Revisiting the “Dogs of the Dow”

Revisiting the “Dogs of the Dow” Strategy for 2013

Published Tue, Dec 11th, 2012   Louis Basenese, Chief Income Strategist

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Investing isn’t supposed to be easy.

Or at least not as easy as, say, buying an equal amount in each of the Dow’s 10 highest-yielding stocks on January 1… waiting 366 days… and then replacing that basket of stocks with the new set of highest yielders.

But, as it turns out, this simple strategy – known as the “Dogs of the Dow” – delivered impressive results in 2010 and 2011.

So impressive, in fact, that at the beginning of this year I took the time to evaluate the fundamentals for each of the 2012 Dogs to try and predict if the strategy would deliver solid results yet again.

My conclusion? They would.

So was I right?

With only a few weeks left in the year, let’s take the time today to find out. In the process, I’ll also share how you can check the performance any time you’re curious. Then we’ll take a look at the crop of Dow laggards contending for the opportunity to join the Dogs of 2013.

Simple and Beloved

Money manager Michael O’Higgins deserves credit for popularizing the Dogs of the Dow strategy in his bestselling book, Beating the Dow. And the famed Wharton Professor, Jeremy Siegel, added to the enthusiasm when he featured the strategy in his book, Stocks for the Long Run.

I can’t really say I blame investors for latching onto the strategy, either. Consider:

• It’s easy to implement and manage. Even a caveman can handle buying and selling stocks once every 366 days.
• It’s tax efficient. The strategy forces investors to hold stocks long enough to benefit from long-term capital gains tax rates. That’s no small feat, considering that nowadays, the average investor only holds a stock for about five months.
• It’s a conservative, income-oriented strategy by design. After all, it involves buying out-of-favor stocks (i.e. – value stocks) with above-average yields. And throngs of retirees and almost-retirees want conservative income.
• It works. Although past performance does not guarantee future results, we can’t ignore the track record. The Dogs outperformed the Dow and the S&P 500 in every decade except the 1930s and 1990s.

And lo and behold, it’s working again in 2012.

So far this year, the Dogs of the Dow are up 11.2% (including dividends), compared to a 10.7% return for the overall Dow.

Granted, the outperformance isn’t as strong as it was in past years. Take 2011, for example, when the Dogs rose 16.7% (including dividends), compared to an 8.4% rise for all 30 stocks in the Dow.

Still, there’s something to be said about earning this year’s returns with such a simple strategy.

If you ever want to check out the performance on your own, you can easily find the total return for the Dogs of the Dow and then compare it to the Dow’s.

The Perfect Dividend Strategy for 2013?

If dividend tax rates do spike higher in 2013, the Dogs of the Dow might be the perfect strategy to employ in an IRA account.

With that in mind, here’s a list of the companies that would make the list if the year ended today.

• AT&T (T)
• Verizon (VZ)
• Intel (INTC)
• DuPont (DD)
• Merck (MRK)I
• Hewlett-Packard (HPQ)
• McDonald’s (MCD)
• Microsoft (MSFT)
• Johnson & Johnson (JNJ)
• Pfizer (PFE)

Purists will argue that we need to wait until the last trading day of the year to compile the roster. But it’s unlikely to change very much. So it can’t hurt toget started doing our research, even if one or two companies drop out of the list.

Remember, the Dogs of the Dow are comprised of the highest-yielding stocks. But they likely earned this distinction because of poor stock price performance, not aggressive dividend hikes.

Case in point: Hewlett-Packard. Although the company raised its dividend by about 10%, it’s near the top of the list because share prices collapsed by about 50%.

And putting our hard-earned capital on the line based on dividend yield alone is a surefire way to get snared in the dividend yield trap.

Bottom line: Based on three consecutive years of solid performance, countless investors are bound to become devout followers of the Dogs of the Dow strategy in 2013. But please don’t be so naïve or lazy.

If we’re going to embrace the strategy in 2013, we need to do some more homework first. Specifically, we need to evaluate the Dogs based on multiple fundamental metrics, instead of just one. And I’ll do just that for you in a future column. So stay tuned.

Artificial Heart Provides An Extra 300 Years of Life

Published Tue, Dec 18th, 2012   Wall Street Daily Research

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Arizona-based SynCardia Systems is making life easier (and longer) for patients waiting for a heart transplant.

The company manufactures an artificial heart that replaces the organ’s two lower chambers that pump blood through the body. And it can keep patients alive longer while they wait for a donor heart to become available.

It’s portable, too. So patients can go home instead of staying at the hospital the whole time.

One New York City resident, Daquain Jenkins, was recently implanted with the technology. He received a real donor heart in August. But when it failed, doctors removed the heart and replaced it with SynCardia’s plastic alternative.

Dr. Anelechi Anyanwu, who performed Jenkins’ operation, says that while the technology is certainly adequate, the company understands that there’s a lot of room for improvement…

“In a way, it’s just a crude mechanical pump that just moves blood in one direction, and that’s where we are now,” he says. “But there are several developments going on, for example – to make smaller pumps, to have better power supplies and ultimately to have a pump [where] the whole mechanism is within the body.”

So it might not be the most sophisticated technology at this time. But even with the current version, the company has provided patients with 300 years of extra life so far.

And as the technology becomes more advanced, some heart surgeons believe that a permanent artificial heart may soon be an option for some patients.

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Dividend Yield - Stock, Capital, Investment: Dividend Weekly Stock Report 49/2012 | Free PDF Download

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I am trying to find something similar to this on the other candidate, however, thus far there is no history of his early development that is cohesive, chronologically detailed and verifiable.  If anyone has such a history, I would like to publish it along with Romney's .  Thanks !

  Bob
Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer 

HISTORY

1958
1963

The childhood narratives that inform the public’s perception of so many political figures — Abe Lincoln’s log cabin; George Washington’s cherry tree; JFK’s privileged youth — often assume the shape of myth, or at least of very-tall-tale, with the occasional, grudging nod to hard, historical facts. In the current race for the White House, the candidates’ upbringings are once again subjects of conversation — and of sometimes willfully fact-averse allegation from the spittle-flecked fringe. (“Obama’s a Kenyan!” “Romney’s a bigamist!”)

But then, there’s no reason at all why a candidate’s younger days should not be of interest to pundits and to the electorate as a whole. As Wordsworth long ago observed: “The child is father of the man.” Even if we wanted to escape our earlier selves, we can’t; consciously or unconsciously, for better or for worse, our earliest days inform our later years.

In other words: Wherever we go, it’s often where we come from that really matters.

In the 1950s and ’60s, LIFE magazine spent a lot of time with the parents and the kids — and, occasionally, the grandkids — of a well-known American family, the Romneys of Michigan. George W. Romney (1907 – 1995), was for eight years the president of American Motors Corporation and, from 1963 to 1969, served as the Republican governor of Michigan. (In the early ’60s he feuded, both privately and publicly, with GOP right-wingers like Barry Goldwater, whose deeply conservative views on pressing issues like the civil rights movement struck the moderate Romney as out of step with the times, and counter to what he saw as the party’s traditions.)

[See all of TIME.com's Mitt Romney coverage here.]

George Romney’s second son, Willard Mitt Romney, has followed the same path taken by the children of countless eminent families in the United States. Kennedy, Bush, Cuomo, Daley, Roosevelt — the list of family names associated with the presidency, Congress, governorships and mayoral seats around the country is tremendously long, with hardly anyone ever blinking an eye when a young man or woman decides to follow a family tradition and jump into the political ring.

That Mitt Romney did just that is no surprise; that he’s gotten as far as he has — especially in light of his Mormon faith, which for many Americans remains a something of a mystery — says as much about Romney’s ambition and his confidence as it does about his upbringing.

The photographs in this gallery, meanwhile — most of which never ran in LIFE — are hardly meant to capture the “real” Mitt Romney, or to somehow miraculously convey the essence of the Romney family as a whole. (Many of the pictures focus not on Mitt, but on his father, mother and other family members.) After all, the man’s own statements and actions as a public figure over the past two decades provide more than enough informational grist — for supporters and detractors, alike — while a few dozen pictures can never come close to distilling the full character of a large, complex, accomplished family.

To pretend or imply, then, that this is anything like a definitive look at Mitt Romney as a boy or a man would suggest an outsized faith in one’s powers rivaling the unmitigated chutzpah of, say, a politician.

Nevertheless, it remains clear that President Obama’s and Governor Romney’s backgrounds are part of the larger national conversation this fall. Electing a commander in chief solely on the basis of his experience of childhood would, of course, be absurd; but ignoring the public curiosity about where these men came from would be equally silly. Both candidates, after all, have proudly proclaimed that the people who raised them unquestionably shaped the way they see the world.

These photos, ultimately, offer one, small window through which to view the world in which Mitt Romney was raised.  His father (“lean, hard George Romney,” as LIFE put characterized the AMC chairman and president in 1958) is here, as are his mom and his siblings. Some of the pictures feel rather stagey; others seem genuinely informal and, as it were, intimate; all of them suggest a close-knit family defined, in large part, by its faith and by the pursuits of its dynamic patriarch. Taken as a whole, they’re one more piece to the puzzle that is the current Republican candidate for president. This is not an exhaustive portrait, but instead a glimpse into what it was sometimes like — at least when reporters and photographers were around — growing up Romney.

 http://life.time.com/history/mitt-romney-photos-from-the-gop-candidates-early-years/#ixzz29TVxiswg

Our communist C. I. C.

This Hollywood movie describes Obama's ideological father.  Even though he points out a strong physical resemblance, Frank Marshall Davis (loyal communist supporter of Stalin) was a teacher, mentor and ideological role model for Obama.  This is one of the top documentaries of 2012.  It will hold your interest from beginning to end.

                                 http://www.ourcommunistcommanderinchief.com/