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A little under one year ago I wrote an article about one of the most successful long-term strategies for buying undervalued stocks, known as the “Small Dogs of the Dow.”
So what is the “Small Dogs of the Dow?” And how does it work?
First, you must understand the Dogs of the Dow. These are the 10 highest-yielding stocks in the Dow Jones Industrial Average. The strategy recommends buying these 10 high-yield Dow stocks at the beginning of each year, and rebalancing annually. That’s just one transaction per year…
The “Small Dogs of the Dow” offers a slight twist on this winning strategy. And the results require your attention.
One of the key attractions of using the conservative strategy is that it requires very little research or time. Simply take the five lowest-priced Dogs of the Dow stocks and invest an equal sum in each stock.
Every year, the whole process starts over. Oftentimes, most of the stocks will remain on the list from one year to the next, simplifying things from a taxation perspective (no gains or losses to report) and also helping to lower commission costs.
The Dogs and Small Dogs have beaten the performance of the Dow 30 Industrial Average in two of the last three years. But it’s the long-term record that has me convinced that this is a winning strategy.
And in a related note, at the beginning of 2014, my colleague and the founder of Wyatt Investment Research, Ian Wyatt, introduced an interesting portfolio of undervalued stocks based on the S&P 500. The concept was based on both the Dogs of the Dow and Small Dogs.
He started by looking at the 10 worst-performing S&P 500 stocks from one year, and examining their performance in the subsequent year. His data included the top 10 stocks in the S&P 500 that lost the greatest percentage of their value in a single calendar year (2009 – 2012) and their performance in the following calendar year (2010 – 2013).
In three of the last four years, the losers beat the S&P 500 index. In fact, they crushed it. In the year after their big decline, the average S&P 500 loser gained 32.8%. That’s a compelling short-term track record compared with the S&P 500 index, which increased an average of 13.5% annually over the same period of time.
And now Ian is on his way to bringing you more top picks of undervalued stocks in the market.
Every year he attends an exclusive conference known as the Value Investing Congress. And every year he consistently brings subscribers winning stock picks from “The Congress.”
Last year he brought subscribers the following two winning stocks, among others:
- Supremex (TSX: SXP) UP 12.6% in 6 days… 26.7% in a week… and 61.3% in less than a year.
- United Rentals (URI) UP 114% in 12 months.
If you’re interested in getting the inside scoop on the best value stocks, then I encourage you to click here now to learn more. I’m certain you will find value in his recommendations and discover some hidden gems.