The Top Two Investment Strategies for the Year Ahead

Goldman Sachs has an interesting trading strategy for 2020.

“Buy 2019’s laggards as they will likely be 2020’s early leaders,” they say.

“The strategy to pick up battered stocks in the beginning of a given year has a good track record of beating the market, according to Goldman. The prior year’s bottom-third stocks have outperformed the S&P 500 in the first quarter for 11 times out of the past 17 years with an average 1.4% extra return on the benchmark, the bank said. In 2019, this laggard trade outperformed the S&P 500 by 3.7 percentage points, Goldman said, as quoted by CNBC.

Some of those top stocks so far include Westlake Chemical, L Brands, and Under Armour.  

In short, it’s like buying the Dogs of the Dow.

While the 2020 Dogs haven’t been released to the hounds just yet, the strategy is simple.  You’re buying toe 10 top Dow dividend-paying stocks that fell out of favor at the start of the year.  You then cash out by the end of the year, and repeat.

For 2016, the Dogs of the Dow returned 16%. 

In 2017, 19%.  In 2018, they eked out a 1% win, as the Dow lost nearly 6%.

For 2019, the Dogs of the Dow are off to the races, as we noted in a previous article.

  • IBM ran from $108 to $136 with a dividend yield of 4.77%
  • Exxon Mobil ran from nearly $65 to $69 with a yield of 5.05%
  • Verizon ran from $53 to nearly $60 with a yield of 4.14%
  • Chevron ran from $107 to $121 with a yield of 4.03%
  • Pfizer didn’t do too well so far, falling from $41 to $38.  PFE yields 3.76%
  • Coca-Cola ran from $46 to $53 with a dividend yield of nearly 3%
  • JP Morgan Chase ran from $93 to $131 with a yield of 2.75%
  • Procter & Gamble ran from $87 to $121 with a yield of 2.46%
  • Cisco ran from $41 to $45 so far with a yield of 3.08%
  • Merck ran from $73 a share to $86 with a yield of 2.82%

Both are great strategies that could very well pay off – with a good deal of patience.