Motors
   (NYSE:GM)
5. * DuPont
   (NYSE:DD)
6. SBC Comm.
   (NYSE:SBC)
7. Int'l Paper
   (NYSE:IP)
8. JP Morgan
   (NYSE:JPM)
9. Exxon
   (NYSE:XON)
10. 3M
   (NYSE:MMM)

NOTE: Today's Foolish Four stock selections are marked with an asterisk.

Foolish Four Portfolio

12/2/99 Closing Numbers
Ticker Company Dly Pr Chg Price
CATCATERPILLAR INC9/16$47.50
IPINTL PAPER1/2$52.56
JPMMORGAN (JP)3/8$132.50
MMMMINNESOTA MIN'G/MFG3/4$97.19

  Day Week Month Year
To Date
Since
12/24/98
Annualized
Foolish Four 2.00% .65% 1.32% 22.41% 24.23% 25.90%
S&P 500(DA) .81% -.54% 1.44% 15.21% 15.27% 16.29%
NASDAQ 2.95% .14% 3.50% 57.47% 58.93% 63.54%
DJIA (DA) .37% .46% 1.48% 21.63% 21.78% 23.27%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
12/24/9814MMM73.571$97.1932.10%
12/24/989JPM105.514$132.5025.58%
12/24/9822IP43.551$52.5620.69%
12/24/9824CAT43.083$47.5010.25%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
12/24/9814MMM$1,030.00$1,360.63$330.63
12/24/989JPM$949.63$1,192.50$242.88
12/24/9822IP$958.12$1,156.38$198.25
12/24/9824CAT$1,034.00$1,140.00$106.00
  Cash: $119.51  
  Total: $4,969.01  

Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.
• DJIA (DA) = dividend adjusted. Dividends have been added to the total return of the DJIA.

Note
The Foolish Four Portfolio was launched on December 24, 1998, with $4,000. Additional cash is never added, all transactions are discussed and explained publicly before being made, and returns are compared daily to the S&P 500 and the Dow. (Dividends are included in the yearly, historic and annualized returns.) Stocks are chosen once per year using a formula based on dividend yield and price. See The Foolish Four Explained for details.