If you have been following me for any length of time, you know I spend a lot of time researching and modeling various investment ideas and strategies. It interesting, often entertaining, and it keeps me off the streets.
I probably kill off ten genius ideas that were disasters once the numbers were crunched for every idea that I find that works.
One that I found last year was loosely based on the original Dogs of the Dow theory put forth by Michael O’Higgins some years ago. One simply purchased the ten highest yield members of the Dow Jones Industrial Average Index and held them for a year in that strategy.
It has narrowly outperformed the Dow for the past 20 years. It is a decent contrarian large-cap dividend-focused approach.
When I was a broker, this was a really popular strategy to pitch. It was large well-known companies with high dividends and high trailing returns. It was an easy sell most of the time.
Most clients lost money because they quit using Dogs of the Dow the first time the strategy underperformed.
It is still a decent large-cap contrarian strategy that should outperform over time.
What I tested was the idea of buying the five lowest price profitable companies in the S&P 500. I rebalanced the strategy monthly to make sure any companies that turned unprofitable on a trailing 12-month basis were sold pretty quickly.
I also limited the stock to those headquartered in the United Ste sot lower political and currency risk.
Even with the quicker rebalance, turnover was reasonably modest.
Over 20 years, this simple strategy outperforms the S&P by a wide margin $10,000 invested in the low price five is now worth about $249,000 compared to just about $45,000 if invested in the index.
It is not perfect. ...
