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By Cal Mankowski
NEW YORK (Reuters) - A contrarian investment strategy known as "Dogs of the Dow" has been a laggard this year, pulled down by Citigroup Inc
The strategy involves buying the 10-highest yielding stocks in the Dow Jones Industrial Average, with an equal amount invested in each, and holding them for one year.
Over the long haul the strategy has beat the 30-stock Dow Jones Industrial Average .DJI with help from the high yields and the ability of long-established companies to bounce back from temporary problems.
"Citigroup did not help the portfolio at all this year," said Neil Hennessy, president and portfolio manager of Hennessy Advisors Inc (HNNA.OB: Quote, Profile, Research) in Novato, California.
Citigroup's shares have lost about 47 percent in 2007 as write-offs hurt earnings and brokers downgraded the stock.
Hennessy notes that General Motors Corp (GM.N: Quote, Profile, Research) has also been a disappointment this year, losing 16 percent.
Based on their current yields, both Citigroup and GM are certain to stay Dogs when the strategy is re-balanced at the end of the year.
In fact, only one substitution is likely at the start of 2008. After a 35 percent rise in 2007, Merck & Co (MRK.N: Quote, Profile, Research) is yielding about 2.6 percent and no longer makes the cut based on yield. Home Depot Inc (HD.N: Quote, Profile, Research), which fell about 34 percent, is now yielding over 3 percent and seems a safe bet to replace Merck in the Dogs.
http://www.reuters.com/article/busin...BrandChannel=0
http://www.dogsofthedow.com/
NEW YORK (Reuters) - A contrarian investment strategy known as "Dogs of the Dow" has been a laggard this year, pulled down by Citigroup Inc
The strategy involves buying the 10-highest yielding stocks in the Dow Jones Industrial Average, with an equal amount invested in each, and holding them for one year.
Over the long haul the strategy has beat the 30-stock Dow Jones Industrial Average .DJI with help from the high yields and the ability of long-established companies to bounce back from temporary problems.
"Citigroup did not help the portfolio at all this year," said Neil Hennessy, president and portfolio manager of Hennessy Advisors Inc (HNNA.OB: Quote, Profile, Research) in Novato, California.
Citigroup's shares have lost about 47 percent in 2007 as write-offs hurt earnings and brokers downgraded the stock.
Hennessy notes that General Motors Corp (GM.N: Quote, Profile, Research) has also been a disappointment this year, losing 16 percent.
Based on their current yields, both Citigroup and GM are certain to stay Dogs when the strategy is re-balanced at the end of the year.
In fact, only one substitution is likely at the start of 2008. After a 35 percent rise in 2007, Merck & Co (MRK.N: Quote, Profile, Research) is yielding about 2.6 percent and no longer makes the cut based on yield. Home Depot Inc (HD.N: Quote, Profile, Research), which fell about 34 percent, is now yielding over 3 percent and seems a safe bet to replace Merck in the Dogs.
http://www.reuters.com/article/busin...BrandChannel=0
http://www.dogsofthedow.com/