Consider grabbing 'Dogs of the Dow' by their tails

The Ticker

September 25, 1996|By Julius Westheimer

Following yesterday's Federal Reserve decision not to raise short-term interest rates, many people may wonder: Where should I put my money now -- stocks, bonds, CDs, money market funds? Several ideas:

NOVEL STRATEGY: "Ever hear of 'Dogs of the Dow'? You buy the 10 highest-yielding Dow Jones industrial stocks," says James O'Shaughnessy, author of "What Works on Wall Street."

He adds, "If you followed this strategy over the past 10 years, you beat the performance of 99 percent of mutual funds. You adjust your portfolio once a year."

As of Monday the "Dogs of the Dow" were AT&T, Chevron, General Motors, Merck, Minnesota Mining, Exxon, DuPont, J. P. Morgan, Philip Morris and Texaco.

DIFFERENT TWIST: "Investors in 401(k)s who reached the $9,500 maximum -- and who want to keep saving for retirement -- often wonder where to invest next. Reduce your debt. Before investing more toward retirement, use the extra cash to wipe out or reduce credit card debt. Nothing else pays a guaranteed 18 percent -- the average credit card rate." (Margaret Welch, financial planner.)

STARTING SMALL: "Here's a strategy where even a small investor with $1,000 can build a quality stock list," says Charles Carlson, editor of the DRIP (Dividend Reinvestment Plan) Investor.

He adds, "Countless studies show the two biggest roads to success are starting early and making regular investments. Yet many people never get in the game, saying, 'The market's too high,' etc.

"But DRIP investing -- dollar-cost averaging by investing each month, regardless of the market level -- makes figuring if the market is too high irrelevant."

VETERANS' VIEWS: Advice from successful investors:

"Become more humble as the market goes your way." (Bernard Baruch.)

"The usual bull market weathers many tests until it is considered invulnerable, whereupon it is ripe for a bust." (George Soros.)

"The worst mistake investors make is taking their profits too soon, and delaying their losses too long." (Michael Price, Mutual Shares Fund.)

CURRENT COMMENT: From this week's (Sept. 23) Barron's:

"While last week's enthusiasm is very encouraging, evidence doesn't confirm that the bull market is back on track." (Lowry's Trend Analysis.)

"Stocks are way overpriced in relation to real assets." (The DeVoe Report.)

"This market continues to be ideal for investors seeking long-term bargains." (Lancz Letter.)

"Risk over the next two weeks, as we end the third quarter and enter the fourth, is that short-term, window-dressing efforts influence stocks." (Strategic Market Overview.)

Summary: Of the 35-40 market views I read over last few days, about 65 percent were gloomy.

GETTING SPECIFIC: Before buying any of the following, see your broker. He or she knows your individual situation.

"Great Small Stocks at Bargain Prices" from Kiplinger's Magazine, October, cover story: Avondale Industries (shipbuilders), Consolidated Products (owns Steak n Shake restaurants), Friedman's (jewelry retailers.)

Horizon Mental Health Management (private mental hospitals), Lumisys (high-technology), Nobel Education Dynamics (operates elementary schools), SEI Corp. (financial services.)

MORE IDEAS: "Gas prices are headed up. Get the difference back, and more, with oil-company stocks, such as Exxon, Mobil, Chevron." (Peter Lynch.)

"Revlon is a rediscovery story, now on a rampage in the color cosmetics area. Sales and market share outstanding." (PaineWebber Letter.)

"Beat-up stocks now include Healthsource, KLA Instruments, LSI Logic, Novellus Systems, Read-Rite, VLSI Technology. (Worth, Oct.)

"Be careful. The first year of a re-elected president's second term is historically a bummer. The 'hyped-up' economy generally falters." (Robert Stovall, market historian.)

Good Read: "Investing for Good: Making Money While Being Socially Responsible," by Peter Kinder, $13.

Does BGE stock interest you? On Tuesday, security analysts present BGE Chairman and CEO Christian Poindexter, discussing proposed Potomac Electric Power merger, etc. Your broker has details.

Pub Date: 9/25/96

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