A Different Version of “Dogs of the Dow?” (Preview)

By Lawrence G. McMillan

The normal version of “Dogs of the Dow” is a trading/dividend strategy in which one buys the 5 or 6 worst performing Dow stocks of the 30 Industrials at the end of one year and holds them for one year.  Then the process is repeated the next year.  It has had some great years and some not-so-great.  Personally, I’ve never traded it, for that holding period is just too long for me – considering that some of those stocks are in steep downtrends.  The only reason I bring this up is that once in a while Dow-Jones Corp. decides to boot a stock out of the 30 industrials and replace it with a shiny new “hot” stock.  That is a real “dog” of the Dow, and they want to get rid of it.

That happened this week, as Walgreen Boots Alliance (WBA) was dropped from the Dow Jones 30 Industrials on Monday, in favor of Amazon (AMZN). The Dow doesn’t change much over the years. This is only the seventh change since 2015 – and the first since August of 2020. Ironically, in 2018 General Electric (GE) was dropped and Walgreen was added!  Many times, the stock being dropped from the Dow rallies shortly thereafter and sometimes rallies a lot.

The portfolio managers who make these decisions often come under a great deal of criticism from the investing community, and some of it is clearly justified.  They...