Stocks: The Good, The Bad and The Ugly

Dogs of the Dow, Nasdaq 100 and more

Good morning,

For those who aren’t familiar, the Dogs of the Dow was a strategy popularized by Michael B. O’Higgins in the early 1990s, where at the turn of the calendar year, you buy the 5 (or 10) highest-yielding Dow stocks and hold through year-end. While it might seem like an income strategy on the surface, the premise was more based on mean reversion and many investors simply refer to or buy the 5 worst performing Dow stocks as their “dogs”.

Today, we’re going to look at the classic version of the Dow stocks to see what the technical setup is for those names, but also check in on some of the worst performers in the Nasdaq 100. I truly believe that dumpster diving in stocks is hazardous to your health, but that doesn’t mean there can’t be opportunities, especially if the market finds itself at an inflection point.

So, let’s check in on those stocks and see if they are Good, Bad, or Ugly.

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Dogs of the Dow

5. WBA: Walgreens Boots Alliance
   Dividend yield: 4.68%

We’re starting off with a potential find here. Walgreens has rallied more than 35% from its October lows and is knocking on the door of a breakout. Nothing to do until it can clear $42, but the inverse head and shoulders pattern and move up above the 200-DMA strongly suggests the lows are behind WBA. Potentially GOOD, support at $39 needs to hold.

4. MMM: 3M
   Dividend yield: 4.68%

3M looks like it is trying to base and has tactical support at $121. A move up above $134 would be a breakout and would target to near $150. UGLY for now, but good if it can get through $134.

3. INTC: Intel
   Dividend yield: 5.08%

Intel has fallen more than it did in the Great Financial Crisis this cycle and the relative chart tells us this doesn’t need to be in our portfolios regardless of improvement in absolute terms. INTC is trying to hold up above the 50-DMA, which roughly acted as resistance on the way down, but will have resistance all the way up. BAD looking stock.

2. DOW: Dow Inc.

   Dividend yield: 5.43%

Dow has been a modest outperformer since late September and has made a nice little rally. However, it is sitting below numerous key resistance levels, notably the breakdown point from a multi-year double top. This is just a very poor entry point and is still in a downtrend, which makes it a BAD stock.

1. VZ: Verizon
   Dividend Yield: 6.89%