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H&W in the Media

After a Bumpy Week, Stocks End Up 0.4%

stocks

The Fed’s likely rate increase, coupled with the ECB’s continued monetary easing, suggests Continental stocks are relative bargains compared with American equities, adds Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management. He says European country exchange-traded funds (except those focused on the U.K.) could offer an opportunity ahead of the Fed’s Dec. 13-14 meeting.

Separately, the Dogs of the Dow strategy is trashing the Dow itself this year. Through Thursday, the 10 Dow Dogs stocks were up 11.7%, versus 4.2% for the whole index and 1.6% for the remaining 20 Dow stocks.

Someone using the Dogs of the Dow approach invests equal dollar amounts in the 10 highest-yielding Dow stocks at year-end and holds them for 12 months. Each year, the portfolio is updated. According to dogsofthedow.com, a Website that tracks the Dogs, the strategy has returned an average 10.6% annually over the past 10 years, higher than 9.1% for the entire index.

The Dogs are getting a big lift this year from Caterpillar (CAT), up 27%, and Merck (MRK), up 17%. All but two Dog stocks have risen by double-digit percentages, and none are down.

The Dogs’ collective dividend yield is 3.7%, notes Neil Hennessy, founder of Hennessy Advisors and a longtime exponent of the Dogs strategy. That’s a nice contrast to the 10-year U.S. Treasury bond’s 1.74%.

Interest rates are going up, so bond prices will continue to fall, he contends. His Hennessy Total Return fund (HDOGX) employs about 75% of its capital in the Dogs strategy and the rest in Treasuries.

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