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No. of Recommendations: 6
docgordy Date: 11/20/99 2:11 PM Number: 207

I would just like some feedback from people who have gt in their foolish four. Will this stock recover again within the next year? Should I buy more since it has dropped considerably this year?

Those are the big questions, aren't they!? And, if anyone could really predict the answers with any certainty, then would they spend their time posting on these boards? Maybe as a hobby from their private island. :)

Will it recover within a year? By "recover" you probably mean price in the mid-50's or higher. My guess is - not likely within a year, but it has a good chance of achieving or beating the market average over several years.

Then again, maybe it will spike upwards one of these quarters, like EK has been doing over the last couple years. Spike up, drift down, spike up, drift down…

If you want a good scare, then look at what GT did from about 1987-1991. Drawn and quartered! But, it recovered in 18 months or so later. To me, reading the chart tea leaves as if it means anything, the drop so far from the peak in 1998 looks somewhat similar. Also, from the XRX chart in the link, the similarities during 87-91 and recently are interesting.

Here are GT results, compared with the Foolish Four and Dow 30, for years GT was (or rather, would have been) in the annual FF, extracted from TMF's 1961 to 1998 history, (warning, loads slowly). Does GT hold a record for the most 2nd year hold-overs? 4 times! I'm only surprised it wasn't chosen by the FF from '87-91 as it plummeted. Some years it won, some it lost, and on average it did fairly well.

Total %Returns
Year GT FF Dow30
1974 -7.84 20.00 -15.64
1975 73.64 68.71 44.25

1977 -21.79 -2.96 -12.58
1978 1.01 9.89 2.53

1981 16.12 9.66 -3.30
1982 91.52 56.88 19.80

1985 26.60 49.82 30.98
1986 43.47 29.67 21.87
Average 22.61 28.02 9.17

Buy more since it dropped? Default answer - why did you buy in the first place? If it was "belief" in an annual mechanical program, then maybe you should just stick with the program. On the other hand, there's the "feed your winners, starve your losers" approach which would say not to feed this loser any more. Another factor is any other alternatives you are considering for your money. That is, how does this possible purchase fit in with your big picture. Finally, if GT was a good buy before, has something changed (other than becoming cheaper) to make it no longer a good buy (like being booted from the Dow)?

I have nothing against several BTD purchases per year, so I lean towards buying more now (particularly in small quantities through a Drip), balanced with other stocks I want to buy now. TMF also seems to be moving towards recommending a Beat the SP500 (or SP30) rather than Beat the Dow in the future. GT would probably be near the top of those selections now if it had been out of the Dow by March when Business Week published the list used for TMF's BSP selector. If you think the RP ratio is a good general indicator for Dow34 &/or SP500 stocks, then the current value of about 0.53 for GT puts it near the top. For comparison, XRX at 0.52 is SP Dog#3, MO at 1.48 is DowDog#1, and CAT at 0.38 is DowDog#2. On the basis of yield alone, the 3%+ for GT looks good.

Finally, about 530,000 shares traded Friday think this is a good time to buy (and sell, of course), and about 120 Million shares think it is time to hold, so at least you won't be alone, whatever you decide.

Good Luck!
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