FOOLISH FOUR PORTFOLIO
Copycats
Mimicking the official portfolio

By Ann Coleman (TMF AnnC)

ALEXANDRIA, VA (Dec. 17, 1999) -- I was surprised last year by how many people really wanted to duplicate our "official" Foolish Four Portfolio. After all, there is absolutely nothing magic about the stocks and prices we end up with. We take whatever the market gives us.

But, as was explained to me patiently by a number of readers until I finally got it, our daily reports are a convenient way to track those stocks. OK. That's cool. But for the record, there is absolutely no monetary reason to duplicate our portfolio. If you buy today or next week or next month, you may get different stocks, and you will almost surely get different buy-in prices, and you will almost certainly not get exactly the return that we get -- but you are just as likely to do better as worse, so feel free to jump in any time.

For those of you who do want to duplicate our portfolio... well, you can't. Not exactly. We place market orders, so that means that the price we pay will be whatever the current asking price is. But here is the procedure I will follow so that you can duplicate it as closely as possible if you like.

Foolish Real-Money Portfolios are managed under a strict policy that ensures that we have no advantage over our readers. All trades are announced in advance. Sure, it would be nice to buy the stock first, then announce it, and wait for lots of people to jump in and drive up the price. We could even sell it real quick while the price was artificially high due to the increased demand we caused, and then tell the world how we made a quick 20% in just a few days -- which is an annualized return of 4,000,000% -- and, wow, aren't we smart investors?

Of course that could leave our readers buying a stock for a lot more than we paid and/or trying to sell a stock that is suddenly falling because we sold it.

We don't do that. But it's been known to happen.

What we do is announce all trades in the evening and then buy (or sell) the stocks at some point in the next five days. We used to just buy them the next day, but Rule Breaker picks developed an annoying tendency to bounce up the next morning even before the market opened. Who's been reading the Fool, I wonder? The five day rule gives us a chance to wait for the excitement to die down before buying in.

However, our Foolish Four picks are highly unlikely to move the mongo-cap stocks we invest in (don't we wish!), so I don't plan to use the five-day grace period. Here's what I will do. On December 23 when the market closes, I will use that list over there on the right to determine the Foolish Four stocks for 2000. I'll write about it in the portfolio report that evening, and sometime over the weekend I will get myself a cup of eggnog, dig through the mounds of torn wrapping paper, find my borrowed laptop, and sign on to Ameritrade.com.

I will place market sell orders for the stocks we will be saying good-bye to and market buy orders for the new ones. When the market opens Monday morning, those stocks will be in a queue and will execute at whatever the going price is. That night I'll report on the prices we sold the old stocks for and what we paid for the new ones. (Note: I can place simultaneous buy and sell orders like that because Ameritrade is cool with it. Not all brokers are. Check with your broker in advance if you're in doubt about their policy.)

It looks like Caterpillar (NYSE: CAT) will be sticking around for another year. If I had a bigger stake in CAT, I might want to buy a few more shares to keep it balanced with the new stocks, but I suspect that the few shares needed to make everything balance would cost me more in commission than it's worth. If the commission is less than 2% of the additional shares, I'll do it; otherwise I will just stand pat on CAT.

You can follow the same procedure at any time. If you want to trade when the market is open, you can use the Today's Stock Lists link on the right to get the most recent listing of the Foolish Four stocks based on current (20-minute delay) prices.

If you want to try to duplicate our Foolish Four portfolio, be my guest. You do have your discount brokerage account all set up, right? And you have opened a Roth IRA account if you qualify, right? And you have read all about the Foolish Four and reviewed the December portfolio reports, right?

OK, then. You can join the party. Or not.

Fool on and prosper!

Have you done your holiday giving? Check out the Fool's charity drive!

Read More Foolish Four Reports


Top Dow Stocks
( RP Order )

12/17/99

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

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

Foolish Four Portfolio

12/17/99 Closing Numbers
Ticker Company Dly Pr Chg Price
CATCATERPILLAR INC-2 3/16$44.94
IPINTL PAPER1$53.50
JPMMORGAN (JP)-3/4$128.13
MMMMINNESOTA MIN'G/MFG7/16$95.13

  Day Week Month Year
To Date
Since
12/24/98
Annualized
Foolish Four -.35% -2.09% -.90% 19.72% 21.50% 21.91%
S&P 500(DA) .16% .28% 2.30% 16.18% 16.25% 16.55%
NASDAQ 1.02% 3.67% 12.50% 71.16% 72.75% 74.40%
DJIA (DA) .11% .29% 3.49% 24.01% 24.15% 24.62%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
12/24/9814MMM73.571$95.1329.30%
12/24/9822IP43.551$53.5022.84%
12/24/989JPM105.514$128.1321.43%
12/24/9824CAT43.083$44.944.30%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
12/24/9814MMM$1,030.00$1,331.75$301.75
12/24/9822IP$958.12$1,177.00$218.88
12/24/989JPM$949.63$1,153.13$203.50
12/24/9824CAT$1,034.00$1,078.50$44.50
  Cash: $119.51  
  Total: $4,859.89  

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.