Are These Dog Stocks For You?
The Dynamic Wealth Report
January 5, 2010
Once a year I write about the "Dogs of the Dow" investment strategy. It’s
a simple technique popularized a few years ago by book called Beating
the Dow. It was originally published in 1991 and seems to have taken on
a life of its own.
The book describes a simple strategy.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
Just buy the ten Dow stocks with the highest yields. Rebalance the
portfolio every January and you’ll laugh all the way to the bank.
According to the data, the Dogs of the Dow outperformed not only the
Dow Jones Industrial Average, but the S&P 500 as well. But that was
then… and this is now!
What a simple and easy way to profit.
Every year the strategy crops up again. Just the other day I read yet
another article about the top Dogs of the Dow stocks for 2010. I see a
few problems with the strategy, but I guess the publisher keeps printing
the book.
The problem is simple… The strategy doesn’t work.
In 2008, I warned everyone to stay away from this investment strategy…
and those who listened saved themselves huge money!
In 2009, I told everyone to stay away once again.
The 2009 results were slightly different. Seven of the ten Dogs of the
Dow stocks ended the year higher than they started. Does that mean we
should rush out and follow the strategy in 2010?
I say no. The gains seen by the various companies in 2009 weren’t earth
shattering. As a matter of fact, General Electric (GE),
AT&T (T) and
Verizon (VZ) all posted losses.
The total return from the Dogs of the Dow was 12.9% for the year.
The Dow itself returned 18.8%.
This year the Dogs of the Dow strategy includes an entirely new group
of companies… Leading the list is AT&T with a yield of 5.8%.
Verizon, DuPont (DD), Kraft (KFT) and
Merck (MRK) round out the top
five. Their dividend yields range from 4.1% to 5.7%.
The rest of the group is Chevron (CVX), McDonalds (MCD),
Pfizer (PFE),
Home Depot (HD) and Boeing (BA). Their yields range from 3.1% to 3.5%.
These are all large and well respected companies. You shouldn’t be
ashamed of holding any of these stocks in your portfolio. However, using
the group as a viable investment strategy just isn’t a smart thing to
do.
For example, I happen to think a few of these stocks will outperform the
others in the next few months and years…
Take Pfizer who is focused on the healthcare industry. Once all this
crazy government intervention gets sorted out, they are sure to thrive.
Another company I like is Home Depot. Despite the housing crisis, this
company is smelling like a rose. I see sales activity in the housing
market moving higher in the next few months and that’s sure to cause
sales activity to jump in Home Depot as well.
You couldn’t pay me to own either Boeing or AT&T.
Boeing is selling products made out of expensive commodities (like
aluminum)… this exposes them to cost over-runs. And their customers are
in one of the most regulated – and least profitable – industries in the
world. If you think it’s going to get easier to fly… or make money
flying, you’re crazy.
It’s a recipe for disaster.
And AT&T is no better. Their landline service is going the way of the
buggy whip. And the wireless service is getting their lunch eaten by the
competition… it won’t be long before they start asking for a government
bailout.
In my mind, the Dogs of the Dow strategy is pure bunk.
You’d be better off looking at the companies you’re investing in and
cherry picking the best and the brightest. You can capture big growth
and big dividends… and nothing is better than that!
It’s been quiet on the IPO front over the last few weeks. Investors are
on break and new deals are hard to fund. However, with the New Year,
bankers start salivating over the next big deal… and those might be the
IPOs of the Apollo Group or KKR. These are two of the largest private
equity shops in the world. If they go public, the deal values will be in
the billions.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map