"The power of the pack is in the dog and the power of the dog is in the pack," says an obscure dog poet. For an example, see the Dow 30 Industrial dogs. A famous pack strategy popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), revealed how low yielding stocks whose prices increase (and whose dividend yields therefore decrease) could be sold off once each year to sweep gains and reinvest seed money into higher yielding stocks in the same index.
Dogs of the Index Metrics
Two key numbers determined the yields to rank stocks in the Dow 30 Industrial index: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price of the stock declared the percentage yield by which each dog stock was ranked.
Historically dividend dog investors utilized this ranking system to select portfolios of five or ten stocks in any one index, sector, or survey to trade. They awaited the results from their investments in the lowest priced, highest yielding stocks and prayed that the price of every stock they now owned climbed higher (having locked in a high yield percentage at purchase). Prior to the publication of the O'Higgins book, Dow dogs were known by some market watchers as "fallen angels."
Dog Power Enhanced.
Dog investors thus believe a single high yielding dog stock chosen for an index as a powerful representative of a business sector has enhanced value. That would equate to the "power of the pack". This logic would dictate that a stock selected for listing by more than one index would have its value multiplied by the number of indices in which it is listed.
Pack Power Plumbed for Popular Pups
This article reports results of a screening of five major indices for the identities of stocks listed on more than three. The indices plumbed were: Russell 1000; S&P500; S&P500 Aristocrats; NASDAQ 100; Dow 30 Industrials. The 106 stocks revealed by the "RSAND" survey being listed on three or more of those indices are shown below. The indices on which each stock is listed is shown in the far right column.
Four Star Power Dogs
Thirteen four star power dogs were listed on four of the five lists. All thirteen came from the Russell and S&P500 lists. Eleven of the thirteen showed up on the Dow list. Ten of the thirteen appeared on the Aristocrats list. Five of the thirteen were listed as members of the NASDAQ 100. The thirteen included representatives for six of nine sectors: five technology; one healthcare; two services; two consumer goods; two basic materials; one conglomerate.
The top ten four star power pop dogs included five technology dogs, AT&T (T), Intel (INTC), Microsoft (MSFT), Automatic Data Processing (ADP), and Cisco Systems (CSCO); one healthcare dog, Johnson & Johnson (JNJ); one service representative, McDonald's (MCD); two consumer goods firms, Procter & Gamble (PG), and Coca Cola Co. (KO); one basic materials firm, ExxonMobil (XOM).
Russell/S&P500/Aristocrat (RSA) Pop Dogs
Forty nine RSA Dogs included eleven four star power dogs. Nine of nine sectors were represented: fourteen consumer goods; two technology; seven financials; one utility; ten services; five healthcare; five industrial goods; four basic materials; one conglomerate.
The top ten RSA pop dogs included four consumer goods firms, Pitney Bowes (PBI), Leggett & Platt (LEG), Kimberly-Clark (KMB), and Clorox Co. (CLX); one technology dog, AT&T (T); two financials, HCP, Inc. (HCP), and Cincinnati Financial (CINF); one utility, Consolidated Edison (ED); one service representative, Sysco (SYY); one healthcare dog, Johnson & Johnson (JNJ).
Russell/S&P500/Dow (RSD) Pop Dogs
Thirty RSD Dogs also included eleven four star power dogs. Eight of nine sectors were represented: seven technology; four healthcare; four basic materials; five services; two consumer goods; four financials; two industrial goods; two conglomerates; no utilities.
The top ten RSD pop dogs included: four technology dogs, AT&T, Verizon (VZ), Intel (INTC), and Hewlett-Packard (HPQ); three healthcare dogs, Merck (MRK), Pfizer (PFE), Johnson & Johnson; one basic materials firm, Du Pont (E.I.) (DD); one industrial goods firm, General Electric (GE); one in services, McDonald's (MCD).
Russell/S&P500/NASDAQ (RSN) Pop Dogs
Thirty nine RSN Dogs included five four star power dogs. Six of nine sectors were represented by: three in consumer goods; seventeen in technology; four healthcare; thirteen services; one industrial goods; one basic materials; no financials; no conglomerates; no utilities.
The top ten RSN pop dogs included: two consumer goods firms, Altria (MO), and Mattel (MAT); five technology dogs, CA Technologies (CA), Intel, Microchip Technology (MCHP), Microsoft (MSFT) and KLA-Tencor (KLAC); one healthcare dog, Warner Chilcott (WCRX); two in services, Paychex (PAYX), and Staples (SPLS).
Ten Top Pop Dogs
The top ten pop dogs included two listed on four of the five lists. All ten came from the Russell and S&P500 lists. Four of the ten showed up on the Dow list. Four of the ten appeared on the Aristocrats list. Four of the ten were listed as members of the NASDAQ 100.
The ten included representatives on four of nine sectors: three consumer goods, Pitney-Bowes, Altera, and Leggett & Platt ; five technology, AT&T Inc., Verizon Communications, CA Technologies, Intel, and Microchip Technology; one financial, HCP Inc.; one utility, Consolidated Edison.
Actionable Conclusion: Relative Risk For Pop Dogs
Projected dividend vs. price amounts from these five RSAND indices this month displayed five distinct divergence levels.
These indices were ranked for risk as of December 14, 2012 in the following manner: (1) Add the single share prices of the top ten stocks on an index list. Then, (2) add the total annual dividend amounts projected from $1000 invested in each of those ten stocks. Finally, (3) compare the resulting two numbers. Lesser divergence between dividend amounts above single share prices revealed the indices with lesser risk. The overbought stock index showed negative divergence.
By that baseline standard of divergence, these five pop dog indices rank themselves by risk as follows:
As a matter of comparison the metrics for five supporting indices are included on the source table from which the graph was derived.
Actionable Conclusion Two: Analysts Forecast Pop Dog Indices To Reckon 10% to 26% Net Gains
Charts below for each index show comparative net gains as of December, 2012 and those projected to December, 2013. Historic aggregate single share price of the ten highest yielding stocks created the numbers for 2012. Projections based on aggregate one year analyst mean target prices as reported by Yahoo Finance created the 2013 numbers for each index.
Five dogs from each index were selected as sells based on highest net gain. The hypothetical sale of those stocks added to the projected dividends revealed the total net for each index. Since $10k was the initial investment, the percentage net gain was easy to calculate for each.
The number of analysts contributing to the mean target price estimate for each stock was noted in the last column on the charts. Three to nine analysts was considered optimal for a projected estimate.
S&P500 Index Analysts See Over 24% Net Gain
Russell 1000 Index Analysts See Over 26% Net Gain
RSN Pop Dog Index Analysts See Over 16% Net Gain
4 Star Pop Dog Stock Analysts See Near 13% Net Gain
NASDAQ 100 Index Analysts See Over 17% Net Gain
DOW 30 Index Analysts See Near 10% Net Gain
RSD Pop Dog Index Analysts See Near 10% Net Gain
Ten Top Pop Dog Stock Analysts See Over 14% Net Gain
RSA Pop Dog Index Analysts See Near 12% Price Upside
Actionable Conclusion Three: Pop Dogs Index Price Upsides
Top ten dogs for this index component list were graphed below to show relative strengths by price as of November, 2012 and those projected to November, 2013. Historic aggregate single share price of the ten highest yielding stocks created the numbers for 2012. Projections based on aggregate one year analyst mean target price as reported by Yahoo Finance created the 2013 numbers for each index.
This became a graph of upside price potential since all the analyst estimates showed positive price gains for each sector ranging from 1.8% for the ten Dividend Champions dogs to 27.23% for the ten CCC Combo Index dogs.
Actionable Conclusion Four: Nine Top Profit Generating Pop Dog Trades
The top profit generating pop dog trades one year from now were revealed by analysts mean target prices in each of nine indices. The list below is summarized from Yahoo Finance data.
- Warner Chilcott in the NASDAQ 100 Index projected an over 70% price gain determined by a mean target price set by 12 analysts.
- Pitney Bowes Inc. in the S&P500 Index was projected to net over a 60% gain based on mean target price set by 3 analysts.
- Donnelley RR & Sons Inc. netted over a 59% gain in Russell 1000 index top ten based on a mean target price set by 4 analysts.
- Johnson & Johnson netted over a 40% gain in the 4 Star Pop Dogs index top ten based on a mean target price set by 24 analysts.
- Microsoft Corp. netted over a 29% net gain in the RSN Pop Dog index top ten next year based on a mean target price set by 34 analysts.
- General Electric in the Dow 30 Industrial index netted its over 21% net gain as of next December based on a mean target price set by 14 analysts.
- CA Technologies netted over a 20% net gain in the Top Ten Pop Dogs collection next year based on a mean target price set by 10 analysts
- Merck & Co. netted over a 17% annual gain in the RSD Pop Dog index based on mean target pricing set by 17 analysts.
- AT&T Inc. netted nearly a 12% annual gain in the RSA Pop Dog index based on a mean target price set by 29 analysts.
As mentioned above, three to nine analysts was considered optimal for an accurate projected estimate.
Nine Pop Dog indices and their component stocks will have ongoing stories to tell. These graphs, charts, and lists of companies will be updated again for publication periodically.
Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities except as noted in this article are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.