I’ve come up with a new way of refining the Dogs of the Dow stock investing strategy. The Dogs of the Dow strategy has been around for some time. It’s a simple strategy, really. You look at the 30 Dow Industrials stocks on the last trading day of the year, and select the ten stocks which have the highest dividend yield. You buy them. Next year, you do the same thing by keeping only those that made the list again and booting the others out- replacing the discarded stocks with the newer, higher yielding stocks.
Happiness is a warm puppy
Further refinement of the strategy led into the “Puppies of the Dow”. In this strategy, you select the lowest priced “puppies” of the group. Being a dog owner (bullmastiffs) for many years – and recently acquiring another puppy, I got thinking about this strategy.
It’s been successful – in fact, the Puppies have outperformed the Dogs in most years. That’s no small feet, er, I mean, feat. The Dogs have outperformed the 30 Dow Industrials over the long term – so the Puppies have done considerably better than the market (well deserving of a treat!). Here’s a link to the Dogs of the Dow website that has been tracking its performance, and that of the Puppies, for many years.
The site has a link where it provides the “Dogs” (10 highest yielding stocks) and the Puppies (5 lowest priced of the 10 Dogs) on a daily basis. So, for those who would like to start the program at a different date than the New Year, you can choose your start date as you wish, and follow the strategy by adjusting it once a year from your unique start date.
Here are the 10 Dogs, with the Puppies highlighted in bold – using the above website’s data for December 5th
Verizon $50.92…4.63% Yield (VZ)
Coca-Cola $46.26…3.20% Yield (KO)
Cisco Systems $37.31…3.11% Yield (CSCO)
Pfizer $35.63…3.59% Yield (PFE)
General Electric $17.76….5.41% Yield (GE)
International Business Machines $155.35…3.86% Yield (IBM)
Chevron $120.39…3.59% Yield (CVX)
Procter & Gamble $91.40…3.02% Yield (PG)
ExxonMobil $82.89…3.72% Yield (XOM)
Merck $55.77 …3.44% Yield (MRK)
I took the above 10 stocks and did a Dogs of the Dow technical evaluation. The best technically profiled five stocks of the 10 Dogs will be highlighted. Let’s call this the “Best in Show” list. You heard it here first.
I thought it best to look for the basic trend or base pattern breakout to qualify one of the Dogs for our “Best in Show” list. A trend is defined as higher highs and lows on the weekly chart, and above the 200 day (40 week) Simple Moving Average (SMA). A base breakout is a breakout in price through a succession of at least two prior highs that were at or near the same price level. Best in Show are highlighted in green. Here goes:
VZ: sideways pattern, needs to break $53
KO: Higher highs and lows.
CSCO: Broken out, new uptrend
PFE: broke its old highs of $35, new uptrend
GE: A falling knife. Recommend this stock to people you hate.
IBM: Basing, needs to break out.
CVX: Breakout, new uptrend
XOM: Basing – needs to break out
MRK: Falling like a brick. Another one for your best enemies.
Introducing the 2017/2018 “Best in Show winners”
To recap, my “Best in show” list is comprised of 5 stocks that make up the best technical profiles amongst the 10 Dogs.
This year’s winners of “Best in show” Dogs are: KO, CSCO, PFE, CVX and PG.
Note that two are consumer staples (KO and PG) and the other three are in different sectors (CSCO is tech, PFE is Pharma, and CVX is energy).
Perhaps we should revisit this Best in show list next December and see how it did versus the Dogs, and the Puppies. If its an outperformer vs. the broad Dow, the “Best in Show’ will become a new list that I will attempt to post and follow on a yearly basis. And remember…You heard it here first.