Dogs of the Dow: Part 2

To refresh, the Dogs of the Dow investment strategy is based on the work of Michael O’Higgins’ book Beating the Dow.  This approach is by no means the first attempt at a mechanized approach to investing in the Dow Jones Industrial Average.  The June 1951 Journal of Finance article by Henry S. Scheider titled “Two Formula Methods for Choosing Common Stocks” was the earliest system that we could find which covers a similar investment strategy as Dogs of the Dow from 1914 to 1948.  The results give mixed picture on he data presented (we’ll have to save that for another day.)

When looking at the website Dogs of the Dow, we find a complete list of annual performance of stocks and their performance from 1996 to the present.  In our posting of Part 1, we showed how the Dogs of the Dow performed from November 4, 2016 to November 15, 2017.  We also compare the performance of the highest yielding stocks to price-to-earnings, price-to-book and lowest dividend yield.  The results confirmed what we’ve seen in the performance reviews of the U.S. Dividend Watch Lists.

In an attempt to better understand the data and avoid the bias that goes along with data that we find appealing to our senses, we’ve generated a breakdown of the Dogs of the Dow  for 2017 and compared it to the 2017 year-to-date YTD performance of the various fundamental metrics to see what would have generated higher returns, if at all.  In addition, we’ve included the top three and top ten (traditional Dogs) to see if there is any material difference in performance over the covered period in question.

In Part 3 of this series on the Dogs of the Dow, we will see how the stocks perform in the year 2008.  Thus giving us a more complete picture of the risks associated with using a mechanical investment strategy.

Dogs of the Dow: Part 1

Based on the work of TradingTips.com, the following are the Dogs of the Dow (ten highest dividend yielding stocks) from November 4, 2016 and their performance as of November 15, 2017 (intraday):

symbol name total return
PFE Pfizer Inc. 23.93%
CSCO Cisco Systems, Inc. 17.63%
KO The Coca-Cola Company 16.25%
VZ Verizon Communications Inc. -1.36%
MRK Merck & Co., Inc. -3.73%
XOM Exxon Mobil Corporation 2.01%
CAT Caterpillar Inc. 68.31%
CVX Chevron Corporation 15.81%
BA The Boeing Company 95.67%
IBM IBM 1.38%
Average % change 23.59%

TradingTips.com also published a subset of the above list called the Small Dogs. (five lowest priced of the above 10 stocks). Those stocks from November 4, 2016 to November 15, 2017 (intraday)  have had the following performance:

symbol name total return
PFE Pfizer Inc. 23.93%
CSCO Cisco Systems, Inc. 17.63%
KO The Coca-Cola Company 16.25%
VZ Verizon Communications Inc. -1.36%
MRK Merck & Co., Inc. -3.73%
Average % change 10.54%

Below, we have generated the average performance of the top 3 Dow Jones Industrial Average (DJIA) stocks in the listed categories From November 4, 2016 to November 15, 2017 (intraday).  The results show a considerable contradiction to the conventional wisdom on this topic.

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Transaction Alert

On November 13, 2017, we executed the following transactions: Continue reading

Performance Review: November 13, 2009

Below is the 8-year performance of our Dividend Watch List from November 13, 2009 to November 14, 2017 as compared to the Dow Jones Industrial Average.

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Bitcoin: November 2017

On October 13, 2017, when Bitcoin was quoted at $5,640, we said the following:

“We are throwing in the towel on taking the $7,166.29 [our upside target] figure, and any future upside targets that go uncorrected to the tune of –50% or more, as something we can feel confident is worth the speculation.”

Our upside target of $7,166.29 has come and gone.  Now comes our updated downside targets for those mindful of the risks.