Tobin Family Website

In late December 2005, I decided to change a portion of my investment portfolio to use a strategy known as the “Dogs of the Dow”.  This is a simplistic stock picking strategy based on selecting the ten highest dividend stocks in the Dow, investing an equal amount in each of them, and then holding them for a year.  At the end of the year, you repeat the process….selling your stocks and reinvesting equally in the top dividend yielding stocks.  I opted for a slight variation on the theme, buying an equal amount of five of the ten Dogs with the lowest stock price (also known as The Small Dogs of the Dow).  The intent is to try and outperform the Dow, which this strategy has consistently done for years, without having to spend a lot of time researching and moving positions around.  So, in late December I bought equal shares of GM, Verizon, AT&T, Merck and Pfizer (aka, the small dogs).  Due to my skiddishness with GM’s position in Feb 06, I sold and closed those positions out (which turned out to be a bad idea as you will see below!).  I also cashed in my Pfizer stocks and reinvested that money elsewhere.  Nonetheless, here is the Year-to-Date performance of the 5 Small Dogs of the Dow for 2006:

• General Motors (GM) = +51%
• AT&T (T) = +25.1%
• Verizon (VZ) = +15.2%
• Merck (MRK) = +27.1%
• Pfizer (PFE) = +16.8%

This equates to an average +27% on the year!  By comparison, the Dow Jones Industrial Average is up just 5.3% year-to-date.  Since I dumped GM and Pfizer, my average gain year-to-date on this portion of my portfolio is +22.5%.  (Note that these gains are pre-dividend, pre-tax, pre-commission). 

In my other investments, Microsoft is +3.8%, Sirius is -38.7% (hoping for a comeback here!), and my various Thrift Savings Plan investments (money market equivalents) average out at +2.9%.  Fortunately, I sold out of XM Satelllite Radio Holdings before they dropped from $37/share to $10/share!

Based on my limited experience with the Small Dogs of the Dow stock picking strategy, I can say that the strategy is working quite well so far this year!  I only wish I hadn’t gotten gun shy about the GM stock!

I have successfully assembled the new gas grill.  It was actually pretty easy and only took about an hour and fifteen minutes or so.  After assembling the grill, we put it to good use and grilled up a hot dog for the kids and a couple of small pork chops for Karen and I (grilled chix salad postponed to tomorrow).  It starts real easy with an electronic ignitor and it grills quite nice and even with its three burner tubes. 

On another topic altogether, about 2 weeks ago I started a new savings account for each of the kids using USAA’s “First Start” program.  It is a really neat program that enables you to open a savings account in their name with an associated ATM card for them to use.  They also get a starter kit with a financial binder and printed information inside that talks about how money grows (in an interest bearing account vs “on trees”), and what savings and investing is all about.  Under the program, they get a quarterly financial newsletter geared for their age group.  What I like the most about it is that I can directly move money online from my USAA account into theirs with the click of a button.  This is awesome for once-a-month deposit of “allowance” for completing their chores.  Once the money is their account, they have to manage it….mindful of how much money they have for saving and spending.  Tonight, they both made their first withdrawal from their accounts and went shopping at WalMart.  Each of them had $20 to spend, and they were very careful about what they selected so that they got the best value for their money.  I am not sure which they enjoyed more….buying something with their own money, or going to the ATM machine and inserting their own card, punching in their own PIN, and getting their own cash.  I also established First Start “investment” accounts for each of them as well with a monthly allotment (in addition to the savings bonds we have been buying for years).  It is a USAA managed aggressive money market account that focuses on long-term growth.  Each day they can check the web and see how their money market account is doing.  Hopefully it will help teach them the value of things, the power of compounding interest, and how to manage their money.  It is nice having access to such great tools that you can manage online…USAA’s web-based banking tools are truly world class!