Investment

The Surprising Investing Strategy That Made Money in a Horrendous 2022

Published

2 years ago

December 27, 2022

This has been a terrible year for the stock market, and many investors have found themselves with huge losses compared to where they started the year. All in all, the Dow Jones Industrial Average (^DJI 0.11%) actually managed to hold up far better than broader benchmarks like the S&P 500, but it still came into the last week of the year down almost 9% from where it started 2022.

Those who had hoped to avoid losses by putting some of their money into the bond market were equally disappointed, as many bonds actually lost more ground than the Dow.

Interestingly, though, one strategy that many people have followed for years not only managed to outperform the struggling Dow Jones Industrials but also looked poised to eke out a modest gain for the year. Those seeking a simple approach (that’s easy for even brand-new investors to follow) often turn to the investing method known as the Dogs of the Dow, because it involves making just a single decision each year and then sitting back to see what happens.

Below, you can learn more about why the Dogs of the Dow were so successful in 2022 and see what might be ahead for 2023.

Image source: Getty Images.

Why investors love the Dogs of the Dow

If you don’t want to spend a lot of time on your investing, the Dogs of the Dow strategy has a ton of appeal. Following the strategy involves investing in just 10 stocks, which isn’t enough to form a well-diversified stock portfolio by itself but can complement other individual stocks or various exchange-traded funds and mutual funds.

Here’s how the strategy works: At the beginning of each year, you look at the 30 stocks in the Dow Jones Industrials and put them in order by dividend yield. The 10 top-yielding Dow dividend stocks become the Dogs of the Dow for the coming year. Buy those stocks in equal dollar amounts at the beginning of January, and then hold them for the entire year.

You don’t have to do anything along the way except collect dividend checks. And if you want, you can do the same thing the following year, holding on to any stocks that stay on the list and selling those that no longer qualify to buy the newcomers.

2022 performance: Dogs of the Dow vs. Dow Jones Industrial Average

Dogs of the Dow (Decline)	Dow Jones Industrial Average
(1.6%)	(8.3%)

Data source: DogsoftheDow.com. As of Dec. 23. Based on price change only and omits positive impact of dividend payments on total return.

As you can see from the chart above, 2022 was a great year for the Dogs of the Dow. In fact, if you add in the dividends that the 10 stocks paid during the year, it extends the edge the Dogs had, and it also pushes their total returns into positive territory by about 2%. That might not be a lot, but it’s better than the steep losses most stock investors suffered this year.

It’s not surprising to see the Dogs do well, though, because 2022 was a great year for value stocks. The Dogs of the Dow tend to do well when value investing comes into favor, because it’s often the most beaten-down stocks in the Dow whose yields rise enough to make the Dogs list. Moreover, value investors like the stability and reputation that come from being a Dow component stock.

Two stocks were largely responsible for the Dogs’ big win. Chevron (CVX 1.26%) jumped more than 50% on the year, buoyed by persistently high energy prices that rebounded sharply from the disruptions early in the pandemic.

Also, drugmaker Merck (MRK 0.23%) posted gains of around 45%, with strong sales of its cancer drug Keytruda and the excitement generated by its innovation in working toward a potential cancer vaccine that’s personalized to individual patients’ needs.

Starting a streak?

To be clear, the Dogs of the Dow don’t always beat the Dow Jones Industrials. With growth stocks having done so well recently, the Dogs’ win in 2022 will be the first in four years for the strategy. Yet for those seeking simple investing approaches, the Dogs of the Dow remain attractive — and proponents have high hopes for another year of outperformance in 2023.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck. The Motley Fool has a disclosure policy.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

6 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

4 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

1 month ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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