Below are the price projections based on analyst earnings estimates for the Dow Jones Industrial Average as of October 22, 2016. These estimates project the price change for the respective stocks over the next 12 months and the risk profiles associated with the estimates. We also propose a variation of the “Dogs of the Dow” theme for future analysis.
In our view, the real “Dogs of the Dow” are those stocks that the analysts project will experience a decline in earnings over the coming year, which should put further downside pressure on the stock price. However, we suspect that our “dogs” (CVX, UTX, AXP, WMT, TRV, DIS, JPM, VZ, IBM & MMM) will produce surprising numbers as compared to the way the conventional “dogs” (BA, KO, MCD, CSCO, XOM, CAT, IBM, PFE, CVX, VZ) would perform as charted below.
| Dogs of the Dow | est. % change | NLO dogs | est. % change | |
| BA | 44.04% | CVX | -80.01% | |
| KO | 12.20% | UTX | -20.96% | |
| MCD | 13.02% | AXP | -16.12% | |
| CSCO | 11.86% | AAPL | -10.89% | |
| XOM | 31.06% | WMT | -8.95% | |
| CAT | 53.99% | TRV | -7.19% | |
| IBM | 5.33% | DIS | 1.37% | |
| PFE | 107.46% | JPM | 1.56% | |
| CVX | -80.01% | VZ | 2.86% | |
| VZ | 2.86% | IBM | 5.33% | |
| 20.18% | Avg. est. chg | -13.30% |
The Takeaway
There are two things that we’ll be looking for, how does the three categories (high risk, average risk and high expectation) perform. We believe that the average category provides the best return overall with the high risk group offering exceptional gains for aggressive investors who have a longer time horizon (3-7 years).
Also, how does the comparison of our “dogs” compare to the conventional “dogs”. We’ll revisit this matter in a year to see if there is any validity to our claims. Our expectation is that the NLO “dogs” will exceed the return of –13.30% while the conventional “dogs” should underperform the +20.18% expected return. It isn’t saying much to exceed the return of –13.30% however we believe that the return for our group will exceed the return of the conventional group, whatever that return will ultimately be.