Meet The Dow Dogs For 2020

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Michael B. O'Higgins, an immigrant from Venezuela earned his B.S. in Economics from Siena College in 1970 and entered the investment world in 1971 as a stockbroker trainee for Spencer Trask & Company. He eventually went on to start his own money management firm in early 1978.

Michael is considered one of the top money managers in the United States and has been featured in such magazines as Barron’s, Forbes, Money Magazine, The Wall Street Journal, etc. But what Michael is most known for his best-selling investment classic: Beating The Dow, which later turned into "Dogs of the Dow" investment strategy.

It involves buying the ten stocks with the highest yields among the thirty in the Dow Jones Industrial Average at the end of each year then holding them until the end of the next year. Since 2010, in the recovery from the recession, the dogs have outperformed the Dow Average in every year but two, and the strategy beats the Dow and S&P 500 indices over 3,5,10, and 20-year average total returns.

According to Hartford Funds, 82% of the total return of the S&P 500 since 1960 is attributable to reinvested dividends. That is a staggering number and a testament to the power of compounding, and it is not lost on big pension and investment funds. They rely on yield to meet their obligations and keep building their capital, but yield has become hard to find.

That is the key as to why the “dogs” strategy could do even better than its already impressive average outperformance over the next couple of years.

Source

Here is the list of in what's shaping up to be the Dogs of the Dow for 2020:

Dow Inc. (NYSE: DOW), 5.1%
Exxon Mobil Corp. (NYSE: XOM), 4.9%
International Business Machines Corp. (NYSE: IBM), 4.8%
Verizon Communications Inc. (NYSE: VZ), 4.0%
Chevron Corp. (NYSE: CVX), 4.0%
Pfizer Inc. (NYSE: PFE), 3.7%
3M Co. (NYSE: MMM), 3.4%
Walgreens Boots Alliance Inc. (NASDAQ: WBA), 3.1%
Cisco Systems Inc. (NASDAQ: CSCO), 3.1%
Coca-Cola Co. (NYSE: KO), 3.0%

The stock that intrigues me the most is Exon Mobil . Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States, Canada/Other Americas, Europe, Africa, Asia, and Australia/Oceania. While the S&P 500 is up 25% YTD, Exxon Mobil is up only 2%. Part of the issue is oil prices are depressed, oil shale players are barely making money and the US-China trade war has put a damper on economic growth around the world.

But according to the IEA estimates, oil demand will continue rising sharply for at least another five years and then plateau around 2030. And according to Bank of America, they have selected Exxon Mobil as its top U.S. oil major pick for 2020, saying the shares could gain 50% as production continues ramping up and growth accelerates.

The other company on the list that intrigues me is IBM. The 100-plus-year-old computer-services giant has been trying to reinvent itself for years to say young and relevant and last year bought Red Hat, Inc. for $34 billion. The price tag IBM paid made the purchase the world’s second-largest technology deal ever in an effort to compete right away in the cloud computing service business against the two leaders, Amazon and Microsoft who control about 50% of the market collectively.

I believe Blockchain technology will revolutionize how we live, but will disrupt all business industries even more. For example, companies will a secure way of transacting with consumers directly, without a middle party, saving billions in the process. So what really intrigues me about IBM is it's one of the companies leading the charge in Blockchain technology with over 20 patents.

But I don't think the investment world is ready just yet to invest in IBM. Nevertheless, the level to be aware of are the monthly zones.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.



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