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Vet67to82 (< 20)

A 4 or 8 Stock Market Proxy?

Recs

265

March 18, 2010 – Comments (4) | RELATED TICKERS: UTX , DD , DIS

A couple of articles recently suggested using the first 4 stocks, or all 8,  in the list to avoid fund fees and with a good daily correlation to the market, about 90% with the first 4, and 95 % with all 8 .  Here is the list:

3/18/2010 1:34 PM ET   Market Closes: 2hr 26min 

Symbl Price $ Chg % Chg Volume Bid Ask
(1) UTX 72.51 +0.32 +0.44 1,688,977 72.50 72.51  
(2) DD 37.02 +0.53 +1.45 10,130,953 37.02 37.03  
(3) DIS 33.71 -0.04 -0.12 4,648,927 33.71 33.72  
(4) XOM 67.31 -0.05 -0.07 15,875,875 67.31 67.32  
(5) AXP 40.88 -0.13 -0.32 2,988,544 40.88 40.89  
(6) VZ 30.36 +0.21 +0.70 5,388,400 30.35 30.36  
(7) IBM 128.65 +0.89 +0.70 2,774,077 128.65 128.67  
(8) WMT 55.79 -0.13 -0.23 5,428,561 55.79 55.80
 

 Curiously, the articles don't mention whether you should consider equal share numbers, or equal dollar amounts, or a different mechanism.  So, I intend to run the math myself based on the following fundamentals:   Hmmm!  Different Betas, Market Caps, etc ... so this ahould be interesting.  

(1)  United Technologies Corp (UTX)         72.43+0.24/+0.33% 12:33 PM ET
       Beta 0.97
       Dividend & Yield 1.70 (2.36%)
       Earnings/Share 4.12
       Forward P/E 13.64
      Market Cap. 67.84 Bil
      P/E 17.58
      Return on Equity 21.37
     Total Shares Out. 936.41 Mil
     Stock Scouter Rating:   7 out of 10

(2)  E I du Pont de Nemours and Co (DD)  37.01+0.52/+1.43% 12:37 PM ET
      Beta 1.38 
     Dividend & Yield 1.64 (4.56%)
     Earnings/Share 1.92
     Forward P/E 13.79
     Market Cap. 33.53 Bil
     P/E 19.32
     Return on Equity 25.17
     Total Shares Out. 903.84 Mil
     Stock Scouter Rating:   8 out of 10

(3) Walt Disney Co (DIS)  -0.20/-0.59% 12:40 PM ET
      Beta 1.15
      Dividend & Yield 0.35 (1.04%)
      Earnings/Share 1.76
      Forward P/E 14.72
     Market Cap. 65.11 Bil
     P/E 19.18
     Return on Equity 9.61
    Total Shares Out. 1.94 Bil
     Stock Scouter Rating:   7 out of 10
 
(4)  Mobil Corp (XOM)  67.12-0.24/-0.36% 12:42 PM ET
      Beta 0.43
     Dividend & Yield 1.68 (2.49%)
     Earnings/Share 3.98
     Forward P/E 9.24
     Market Cap. 317.03 Bil
     P/E 16.87
     Return on Equity 17.25
     Total Shares Out. 4.72 Bil
     Stock Scouter Rating:   7 out of 10
 
(5) American Express Co (AXP)   40.54   -0.47/-1.15% 12:43 PM ET  
     Beta 2.10
     Dividend & Yield 0.72 (1.76%)
     Earnings/Share 1.53
     Forward P/E 12.56
    Market Cap. 48.68 Bil
    P/E 26.42
    Return on Equity 13.78
    Total Shares Out. 1.20 Bil
    Stock Scouter Rating:    5 out of 10
 
(6)  Verizon Communications Inc (VZ)   30.34+0.19/+0.63% 12:46 PM ET
      Beta 0.62 
     Dividend & Yield 1.90 (6.30%)
      Earnings/Share 1.29
     Forward P/E 12.14
    Market Cap. 86.09 Bil
    P/E 23.53
    Return on Equity 8.76
    Total Shares Out. 2.84 Bil
    Stock Scouter Rating: 8 out of 10

(7)  International Business Machines Corp (IBM)   128.31+0.55/+0.43% 12:53 PM ET
     Beta 0.79
     Dividend & Yield 2.20 (1.72%)
     Earnings/Share 10.01
     Forward P/E 10.64
     Market Cap. 166.54 Bil
     P/E 12.81
     Return on Equity 74.37
     Total Shares Out. 1.30 Bil
     Stock Scouter Rating:  9 out of 10

(8)  Wal-Mart Stores Inc (WMT)   55.76-0.16/-0.29% 12:56 PM ET
      Beta 0.24
      Dividend & Yield 1.21 (2.16%)
     Earnings/Share 3.70
     Forward P/E 12.69
     Market Cap. 212.34 Bil
     P/E 15.23
     Return on Equity 21.19
    Total Shares Out. 3.81 Bil
     Stock Scouter Rating:  8 out of 10.:

 

    

4 Comments – Post Your Own

#1) On March 18, 2010 at 9:12 PM, megalong (< 20) wrote:

You can eliminate expense ratios, but still need to pay 8x the trading fees if you own 8x as many stocks.  And you are not guaranteed to be well-diversified - you could see an unexpected "black swan" event in one of the 8 companies. If you are not trying to beat the market then buy a low cost index ETF or mutual fund and don't worry about it.

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#2) On March 18, 2010 at 9:46 PM, Vet67to82 (< 20) wrote:

Thanks for your reply... but the math is interesting.  It's an excellant example of articles that left out important info and will be sending people down the garden path ... only to get ripped apart by the wolves.  You've also have good points on fees and diversification ..   However, it's  the "What if ... this and/or that?", the info "THEY" left OUT that bugs me.   So, I'll run different scenarios ( and I won't neglect the sector/industry factors ),  anyway. 

 There are times when the effort may be a worthwhile even if the result winds up a non-event ... it's the trip and NOT the destination.  

  Rest assured  ... I'll share my results, findings, and conclusions ...  

  

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#3) On March 18, 2010 at 10:54 PM, Vet67to82 (< 20) wrote:

II'm looking for the article on the first 4 stocks that refered me to this article covering the eight stocks:

" An Eight-Stock Index Fund with 95% Accuracy "
March 17, 2010

By Ed Elfenbein, Editor, Crossing Wall Street
 
http://www.investorplace.com/experts/ed_elfenbein/index-fund-eight-stocks-utx-dd-dis-xom-axp-vz-ibm-wmt.html

 

 

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#4) On May 10, 2010 at 1:59 PM, Bad2dBone99 (< 20) wrote:

Previous +1 rec   :)   

 only once  :(

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