After four years of tracking the Dogs of the Dow strategy, 2017 proved to be the first year that the strategy underperformed the overall market.
The concept behind the Dogs of the Dow, is that at the beginning of each year, an investor would buy an equal dollar weighted amount of the top ten yielding stocks in the Dow Jones, and hold those positions through the course of the year with the anticipation of outpacing the broader market.
The reasoning is that the yields on each stock are higher than they should be, because the security itself is trading below their fair market value. Since the stocks are below their fair value, the idea is that through the course of the year, dividend investors will come into the stocks in hunt for the best yield, and the stocks themselves should enjoy bigger gains in an up market, and smaller losses if the market trades lower.
We will keep a watch on this year’s group through the course of the year and keep you posted on how the strategy is holding up, and if it can once again show the success it did during the first three years we surveyed the group.
Here are this year’s Dogs of the Dow.