Conference nyoss1::market_investing

The 26-Dec-1994 Barron's has another article about the Dogs of the Dow
strategy (pp.14-15).

Total return for 1994 was 4.1%, which beat all the major market averages.

Here are stats for the past several years:


   Year	       Dow Dogs	 	 DJIA	       S&P 500
   ----------------------------------------------------
   1983		38.73%		25.65%		22.51%
   1984		 7.64		 1.08		 6.27
   1985		29.48		32.78		32.16

   1986		32.08		26.92		18.47
   1987		 0.61		 6.02		 5.23
   1988         26.14		15.95		16.81

   1989		26.53		31.71		31.49
   1990		-7.58		-0.40		-3.17
   1991	        34.25		23.91		30.00

   1992		 7.86		 7.44		 7.60
   1993		27.30		16.80		10.10
   1994*	 4.10		 4.00		 1.30
   ----------------------------------------------------
      * Through 12/22

    Of course you have to remember to account for taxes and dividends 
    when comparing against an index that can be held without paying
    taxes on gains. Figure taxes are 1/3 of the gains on that part 
    of the portfolio that turns over, which is probably half or less.
    Transaction costs have to be counted, too.
    
    Of course you don't have to rebalance your portfolio every year 
    nor do you have to rebalance your portfolio at year-end. I wonder if
    there's an optimal day of year to do the rejuggling. Or if changing
    every 17 months works better. Anybody have daily DJIA component data 
    going back 10 years or more?
    
    I think this is a good method if you have enough cash, say $30k+
    
      John

John,

Sure, a third of dividends and capital gains will go to Uncle to pay for empty
VA hospitals, tobacco subsidies, strategic stockpiles of mohair, and other
essentials, but the same of true of any strategy using periodic adjustments, so
it's a wash when making comparisons.

Transaction costs can be held to a minimum by buying/selling shares through
dividend reinvestment plans (once you have an initial share or two).  DRPs are a
nice way to avoid paying for your broker's daughter's wedding in Palm Beach.  I
think nearly all the DJIA stocks offer them.

DRPs also allow the small investor to buy odd amounts, some as little as $25 at
a time, as long as you are already a shareholder, so you don't need $30k+ to get
started.  Exxon and Texaco, two perennial Dogs, let you buy initial shares
directly.

Jerry

>                    -< Taxes, transactions, all a wash... >-
> essentials, but the same of true of any strategy using periodic adjustments, so
> it's a wash when making comparisons.
    
    Yes, that's true assuming the underlying instruments pay approximately
    the same in dividends.
    
    BUT the previous comparisons showed DOGS vs. DJIA vs. S&P500.
    The latter two indexes can be purchased via mutual funds and held
    indefinitely, and thus do not incur periodic transaction costs,
    especially for transactions that generate taxable events.
    
    Comparisons against indexes must include taxed dividend return and
    UNTAXED capital gains, versus the AFTER-TAX return of the trading
    strategy. You want to model what happens in real life, and it
    inevitably gets much dirtier than the numbers that come in the paper.
    
      John
    
    p.s., next "great strategy" will be "Dogs of the Utility average".

    PaineWebber has a fund set up that uses this strategy. If you are
    intersested in more details, contact me and I can give you an 
    800 number for the broker I use.
    
    ASABET::MOLLIN or Dick Mollin @MLO
    
    Dick

    A.G. Edwards has a special commission rate for the purchase of
    a single share:  16 percent of stock price, plus $3.00.
    Makes it inexpensive to get started with DRPs, plus it's quick.
    
    The two AGE brokers I called (Wellesley, MA and Worcester, MA)
    did not know about the special rate.  Each thought the $25 minimum
    would apply.  The Wellesely broker called up the commission on a
    hypothetical trade of one share at $10.00 and was surprised to see
    the commission of $1.60 (plus $3 transaction fee). 
    
    -Jerry

   Not a bad year for the Dow Dogs strategy.

   As Andrew Bary pointed out in "By a Nose" (Barron's, 18-Dec-1995),
   as of Dec. 14th the Dogs were leading the DJIA and the S&P 500
   by a small percentage.  Also, the Dogs were doing better than
   over 90% of all general equity funds.

   Here are results for 1995.  In this analysis I've assumed that
   each company's dividend is immediately reinvested at the stock
   price used by that company's dividend reinvestment plan.
   Figures do not take taxes or commissions into account.

                          Dividends    1994      1995      Total  
   Symb  Issue            Paid/share   Price     Price     Return  
   ---------------------------------------------------------------
   S     Sears            1.79*       $22.875*  $39.000    71.5%
   MO    PhilMorris       3.49**       57.500    90.250    64.6
   JPM   MorganJP         3.00         56.125    80.250    49.6
   EK    EKodak           1.60         47.750    67.000    44.5
   XON   Exxon            3.00         60.750    80.500    39.4
   TX    Texaco           3.20         59.875    78.500    37.3
   DD    DuPont           2.08         56.125    69.875    28.5
   MMM   MinnMinMfg       1.88         53.375    66.375    28.3
   CHV   Chevron          2.00**       44.625    52.375    22.1
   Z     Woolworth        0.15***      15.000    13.000   -12.6
   ---------------------------------------------------------------
                                                 Average:  37.3%

     * 1994 price for Sears is adjusted for Allstate spin-off.
       Analysis assumes ALL was held with ALL dividends reinvested
       in additional ALL shares, and year-end ALL price of $41.125.
    ** Dividend increased during 1995.
   *** Dividend suspended during 1995.  
   -------------------------------------------------------------

   Hmmm, 37.3% return beats the Dow (33.5%), the S&P 500 (34.1%),
   and 90% of general equity funds.

   So, who still needs a high-priced money manager?

   -Jerry

   And they're off...
    
   Here are the Dow Dogs for 1996 and their stats at 1995's close.
   There is little turnover: eight 1995 Dogs are on the 1996 list
   (Int'l Paper and General Electric replace Sears and Woolworth).
   Choices are the same as in the 18-Dec-1995 Barron's article except
   that Eastman Kodak overtook General Motors for the #10 spot.

                          Div                    Yield    Price
   Symb  Issue            Rate   Price   Yield    Rank     Rank
   -------------------------------------------------------------
   MO    PhilMorris       4.00   90.250  4.432       1       
   TX    Texaco           3.20   78.500  4.076       2       
   JPM   MorganJP         3.24   80.250  4.037       3       
   CHV   Chevron          2.00   52.375  3.819       4        2
   XON   Exxon            3.00   80.500  3.727       5      
   DD    DuPont           2.08   69.875  2.977       6        5
   MMM   MinnMinMfg       1.88   66.375  2.832       7        3
   IP    Int'l Paper      1.00   37.875  2.640       8        1
   GE    General Electric 1.84   72.000  2.556       9
   EK    EKodak           1.60   67.000  2.388      10        4
   -------------------------------------------------------------

   All these companies offer dividend reinvestment plans that
   allow optional cash purchases, so you can avoid nearly all
   brokerage expense.  Exxon and Texaco even let you buy your
   initial shares directly ($250.00 minimum).

   -Jerry

    Hi,
    
    I should probably do my own research, but do
    you have a phone number for Texaco?
    
    Bart

    Bart,
    
    The number for Texaco is 800-283-9785.
    
    BTW, Exxon's is 800-252-1800.
    
    Here's a good Web site with DRP info on hundreds of companies:
    
       http://www.cs.cmu.edu/afs/cs.cmu.edu/user/jdg/www/drip.html
    
    It lists phone numbers, shares needed to join, optional investment
    amounts (min/max), etc.
    
    Happy investing,
    -Jerry
    

    Hennessy Balanced Fund follows the Dogs of the Dow strategy, sort of.
    It keeps half its holdings in 1-year Treasury issues,  and the other
    half evenly divided among the ten Dow Dogs with annual rebalancing.
    I believe this fund is just starting, as the prospectus is dated
    March 6, 1996.
    
    Minimum initial investment is $1000.  Minimum additions are $100.
    Call 800-966-4354 for fund information.
    
    

	Using the starting numbers from .8 here's what I get for how
	the dogs of the dow are doing so far this year.  Not bad
	given we are only a third into the year, but I'm not sure
	if it's beating the dow as a whole (I know for sure it's not
	beating alot of the other composites :-).

Symb LastTrad	Start 	Change	%Change
  MO  89.5    	90.25	- 0.75	- 0.8%
  TX  86.875  	78.5	+ 8.375	+10.7
 JPM  84.125  	80.25	+ 3.875	+ 4.8%
 CHV  58.5    	52.375	+ 6.125	+11.7%
 XON  85.875  	80.5	+ 5.375	+ 6.7%
  DD  79.875  	69.875	+10	+ 14.3%
 MMM  66      	66.375	- 0.375	- 0.6%
  IP  40.625  	37.875	+ 2.75	+ 7.3%
  GE  77.625  	72	+ 5.625	+ 7.8%
  EK  76.75  	67	+ 9.75	+14.6%

	Which if I'm correct in averaging the %'s to get the average % change
	of the group assuming you invested the same amount of cash in each
	is 7.66% return for the group (not counting dividends).  I think that
	is below the gain in the DJIA as a whole for the year to date?

Symb LastTrad  Change %Chg    Bid      Ask    DayLow   DayHigh  52Wlow   52WHigh
  MO  89.5    +0.25   +0.3   V:  1445400      88.75    90.25    67.75   104.625
  TX  86.875  +1.5    +1.8   V:   534900      85.25    87       62.875   88.75
 JPM  84.125  -0.25   -0.3   V:   370300      83.5     84.25    65.25    85.75
 CHV  58.5    +0.625  +1.1   V:   764800      57.875   58.875   46       59
 XON  85.875  +1.375  +1.6   V:  1204800      84.25    85.875   68.125   86
  DD  79.875  +0.5    +0.6   V:  1582500      78.625   80.375   60.125   84.875
 MMM  66      +0.875  +1.3   V:   491200      65       66.125   53.875   69.875
  IP  40.625  +0.875  +2.2   V:  1890900      39.5     40.75    34.125   45.625
  GE  77.625  -0.375  -0.5   V:  1036500      77.5     78.5     55.5     80.625
  EK  76.75   +0.75   +1     V:   469100      75.5     76.75    55.625   77.875

    The July 15, 1996 issue of Barron's has a short article by Andrew Bary
    on YTD performance of the Dow Dogs.  Here are comparative returns
    through the end of June (with reinvested dividends):
    
        Dow Dogs                        11.5%
        DJIA                            11.8
        S&P 500                         10.1
        Average U.S. equity fund        10.8
        Average growth & income fund     9.2
        Average equity-income fund       7.7
    
    The Dogs have held up well since the start of July, losing less than 0.5%
    (through July 11) vs. a 3% loss for the DJIA, according to John Downes,
    editor of "Beating the Dow" newsletter.
    
    Guess those juicy dividends help protect on the downside.
    
    -Jerry