WWII 039: Dogs of the Dow Strategy 2016 Report and Dogs for 2017, Crunching Data to Improve Decisions, Seth Klarman on Trump Tweets, Wells Fargo Bonuses

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Have you heard of the Dogs of the Dow investment strategy? This strategy has outperformed the Dow Jones Industrial Average index in six of the last seven years.

Main Topic: The Dogs of the Dow Report for 2016 and the Dogs for 2017

· Dogs of the Dow is an investing strategy that uses the worst performing stocks in the Dow Jones Industrial Average (DJIA) index.

· The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry.

· The DJIA consists of 30 large cap “industrial” stocks and is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index.

· Dogs of the Dow has beat the index for six of the last seven years.

· The Dogs of the Dow strategy is fairly simple.

o Pick the top 10 yielding dividend stocks in the DJIA.

o Invest equal amounts of money in all 10 stocks

o Hold for the year, and rebalance / turnover at the end of the year

· Dogs of the Dow is an blended investment strategy – dividend investing and potentially value investing (because the Dogs lagged in performance). If underlying earnings are increasing the value of the company, and the price hasn’t reflected that increase in value, you are paying less per share than you should be.

· All in all, the Dogs of the Dow in 2016 managed to gain an average of 16%. That topped the Dow by about three percentage points, making it the sixth year out of seven that the strategy has beaten the venerable market benchmark.

· A combination of value and dividend strength played out again in 2016. The best example was Caterpillar (NYSE:CAT), which climbed more than 36% in 2016 thanks to a rebound in optimism for its heavy equipment business. Improving conditions in industries including mining, energy, construction, and infrastructure development all led shareholders to look more favorably on Caterpillar's business, and the downtrodden stock led all Dow stocks higher over the past year

· A rebound in oil prices had the same impact on energy giants Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM), which climbed 31% and 16% respectively. Oil hasn't come close to regaining all of its lost ground from the plunge in late 2014 and 2015, but with prices solidly above the $50 per barrel level, crude is coming close to doubling from its worst levels of 2016. Even with the recoveries, both Chevron and ExxonMobil still yield well above 3%, meaning that investors following the Dogs of the Dow strategy will get another year of exposure to the oil giants in 2017.

· The Dogs of the Dow strategy doesn’t work every year, but seems to work more often than it doesn’t.

· Finally, here are the official Dogs for 2017

Symbol Company Price Yield Small Dog
NYSE / NASDAQ The Dow stocks ranked by yield on 12/31/16 on 12/31/16 on 12/31/16 on 12/31/16
VZ Verizon 53.38 4.33% Yes
PFE Pfizer 32.48 3.94% Yes
CVX Chevron 117.70 3.67% No
BA Boeing 155.68 3.65% No
CSCO Cisco Systems 30.22 3.44% Yes
KO Coca-Cola 41.46 3.38% Yes
IBM International Business Machines 165.99 3.37% No
XOM ExxonMobil 90.26 3.32% No
CAT Caterpillar 92.74 3.32% No
MRK Merck 58.87 3.19% Yes

It is not necessary to do extraordinary things to get extraordinary results.
Warren Buffett
Bershire Hathaway

Ask JB: Crunching Data and What Is An ADS?

Best way to use statistics for investing (self.investing_discussion)

submitted 2 days ago by quantum_metaphysics

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I've been making some small investments on and off for several years, making some decent side money, but I keep wanting to get more involved. So far, my strategy has mostly been to invest in companies I know and industries I understand, to apply my limited knowledge of behavioral economics, and to do some research on what investments people are recommending.

However, as a graduate student in the sciences, I'd really like to take a more quantitative approach. I don't really have an economics background, but I do have a moderate understanding of statistics and to a lesser extent computational modeling.

I'm wondering what data I should be looking at that I can test statistically to make better investments, or if there are any reasonably effective models I can train using that data. The simpler the better; both for ease of use, and because my understanding is that simpler models tend to outperform (or at least be more long-term reliable than) more sophisticated models.

JB Says:

· The nice thing about being alive and investing in 2017 is the plethora of data and statistics that have already been calculated and analyzed for you. You won’t need to crunch a ton of data to make good investment decisions. In fact, much of the key information is readily served up for you on websites like Gurufocus.com and Yahoo Finance.

o Instead of thinking about crunching data, I recommend you spend your time learning how to value companies until you are really good at it. There are some calculations you will need to do, but nothing more complicated than a discounted cash flow.

You can also continue your studies into investor psychology and learn to analyze and internalize any investing mistakes you make.

o With those two focuses, you are sure to become a decent investor and you and your family will benefit from that knowledge over the years.

What happens when a company goes private? (self.investing_discussion)

submitted 10 days ago by himcgrew

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Hello, I'm fairly new to trading and I have a question regarding a company that I hold shares in. A while ago I bought a few shares of Trina Solar, one of the worlds largest solar panel manufacturers. Recently a deal was made in which the company is being bought out and going private. If this happens, the american depository shares are being bought for 11.60 a share. How would one know if they own an ADS? Is it just the fact that it is a foreign company on the New York Stock Exchange? Trying to decide whether I will be paid this amount back or if I should sell my shares now. Thanks.

JB Says:

· Trina Solar filed a 6-K on August 1, 2016 announcing they entered into the agreement to be acquired by Red Vibernum (China).

· Trina is a China-based company being acquired by the Chinese government.

· For every ADS you hold, you will receive $11.60 per share in compensation, less a $0.05 fee (maybe).

· Every ADS represents 50 shares of Trina Solar (Chinese shares) which are being paid $0.232 per share.

· https://www.sec.gov/Archives/edgar/data/1382158/000104746916015138/a2229512zsc13e3.htm

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About the Author

Jeremy Scott Bailey is an investor, author, entrepreneur and host of the "What Works In Investing?" podcast now available on iTunes. He is founder and Chief Investment Officer of Burgeón Group, Inc. an investment advisory firm that provides portfolio management services to families and individuals.

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