Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to February 21, 2018.
The latest update on the performance of the respective categories demonstrates, in part, the quality of analysis that we provided on the Dogs of the Dow investment theory.
As shown in the breakdown of the categories under review, the Dogs of the Dow has provided no refuge for market declines while digging in at securing the worst performance out of all the groups.
Currently, the top three stocks, as part of our Dogs of the Dow, have lost –8.67% so far this year. This is compared to the second worst performing category which is the high p/e group. Keep in mind that it was our observation beforehand that the high p/e group had the following attributes:
"…adversely impact the volatility of the respective category." -December 12, 2017
"...gains and losses will be bigger by selecting high p/e, high p/b, and low dividend yield.” November 24, 2017
"…this higher risk should translate in to a larger percentage decline than the high dividend yield stocks." November 20, 2017
We have warned about the risks in selecting the high p/e group, in spite of the fact that it has actually beaten the DJIA and the Dogs of the Dow strategy from 1996 to 2017. What has come as a surprise to us is that the low yield and high p/b categories have held up so well in the face of a large decline in the overall DJIA. Even more fascinating is that the low yield stocks actually gained in value over the last month.
Finally, how does our “top three stocks” compare to the real Dogs of the Dow which selects the top ten highest yielding stocks? As expected, the less diversification the greater the volatility. The real Dogs of the Dow lost approximately –5.90% while our top three lost –8.67%. However, the real Dogs of the Dow, in spite of being more diversified, were exceeded by five out of the six categories that only used the top three stocks.
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