Customer Reviews

Beating the Dow (Revised and Updated)

5 star:		(10)
4 star:		(5)
3 star:		(3)
2 star:		(1)
1 star:		(0)

 

 

This book is now quite dated as far as the discussion of the individual Dow stocks, but the principals are still the same. I have never lost money doing this formula ever. In fact, I now average about 27% over the past seven years with only looking at my portfolio once a year. I now buy this book for a lot of my friends who ask me about investing when they have no experience. Adam Shaughnessy ashag@flash.net

Michael O'Higgin's investing classic holds up as well in the New Millenium as it did when it first hit book stands 10 years ago.

He maintains that it is still possible to beat the DOW by buying the 10 highest yielding stocks and tweaking your holdings each year, with correspondingly greater rates of return with a two- or five-stock selection from the group. O'Higgin's admits in the new eidtion that the strategy has been muddied by a drop in the relative importance of dividends as a part of total yield of the DOW. Dividends and payouts have lost lost out to stock buybacks, in part because dividends are taxed at a higher rate than long-term capital gains from stock sales. Changes in the DOW have also reduced the overall dividend payout. Of the most recent additions, Microsoft pays no dividend and Intel and Home Depot have nominal payouts. O'Higgin's strategy may also be less effective because it's simplicity and past returns attracted the attention of Wall Street money managers and of many, many individual investors. There is at least one web site devoted to the Dogs of the Dow and a number of similar investment strategies were profiled for several years on the Motley Fool website.

Nor is the most valuable part of O'Higgin's book his thumbnail sketches of other value strategies for beating the market with a basket of DOW stocks. Several seem downright ridiculous. I remain skeptical that investing based on presidential election cycles or end-of-year asset sales by fund managers can yield meaningful, long-term results for individual investors.

The value of this book is O'Higgin's championing of value investing in general and his highlighting of the resilience of the DOW stocks in markets bull and bear. Most people aren't professional investors and lack the time and resources to profit from a strategy of active trading. If the efficient markets guys are right, then buying all 30 DOW stocks and holding on long-term will beat returns of most professionally baskets of stocks, with less risk and less payouts for taxes and trading costs to boot. Or maybe buying the highest yielders in any given year and holding. Anyway, you get the picture.

Regardless of whether you think the high-yield 10 is still capable of outgaining the overall DOW, O'Higgin's book is, to me, as valuable in 2001 as it was when I first read it in 1993.

Some people might laugh at this book specially the brokers who make living by sucking the commision out of an average investor. What had happened in the NASDAQ in 1999 before the correction was absolutely mind blowing and this book might have looked like a bad joke i.e. advocating to invest in companies like International Paper! but now that the dotcoms are down the drain, the valuations are somewhat back on earth, the margin-debt bitten people are done crying, maybe it is time that us i.e. average investors read this book.

This book as the name says is all about investing in Dow companies, the giants of the US and global economy. The companies which I truly believe that world could come to an end but GE would still be there. The book covers all the Dow components individually along with their historical financial performance, weaknesses, strenghts and their power to stay in business by being profitable over years and years. There are many different 'low risk' investment strategies covered in this book such as 'High Yielding 5'. These are the 5 Dow stock that you pick annually based on the criteria described, HOLD it for 1 year, redo the math (barely any)and pick your 5 stocks again. You also sell some at this point that didn;t meet your criteria and pick the new ones to fill their spot.

Sounds simple, yes! and that's the way it should be. Not only you can ride out the swings of the stock market in this way but also save a ton on commisions, taxes and most importantly be less stressed.

If you read the Motley Fool, you'll notice some of their strategies are derived from O'Higgin's methods.

A must read for all investors, specially younger people like myself who want to start building the nest yesterday!

This is a classic book describing a simple method for achieving outstanding results in the stock market by investing in a selection of five stocks from the Dow Jones Industrial average. There is one little problem. The method hasn't worked very well recently. Taking some data from the table on page 204 of the O'higgins book we see the % gain or loss of the selected five stocks compared with the Dow Jones Industrial Average: (Year, Five stocks, Dow Jones Average);(1994 8.6 4.9),(1995 30.5 36.4), (1996 27.9 28.9), (1997 20.5 24.9), (1998 12.3 17.9). The method has faied to Beat the DOW every year since 1994. My own calculations shows that this under performance continues into 2001. The Motley Fool Group has done extensive research on this method and after their initial enthusiam they have recently terminated their recommendation. Serious students of the market should buy this book. Further study of this approach may lead to new methods for "Beating the Dow".

I know it sounds corny, but I feel that I found the pot at the end of the rainbow. I knew if there was some way that I could get the best of the Dow 30 that I could make money on a regular basis. But which ones? One day while my wife and I were at the library she hands me Beating The Dow, I read it that evening and I got my answer to "which ones". Without hesitation I started a portfolio and have stuck with the stratagy for several years. The book is easy to read and very informative. It gives a rundown on all the Dow stocks with easy to read charts and statistics. I wish this book was around 20 years ago. P.S. I purchased the book!

I started using the beating the Dow strategy last June and picked MO, T, UK, CAT & IP. Over the six month period I have "beat the Dow" due to stellar performance of MO & T. UK and CAT have prevented this portfolio from extraordinary performance. Using relative strength index to help time the picks would have helped avoid buying UK and CAT at near their 52 week highs. Beating the Dow is a good way to get into buying stocks without great risk.

I have the book and have used the "High Yield 5" method since 1995. The results have beaten all other methods of investment that I have used and with the least amount of effort. I also enjoy the feeling of comfort involved with owning the various DJIA 30 stocks. Even if the share price drops, I know that in time it will recover! I'm convinced that in the long term, equities give the best return and that market timing is to risky and difficult. This method is so easy and the best news is that it works.

Day traders often laugh at O'Higgins as their returns beat his. But keep in mind it takes a total moron not to make a killing in the market these past few years. Wait until the next recession and the day traders have all thrown themselves into NY Harbor. O'Higgins' system will still be blowing away the averages. You are a fool to not buy this book. Especially if you are a casual investor. When he says his system takes 5 minutes per year he is not kidding, and year after year his system will blow away those mutual funds you have your money in now.

This may be the first book that mentions how the stock market usually performs much better Nov. 1-May 1. This is a more important observation than the "Dogs of the Dow" strategy this book became famous for. Sy Harding's "Riding the Bear" thoroughly covers this "seasonality" feature. Though the manic bull market of Oct 98-March 2000 TEMPORARILY made this book seem outdated, it holds up well (had the non-updated version) and is a solid effort that is well thought out (which immediately puts it above 80% of stock market books). A keeper, re-read it.

O'Higgins writes nicely... and identifies with specificity one generally agreeable style of mechanical stock investing... it doesn't particularly work well recently... but it is a useful text to introduce the idea of rule-based (non-emotional) trading decision making. assumptions of money management particularly out of phase with first tier thinking.. but i like the book.