1996 Beating The Dow Switch

Well, it's that time of year again, when the Fool Portfolio ushers out the old Dow Dividend stocks, and welcomes the new behemoths to the fold.

This year, we're bidding farewell to General Electric and Sears, and giving a Foolish welcome to AT&T, General Motors, and Minnesota Mining & Manufacturing (3M).

The graph below above depicts the performance of the Fool Portfolio's Dow stocks from the time of last year's switch. For more information on Dow Dividend Approaches, including the Foolish Four, we invite you to peruse our Dow Area.

Here is the first announcement of trades for the Fool Portfolio since our sale of Applied Materials in May. (These will also be our first new buys since January.) Despite the lack of trading activity, it's been another good year, with the Fool Portfolio ahead of 1996's S&P 500 by a count of 29% to 8%. That said, we've had a more volatile journey than we normally like, and are substantially down from our highs of a few months ago. Ah, well, the whims of the short-term markets.

We are making our annual Dow switch next week, and we present you our two sell announcements and our four new buys. Please note that we are strictly adhering to our Foolish Four approach (for the first time, ironically), the one elucidated in our book. Also note that the monies we're putting in the Foolish Four represent exactly 30% of our current assets.

Just to summarize all the moves right here, we will be doing the following:

Selling: 95 General Electric, 165 Sears

Buying: 130 AT&T, 15 Chevron, 280 General Motors, 110 3M Corp.

The rationale and write-ups all follow. We wish you continued best of luck with your investments. It always remains our earnest hope that every one of our readers outperforms us. (And over the past two months, that wouldn't have been hard!) In the end, of course, what matters most is that we each learn to guide our own money toward market-beating returns. The enjoyment, learning, security, and satisfaction that comes with do-it-yerselfing your own portfolio cannot be overstated.

Fool on!

David Gardner, on behalf of Fool HQ

ALEXANDRIA, VA, August 12, 1996 -- The Fool Portfolio went through its historic third Dow Dividend Day with flying colors!

With our new five-day rule in play, we could've made our trades any time this week following their Saturday announcement. But as all of these companies were "huge caps," we decided to do the trades at market open this morning... all six of them.

By the end of the day, all four Dow stocks purchased were up. None of them did quite so well as General Motors, the automotive behemoth that today had more Foolish money invested in it than any stock in our portfolio's history. Purchasing 280 shares of GM at $51 7/8 (and paying our standard $27.49 commission), GM's cost basis is a whopping $14,552.49, the first five-figure cost basis in Fool Port annals. We love this... I think it's going to be a great year.

OK, for those keeping score on your home PC, the full tallies on our trades are just below:


         Price    Shares    Amount
    GM   51.875   280      $14552.49
    T    54.75    130       $7144.99
    CHV  57.875    15        $895.62
    MMM  65.875   110       $7273.74


       Price  Shares Amount    Cost Basis
    GE 83.75   95    $7928.76  $5501.87
    S  44.625 165    $7335.64  $4772.65

Total gain on General Electric: 30.61%

Total gain on Sears: 34.94%

When the dust cleared, we had shed our portfolio of its outstandingly profitable General Electric and Sears holdings... perhaps a foolish (small "f") move -- we'll find out -- but as I've written elsewhere, about the only thing in which I put more faith than in GE and Sears is the Foolish Four approach itself, and The Man was telling us to move our money. For the record, Sears closed out unchanged on its final Foolish day, while GE rose over a buck (what's new?).