'Dogs of the Dow'

[bebbitfaux]

Am a novice and have come across this 'Dogs of the Dow' website - the one where you buy the top 10 dow shares (highest dividend) for a year then sell the lot and buy again. The strategy claims 20% avg annual return.

Has anyone done this one? It seems simple so therefore attractive to me as a beginner as a place to start, but would like to get others feedback first - Also i have little (£1000) to invest so this may also not be the best place to start for that reason - any feedback?

Cheers

 

[cd173]

Hi there

I'm not familar with this strategy. However there is the one step plan from the investors chronicle! On the 1st Oct you buy the worst 10 performing stocks of the S&P 500 over the last 3 years. Then come Sept 30ish the following year you sell and buy the next 10 worst of the last 3 years etc. Over the last 8 years it's generated 176% return per year.

Not bad!!

C

 

[ChartMan]

It's a very simple, statistically based long term buy and hold strategy that requires a couple of hours work once a year. Suits some, others not. The returns seem to be reasonable, and for the effort put in, exceptional.

 

[MCGF]

It has produced about 18% returns over last 30 years per annum on average, but that doesnt really guarantee itll work into the future does it tho?

 

[MCGF]

Plus this method gets quite a lot of publicity now-surely if too many people are using this method then it will render it useless as share prices rocket up in those companies that it will affect-or am i wrong?

 

[FTSE Beater]

Hi MCGF

I don't think so. The reason is that it might produce a bit of extra buying pressure on the first day. Price will then pull-back as the short-termers sell for a profit and bring price back to where it started. The ones who are in for the long-term won't care though as their not looking to sell for a year.

What happens after that is probably fundamental based buying

Just my thoughts

 

[MCGF]

Hmm.....i think ur right

Mind u there must be some sort of potential then for other profits to be made tho due to that sudden increase in volume of shares bought in those companies?

 

[mias]

To me as a newbie, this is very interesting...Volume-lots or lack of.
Isn't this a double edged sword though?
Imagine, 1st of Oct, 1000 people each buy 1000 shares each.
FTSE Beater (Short termers jump in for a quick buck and then it stabilizes and it's over to fundamentals for the rest of the year)

So eventually we all get to the 30th of Sept and guess what, all of a sudden the market gets flooded with 1 000 000 shares for sale...

2 Questions.
1) who will buy all these shares and what an affect is this going to have on the price-I'm looking at the floor here?
2) Did the company float so many shares in the 1st place?

 

[Austin_Clone]

If you're buying Dow stocks, these are the largest U.S. stocks with millions and millions of shares outstanding and very high daily volume. I doubt the Dogs of the Dow buyers/sellers will have much of an impact.

Also, there may be market moving news (interest rate cut/raise, etc.) on the day of purchase/sales that affects the price more than "Dogs of the Dow" participants ever could.

As far as who do you sell it to? Most are NYSE stocks so you'd be selling to the specialist in that stock who is required to be the buyer of last resort. That is, if the market is tanking and there's no buyers, he/she has to buy - but unfortunately probably not at a price at which you're going to be happy to sell.

 

[jslee]

Dogs of the Dow is a 50/50 trading strategy. The divvies might be nice but the growth will be crap. I think this technique has worked only twice in the last 10 years.

Jane

 

[mias]

a well, back to the drawing board...

 

[Austin_Clone]

Mias,

The Motley Fool has their own version of the Dogs of the Dow you might want to look at. There has been some success with these stocks as they are "undervalued" compared to other stocks on a dividend to price ratio.

Another strategy is to buy the stocks that are dropped from the DOW. Sears, (S) a U.S. retailer is a good example of a stock that doubled in price after being dropped (though they're struggling a bit now).

I wouldn't give up just yet if you're interested in this strategy. As always, it takes a bit of research and digging to find the truth. Don't take my word or anyone else's. Find out for yourself.

 

[mias]

Hi Austin,
Appreciate the advise, I'm far from giving up, it's a case of different courese for different horses I suppose.

I'm looking into a few ideas,
it's just the time....

 

[Treve]

Hi there

On the 1st Oct you buy the worst 10 performing stocks of the S&P 500 over the last 3 years. Then come Sept 30ish the following year you sell and buy the next 10 worst of the last 3 years etc. Over the last 8 years it's generated 176% return per year.

Not bad!!

C

Seems like there is no much subject about buy and hold strategies like the one above? Is anyone investing this way? Are there any websites offering similar strategies, or similar threads on this forum?