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Dogs of the FTSE?

Posted: July 21st, 2017, 2:57 pm
by kiloran
I'd hate to call the following an investment strategy, but it's done well for me, probably more by luck than judgement.

I went through the standard initiation process of getting burnt by the tech boom of the late nineties (well, not so much the boom, more like the subsequent bust), and moved to HYP a few years later, with the odd growth IT thrown in. I like it, it's done well for me, but there's no real excitement other than logging all of the dividends and then reinvesting them.

In Jan 2012, I decided to try some sort of mechanical investing as a bit of fun on the side, which has evolved, somewhat randomly and haphazardly along the way.

I initially invested £10k into the Dogs of FTSE30.... 5 shares in the FTSE30 which had the highest trailing yield at the end of 2011.
Total return of 10.5%, against 8.7% for the all-share.

Jan 2013, I added another £10k, this time into 5 shares with the highest trailing yield of the FTSE100.
Result....24.3% against 16.2% for the all-share

Jan 2014, I reinvested into 5 shares from the FTSE100 with the highest trailing yield (excluding specials), but only one share per sector.
Result... 6.5% against -2.1% for the all-share

Jan 2015, again reinvested into 10 shares from the FTSE100 with the highest trailing yield (excluding specials).
Result... 3.8% against -2.5% for the all-share

Jan 2016, reinvested into 10 shares from the FTSE100, based on the combined ranking of trailing and forecast yields (from Digital Look).
Result... 84.5% (!!!!) against 12.5% for the all-share

Jan 2017, again reinvested into 10 shares from the FTSE100, based on the combined ranking of trailing and forecast yields (from Digital Look).
Result so far... 8.1% against 3.8% for the all-share

In all cases, the reinvestment has been split equally into the 5 or 10 shares. I vaguely remember I've occasionally ignored a share that the strategy suggested if it didn't smell right.

So, beat the all-share every year, gained every year, and two stonking years out of six and a half. £20k turned into £57k (regrets.... if only I'd invested ten times as much!!!). I'll come a cropper one day, but it's only a bit of fun with money that is a relatively small part of my total investment.

--kiloran

Re: Dogs of the FTSE?

Posted: July 21st, 2017, 5:56 pm
by bailey56
I think that MIDAS in the Mail on Sunday followed this strategy in the 2000's. It worked well until the market downturn in 2008 and then made huge losses because the banks featured quite heavily. There are probably some old articles out there from that time.
bailey

Re: Dogs of the FTSE?

Posted: July 21st, 2017, 7:13 pm
by kiloran
bailey56 wrote:I think that MIDAS in the Mail on Sunday followed this strategy in the 2000's. It worked well until the market downturn in 2008 and then made huge losses because the banks featured quite heavily. There are probably some old articles out there from that time.
bailey

Yes, that's essentially my expectation, but at least I have some profits to help me when the bad times arrive. At least this strategy can't be any worse than my historic stock-picking skills.

--kiloran

Re: Dogs of the FTSE?

Posted: August 27th, 2017, 10:11 am
by Hypster
I too have been playing with a Dogs strategy with some fun money since 2012. I use the methodology described by Peter Temple (https://www.investorschronicle.co.uk/20 ... ticle.html) except that I don't rebalance exactly as described if the trades aren't economical.

It's turned 5k into 10k (compared to 7k for the all share)


*The figures are for April to April each year

Re: Dogs of the FTSE?

Posted: August 27th, 2017, 5:13 pm
by gryffron
Motley Fool US did (maybe still do?) run a Dogs of the Dow portfolio. Which was quite successful.
IIRC Fool Uk similarly ran a Dogs of the FTSE in their early days, but gave it up quite quickly, as it didn't do nearly so well. The FTSE has had some big failures over the years. GEC, techs in 2000, Financials in 2008. And back testing proved exactly what everyone here is saying. It does ok while the market is generally rising, but can do spectacularly badly when the market falls.

Good luck to those who want to try it. History is not on your side. And whilst history cannot predict the future, it often gives some decent pointers.

Gryff

Re: Dogs of the FTSE?

Posted: August 27th, 2017, 11:02 pm
by tjh290633
Oddly I have posted on the subject of the Dogs of the FTSE just now, at viewtopic.php?f=31&t=7021&start=20#p77443

TJH

Re: Dogs of the FTSE?

Posted: August 28th, 2017, 9:05 am
by Raptor
From TJH's thread. It seems Interactive Investor still does it.

Raptor.

Re: Dogs of the FTSE?

Posted: August 29th, 2017, 12:53 pm
by pyad
gryffron wrote:Motley Fool US did (maybe still do?) run a Dogs of the Dow portfolio. Which was quite successful.
IIRC Fool Uk similarly ran a Dogs of the FTSE in their early days, but gave it up quite quickly, as it didn't do nearly so well. The FTSE has had some big failures over the years. GEC, techs in 2000, Financials in 2008. And back testing proved exactly what everyone here is saying. It does ok while the market is generally rising, but can do spectacularly badly when the market falls.

Good luck to those who want to try it. History is not on your side. And whilst history cannot predict the future, it often gives some decent pointers.

Gryff


TMF UK ran what they called Beating the Footsie for a five year trial in their early days. For some reason it wasn't called Dogs of the Footsie but it was a dog in practice. I wrote the later regular reviews so it's something I know a bit about and it was a 'kin disaster with a major loss by the end of the trial term, which is why we abandoned it. In fact it was clear long before the end that it was a pile of brad and could never make its target which I think from memory was a 20% annual compound growth rate of the amount originally invested.

Its methodology was seriously flawed because it selected shares from the almost extinct FT30 and then used those shares to try and beat a different index, the widely used FTSE100. I didn't set it up and it was already running when I took over but I never would have done it that way, it's illogical to use selections from the 30 to try and beat the 100. How they should have done it, logically, was to use selections from the 100 to try and beat the 100. Or use selections from the 30 to try and beat the 30 like the original O'Higgins Dow30 approach in the US, but not mix them.

But anyway it lost money seriously, not just relative to either index but absolutely.

Re: Dogs of the FTSE?

Posted: January 30th, 2018, 1:50 pm
by abacus23
Kiloran,

I have been trading the dogs of the ftse for some time, I haven't quite got to your figures, but they have done well. :)

Can you confirm how you "tweak" / remove stocks, do you remove if the dividend factor is not covered very well? Or another way?

This years dogs for me are:
Centrica, Direct Line, Next, SSE, TW, Barratt, Glaxosmithkline, Lloyds, Marks and Spencer, BT.

I chose Next as they have a special dividend and TW as they are projecting around 7%, rather than the 3% it states.

Is this what you bought, or did you choose Legal and general and BP for past history performance. :shock:

Re: Dogs of the FTSE?

Posted: January 30th, 2018, 2:29 pm
by kiloran
abacus23 wrote:Kiloran,

I have been trading the dogs of the ftse for some time, I haven't quite got to your figures, but they have done well. :)

Can you confirm how you "tweak" / remove stocks, do you remove if the dividend factor is not covered very well? Or another way?

This years dogs for me are:
Centrica, Direct Line, Next, SSE, TW, Barratt, Glaxosmithkline, Lloyds, Marks and Spencer, BT.

I chose Next as they have a special dividend and TW as they are projecting around 7%, rather than the 3% it states.

Is this what you bought, or did you choose Legal and general and BP for past history performance. :shock:

I just used the methodology I've used for the past couple of years..... Ranked the FTSE100 by historic and forecast yields (from Digital Look) and selected based on the combined ranking. Sometimes in the past I've rejected some companies based on my smell test (I think Carillion would have been rejected!), but this year I just used the ranking as-is:

Code: Select all

Name                  | EPIC | Div Yield | Fcst yield | Hist rank | Fcst rank | Total rank
Centrica              | CNA  |     8.74% |      8.59% |         1 |         1 |          2
SSE                   | SSE  |     6.92% |      7.24% |         3 |         4 |          7
GlaxoSmithKline       | GSK  |     6.05% |      6.14% |         4 |         7 |         11
Marks & Spencer Group | MKS  |     5.94% |      5.91% |         5 |         9 |         14
BP                    | BP.  |     5.66% |      5.79% |         7 |        10 |         17
BT Group              | BT.  |     5.67% |      5.65% |         6 |        13 |         19
Royal Dutch Shell 'B' | RDSB |     5.54% |      5.72% |        10 |        12 |         22
Vodafone Group        | VOD  |     5.57% |      5.59% |         9 |        15 |         24
Legal & General Group | LG.  |     5.25% |      5.64% |        12 |        14 |         26
Imperial Brands       | IMB  |     5.39% |      5.41% |        11 |        18 |         29

Is this the year that my methodology bites me in the bum?

--kiloran

Re: Dogs of the FTSE?

Posted: January 30th, 2018, 3:01 pm
by abacus23
I did look at digital look, but found the forecasts of some others which looked promising.

Below are forecasts:

Direct Line 7.7%
TW 7.6%
Barratt 7.1%
Lloyds 6.3%
Next 7.9%

It will be interesting to compare at the end of the year.

Do you follow any other strategies?

I looked into, dogs of the dow, to do a similar fund, but the return was nothing like that of the FTSE.

Lets hope this year continues. :P

Re: Dogs of the FTSE?

Posted: February 5th, 2018, 8:50 pm
by Hypster
I use the methodology described by Peter Temple in the Investors Chronicle (https://www.investorschronicle.co.uk/20 ... ticle.html):

In summary:
-Take the top ten highest yielders from the FT30 then choose the five lowest priced.
-Hold for a year.
-Repeat

Re: Dogs of the FTSE?

Posted: February 6th, 2018, 7:51 am
by abacus23
Hypster,

Many thanks for your methodology.

This is more conservative, but it may have avoided the likes of Capita and Pearson in the past.

I may do a back test. :D

Re: Dogs of the FTSE?

Posted: February 6th, 2018, 2:32 pm
by tjh290633
Hypster's methodology is the original one, with the FT30 replacing the DOW. I used it to pick shares for my ISA in 1999, when it had to run in parallel with my PEP. I eliminated any shares already in my PEP.

From memory, the 5 shares were Allied Domecq, British Airways, Blue Circle, RSA and Tate. I also threw in Stagecoach for interest. I followed the theory, but did not do the annual rebalancing. Only TATE has survived. ALLD split off its pubs and then got taken over, leaving me with BASS as a result. BCI was also taken over and was replaced by UU. BAY stopped paying dividends and was sold, replaced by George Wimpey, in turn becoming TW. RSA was sold when it stopped paying dividends recently, being replaced by LGEN. I can't recall immediately what replaced SGC*, but it was sold when the yield had fallen below 2% as a result of the price rising - a good move as it turned out.

I have a feeling that it was best at picking out takeover candidates.

TJH

* Just looked it up - it was William Hill WMH

Re: Hypster's Dogs of the FT30

Posted: March 30th, 2018, 9:41 am
by Hypster
I reset my Dogs portfolio on the 1st April each year but with the Easter holiday this weekend it means yesterday was the final day for my 2017-18 portfolio. Here are the results:

FT30      | -4.15%
FTSE | -3.64%
Portfolio | -2.75%
Income | 5.34%


Although the capital fell by 2.75% this was less that the fall in the index as a whole and with a yield on cost of 5.34% I'm happy.

The selections for next year are as follows (the trades will go through when the market opens on Tuesday):

Re: Dogs of the FTSE?

Posted: April 2nd, 2018, 10:05 pm
by andyalan10
I'd be very happy with buying into VOD and BP at their current prices (I have held for ages).

Not so sure about M&S, but not one I follow closely.

Andy

Re: Dogs of the FTSE?

Posted: April 3rd, 2018, 9:57 am
by dspp
tjh290633 wrote:Hypster's methodology is the original one, with the FT30 replacing the DOW. I used it to pick shares for my ISA in 1999, when it had to run in parallel with my PEP. I eliminated any shares already in my PEP............ I followed the theory, but did not do the annual rebalancing.


I think the annual rebalancing was the key to this as a mechanical trading strategy. From memory it had mixed success as DoD, even more mixed as DoF.

regards,
dspp

Re: Dogs of the FTSE?

Posted: April 3rd, 2018, 1:21 pm
by abacus23
NIce to see the thread comments. :D

Currently down 5% since Jan 18, dividends should hopefully make it up.

The FTSE has taken a beating this year.

Re: Dogs of the FTSE?

Posted: December 31st, 2018, 5:22 pm
by kiloran
The results for my Dog-like portfolio for 2018:

Stock   | Total Return
BP. | -0.3%
BT.A | -8.8%
CNA | 0.2%
GSK | 13.1%
IMB | -20.1%
LGEN | -9.4%
MKS | -16.7%
RDSB | -2.9%
SSE | -11.2%
VOD | -30.3%
Total | -8.6%
|
FTSA | -13.5%
FTSE100 | -12.9%

Total return includes dividends. A few dividends will be paid in January but won't make a massive difference.

So, the first year I've had a loss (since 2012), but once again I'm nicely ahead of the FTSE100 and the All-share. And the current portfolio value is still 2.5 times what I put in, so I can't complain.

I'll work on selecting the 2019 portfolio over the next few days

--kiloran

Re: Dogs of the FTSE?

Posted: December 31st, 2018, 5:37 pm
by Lootman
kiloran wrote:The results for my Dog-like portfolio for 2018:

You might care to follow the performance of a "Dogs of the Dow" ETF ( DJD) that trades in the US, investing in the top ten yielders in the DJIA and rebalancing every January. It's performance versus the market since launch is shown below. It kept pace with the market until the recent downturn, but is currently ahead. Unlike the UK market, the US index is not dominated by high yielders, so this may be a tougher test for a "Dogs" strategy than a UK comparison:

https://finance.yahoo.com/quote/DJD/cha ... 1dfQ%3D%3D