Dogs of the Dow | Beating The Dow with Stocks | Stock Pick

The Dow Dogs are selected from the 30 major companies that make up the Blue Chip stocks in the DJIA. These companies are big enough, eternal enough and have proven periods of up and down cycles to support the Dow Dogs implementation.

To make things easy, I posted the closing stock figures for April 22, 2008. You don't have to check figures every day, but once a month to once every quarter is sufficient to make changes.

Everything that follows shows figures and picks for 2008. I have added a link above for 2009 for more current picks.

April 22, 2008

Symbol

Company

Stock Price

Yield

C

Citigroup

$25.11

5.10%

PFE

Pfizer

$20.47

6.25%

GM

General Motors

$20.13

4.97%

MO

Altria

$22.10

5.25%

VZ

Verizon

$36.03

4.77%

T

AT&T

$37.51

4.27%

DD

DuPont

$52.02

3.15%

JPM

JP Morgan Chase

$45.76

3.32%

GE

General Electric

$32.69

3.79%

HD

Home Depot

$28.68

3.14%

MRK

Merck

$39.76

3.82%

MCD

McDonald\'s

$58.30

2.57%

JNJ

Johnson & Johnson

$66.51

2.50%

MMM

Minnesota Mining & Manufacturing

$82.90

2.41%

KO

Coca-Cola

$60.11

2.53%

CAT

Caterpillar

$85.28

1.69%

PG

Procter & Gamble

$67.17

2.38%

AA

Alcoa

$36.26

1.88%

WMT

Wal-Mart

$56.31

1.69%

BA

Boeing

$78.66

2.03%

INTC

Intel

$22.55

2.48%

UTX

United Technologies

$72.51

1.77%

HON

Honeywell

$60.99

1.80%

XOM

ExxonMobil

$94.00

1.49%

IBM

International Business Machines

$124.40

1.29%

AXP

American Express

$45.53

1.58%

AIG

American International Group

$48.23

1.66%

MSFT

Microsoft

$30.00

1.47%

DIS

Disney

$31.33

1.12%

HPQ

Hewlett-Packard

$48.18

0.66%

This sample uses the Dow Dogs from April 22, 2008. For the current Dow Dogs, please continue to Current Dow Dogs Picks.

Step 1: Select the 10 highest yields for the table above. These stocks are the ones that will have the best returns if the stock does nothing, and more importantly, they indicate companies that show the best potential for success. I have selected the highest *11* stock yields, because the last 2 are off by .01% and since share price makes a difference, I thought it was relevant.

Step 2: Select the least expensive stocks from the highest yielders.

Step 1 yields the following 11 stocks.

Symbol

Company

Stock Price

Yield

C

Citigroup

$25.11

5.10%

PFE

Pfizer

$20.47

6.25%

GM

General Motors

$20.13

4.97%

MO

Altria

$22.10

5.25%

VZ

Verizon

$36.03

4.77%

T

AT&T

$37.51

4.27%

DD

DuPont

$52.02

3.15%

JPM

JP Morgan Chase

$45.76

3.32%

GE

General Electric

$32.69

3.79%

HD

Home Depot

$28.68

3.14%

MRK

Merck

$39.76

3.82%

(Table format from SquidUtils developed by thefluffanutta).

Of these, pick the 5 lowest priced stocks.

Of these, they are Citigroup ($25.11), Pfizer ($20.47), General Motors ($20.13), (Altria $22.10) and Home Depot ($28.68). Note that Home Depot is the 11th stock based on the step 1 criteria, but it is the 5th cheapest of the 11. If you were to pick the 5th cheapest stock from the actual 10, you would replace Home Depot with General Electric ($32.69). GE has a much higher yield and qualifies with a strict select 10 from step 1, but Home Depot has a lower stock price, allowing more shares in a less strict select 10 from step 1. Either is a rational pick.

Under the easiest Dow Dogs system, the 5 stocks you would buy at the time these numbers came out would be:

C
PFE
MO
GM
HD or GE

Disclaimer: There is no guarantee when picking stocks. I present this system as one potential way to pick stocks. Despite the track record of this system, past results in no way determine future results. Changes to which stocks to by don't necessarily mean that you would sell your old stocks. It simply means that the opportunity to buy new stocks has arisen.

Notice: These are not the current Dow Dog picks. See below.

To reflect the changing views of the market, I will update Dow Dogs picks more regularly.

Changes reflect what are the best picks by the Dow Dogs simple method at the current time. It is not necessarily a plan to sell existing shares, only to buy more shares that are deemed the best opportunity.

Note: Due to the craziness of the 2008 market, I'm still selecting stocks based on the program, but results will probably still be down for the year based on a variety of factors.

Symbol

Company

Price

Yield

T

AT&T

24.79

6.78%

VZ

Verizon

28.55

6.65%

DD

DuPont

36.66

4.47%

PFE

Pfizer

14.64

4.92%

MRK

Merck

35.93

4.23%

KFT

Kraft

29.33

3.95%

CVX

Chevron

70.06

4.11%

MCD

McDonald's

67.42

3.26%

KO

Coca-Cola

50.26

3.50%

JNJ

Johnson & Johnson

58.70

3.68%

Michael O'Higgins makes a big deal about the Penultimate Profit Prospect (PPP). The PPP is the second-cheapest high yield stock selected in Step 2. In the original sample at the top, this would be Pfizer (PFE) at $20.47 and 6.25% Yield.

Mr. O'Higgins goes on to show in his book Beating the Dow, the results he has had with the PPP.

He has seen profits with all ten high yielders, the 5 high yield/low pricers and the PPP from 1973 through 1998. Although the ten high yielders are impressive with a return of 7264%(!), and the 5 stock system is made clear with a return of 13279%(!!), the PPP had a staggering return of 43177%(!!!) over 26 years.

Does this mean that you should only invest in the PPP? No. You cannot put all your eggs in one basket, and O'Higgins doesn't suggest it. The point is that there is something special about this position, and having it in your portfolio will help, and perhaps shore up worse picks in the group of 5.

Remember, this system doesn't guarantee results, it just selects them.