Playing the DJI companies

[dajoga]

Obviously, if you buy low and sell high, you make money in stocks, but does anyone know of a formula that someone uses with the 30 DJ companies that works on the short term? Hmmm...not even sure my question is what I want to know, but maybe someone else does. /ubbthreads/images/graemlins/biggrin.gif

[EagleTed]

Dogs of the Dow Theory. You buy the ten best dividend yielding stocks in the Dow and adjust every year at roughly the same time. Not exactly short short term, but some evidence that it works over time (a number of years).

I don't recommend it though. AT&T (T) would have made that list every year for a while, but the stock hasn't done anything. Eastman Kodak (EK) would have made the list last year, but then it cut it's dividend, so you would have gotten a double whammy with it, as the stock price fell like a rock.

But if you're interested the top ten dividend yielding stock in the DJIA are:

MO
SBC
T
GM
JPM
MRK
DD
XOM
GE
IP

[dajoga]

I was just browsing the DJI's and noticed 3M has fallen some and now showing signs of recovering. I guess my original question about a formula is if a stock falls a certain percent b/c of say, some news bit, how often does it recover to its original or higher level? Ex. if 3M falls 5%, does it usually recover in the short term?

[nosferatuscoffin]

If you have Clark Howard nearby on your radio dial, then listen to him. Ditto for Ric Edelman.

[dajoga]

I check that out--thanks nos

[EagleTed]

That's an extremely hard question to answer. The usually correct answer is: In a bull market, yes, they usually recover fairly quickly from a sharp decline due to bad news. Not keeping up with PG, I can't give you an educated opinon as to what it's future looks like. I know it's a darn fine company, but I have no opinion on it's future.

Rule of thumb, a blue chip stock with adequate looking future is a safe buy at 20 P/E or below. PG has a P/E of 25 right now. Think I'd wait to see if it's beaten down that low before buying, if it was me. BTW, that rule of thumb doesn't work for the cyclical companies, such as DD or BA, where investors often drive down the P/E in the good years to account for the bad years, when the P/E is often 30 or 40.

[EagleTed]

If you're interested in PG, buy on this dip, and add shares if it dips another 5-10 percent. Most stock gurus rightly say that is a bad strategy, and it is short term, but if you're interested in 5 or 10 years results, it makes sense.

[Estragon]

Of the "Dogs," GE and XOM appear to be headed toward a profitable year or two. GE has shown tremendous strides in productivity during the recession, and looks good for long term growth. It's had a good run lately though, so I am waiting for it to drop back a tad before it moves into strong consideration. I expect it to fall to the 32.50 - 32.75 area. If the price bounces back up off that level, it is likely headed up.

XOM is reaping the benefits of the merger, which have been slower in materializing than expected due to economic conditions. They basically doubled the company and eliminated 25,000 duplicated white collar positions. They are also somewhat overbought in the short term, though, after the huge run-up in December when they gained over 10%. Technically, the first support level to be tested would be the 50-day moving average, currently 39.61 {EMA}, but below that support seems weak. It could easily fall to the 39.00 area, or lower. The 200-day MA {@ 37.54 currently} would then be a critical support level. If it should fall to that area and bounce, I'm buying.

I also like Pfizer {PFE}, for more fundamental reasons. They have a number of profitable lines, more in the pipeline, and their M&A strategy seems well considered.

If you just want to bet on the DJIA, there is a derivative issue, DIA. It sells at roughly 1% of the Dow's value.

[EagleTed]

XOM is my second largest holding after HDI (only because it has climbed so rapidly since I bought), and I'd recommend it to anybody has a long term holding. Perhaps not one you can buy and forget about, but nearly so.

I also own JNJ and MRK in the dow, and have owned MSFT and KO. The DJIA is as good a place as any to look for possible stocks to own, but there's a lot of eyes out there on them, so finding a bargain amoungst them is usually pretty tough.

[EagleTed]

Dow Stocks now selling near 52 week lows:

DD
JNJ
MRK
MSFT

May not be a bad place to enter, but as always: Buyer Beware.
I've got an order in for more JNJ @49.08, and I'm looking real
hard at MSFT. I also own MRK, but have no plans of adding shares.

This is not a recommendation for any of the stocks listed.
Disclosure: I own shares in JNJ and MRK.

[EagleTed]

Since the Dow traded T, IP, and EK for AIG, PFE, and VZ, the new Dogs of the Dow are:

<TT>
STX.....Div Yield

SBC...4.75%
MO....4.75%
GM....4.33%
VZ....4.14%
JPM...3.44%
MRK...3.13%
DD....3.11%
C.....2.60%
GE....2.51%
XOM...2.29%

</TT>
For whomever may be interested.