Best in Show: a new way of trading the Dogs of the Dow strategy

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

PG: 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.

 

4 Comments

  • Bingo! He hates us folks …. and he forgets his top pick from February:

    GE:
    “GE has been consolidating between $28-$33 lately. We picked it up around $28 in the summer. It’s getting close enough to that $28-$29 point to be worthy of entry for new buyers. The stock is in a longer-term bullish trend, and pays a three per cent dividend. They reported Q4/16 earnings at the end of January. They disappointed on the industrial segment, but other segments demonstrated solid performance. This is a massive ship that has changed direction. Going forward, we believe shareholders will be rewarded.”

    Keith cant be blamed too much, I mean this sucker fooled everyone, hence the horrible implosion, that got every person bailing. Not sure where the best stop loss would have been because some of us just go, well its big company with a kinda good dividend, so keep it for the long term. (Nope)

    Happy Xmas,

    Reply
    • We sold on June 12th at $28.85 for a more or less break even price.
      The challenge with the 3 top picks on BNN is that for shorter termed (relatively speaking) traders like me, we have a higher turnover based on our buy and sell rules. That’s why I am the only PM on the show who does month by month top picks -my average holding period for a stock is 3-6 months with only a few exceptions. BNN had trouble coordinating the top picks on a 3 month basis so we agreed it would be show by show. While that doesn’t give much chance for the stock to perform, its better than saying “oh we sold that ages ago” in the typical BNN schedule of 1-year ago top pick lookbacks. Obviously, anyone who buys a stock on a top pick from BNN needs to have his or her own stop loss rules- as the manager giving the pick is not following up in managing their money. Bob, you read my blog enough to know that if a stock breaks vital support–which i noted on that show as $28–you give it a bit to see if that break is real (or if its just a spike) – then you sell. That’s what we did. We feel we executed the GE sell perfectly and it gave evidence of why our sell rules really do work.GE broke $28, stayed below for a while, then rallied to that same price as a neckline test where we sold. It then reversed as expected and fell hard.
      BTW–sometimes a stock falls hard and while you wait for a 3 day confirmation of support break, the stock plummets further. That happened to us on Cineplex. So the sell on break of support after 3 days rule mostly works- but sometimes when a stock goes completely parabolic (down) like Cineplex you are rather SOL on the trade. But that’s an exception rather than the rule. Most of the time, our sell rule has served us very well.

      Reply
  • “SO IF I AM RIGHT ON THIS, WITH THE BANK OF CANADA BEING ON HOLD AND THE FED LIVING UP TO ITS PLEDGE TO RAISE RATES THREE MORE TIMES, AT LEAST, THEN THE IMPACT ON THE CANADIAN DOLLAR, WILL BE NEGATIVE. INDEED, THE IMPLICATION FOR A FURTHER DEEPENING IN NEGATIVE CANADA-US SHORT YIELD SPREADS TO 75 OR 100 BASIS POINTS FROM 31 BASIS POINTS CURRENTLY WOULD TAKE THE LOONIE TO $1.37 OR .73 CENTS (U.S) EVEN ASSUMING THAT OIL PRICES STAY AT THEIR LOFTY LEVELS”

    (DAVID ROSENBERG, GLOBE AND MAIL R.O.B., 06/12/2017)

    WHAT IS YOUR TAKE ON CANADIAN DOLLAR? I ALSO READ THAT IF NAFTA IS REJECTED, THE CANADIAN DOLLAR WILL BE ON A DOWN SLOPE AS WELL.

    Reply
    • JP–my technicals agree with Rosenbergs projections for $0.73 – 0.74. I’m willing to bet he is looking at the charts too–thats a support level.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

16 + fourteen =

Never miss another blog post!

Get the SmartBounce blog posts delivered directly to your inbox.

Topics

Topics

Recent Posts

bitcoin

Bitcoin & Dirty Harry

S&P

The NASDAQ has the greatest risk for correction at this time. 

spx vs 200 day

One sign that the market is overbought

ac

Airlines: A value play?

WTI

Past picks and looking forward

vix vs xlp

Consumer staples should be on your radar

cta-bg

Never Miss an Opportunity

Sign up for our newsletter to receive valuable insights that are available only to subscribers.   Beyond the blog – beyond the videos – get the inside scoop.

Scroll to Top