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
See IRG research reports
