Forum Archive Index - May 2000

["nick" <acummin@es.co.nz>]

I have just read The unemotional investor by Robert

Shead.  In the book he outlines the well known strategy

called the "Foolish Four" which was the strategy which the

motley fools website recommended some time ago.

        For those that dont know this is the strategy

1.  Identify the ten highest yielding stocks on the dow top 30

2. rank the ten stocks in ascending order by stock price

3. Buy the four lowest priced stocks on the list and hold

for one year

4. At the start of the next year repeat the process, sell

any of the four which no longer are one of the top four and

replace with those which are.

 

     Apparantly if you had invested 10000 in this method in 1971

and repeated each year , by 1996 it would be worth 2,136,532 dollars.

 

      While in my hospital bed i adapted it to the New Zealand market

using the yields given in fridays national buisnness review.  Here are the results

                         yield %   share price

1) Force corp       13.8         .43

2) Kiwi income p.  12.3        .84

3) Owens g           12.2        1.10

4).Restaurant b      12.1        113

5)steel and tube     11.4        130

6) natural gas         10.8        130

7)hellaby                12.6        1.65

8)hallensteins         13.9        1.92

9)fletcher building    10.3        2.03

10) cavalier             12.3        3.39

 

     So if started now the four stocks to hold

for a year would be force, kip, owens and restaurant brands.

 I think most of us would agree that those four ould have a reasonable

chance of producing a positive return on investment.    The yields are certainly

very high.   In terms of shareprice the only one which would worry me would be

owens group, especially with rising oil prices.

       Apparantly the best time to start the foolish four is in november, due to managers

tinkering with portfolios, plus market always seems to dip in october..

 

    I was thinking of investing in force anyway, has anyone here have amy good reasons

why they are a bad investment at this time?

 

 nick