subject: Introduction to DOTS Seasonal Investment Strategy [print this page] The Dogs of the Season (DOTS) investment strategy came as a result of my experimenting with seasonal investing and fundamental analysis. Seasonal investing is investing during the favorable season which typically runs from November to May (Sell in May and go away"). Several studies confirmed that most market declines came in the unfavorable season, and that investing only during the favorable season is more profitable than buy and hold" strategy. These studies, however, rely on market indices which is not good enough for me because if the market is overpriced it will sooner or later go down and the loss could be considerable even during thefavorable season. To minimize the possibility of large losses DOTS uses fundamental analysis to select strong companies and underpriced or reasonably priced stocks.
TIMING THE MARKET
If you buy reasonably priced or underpriced stocks of good companies you can still suffer significant losses if you buy them at the wrong time. Since the favorable season does not begin on the same day every year, DOTS strategy usesSeasonal Timing Strategy to determine when to buy and sell the stocks.
CHOOSING THE STOCKS
The process of choosing 4 stocks to buy follow a certain set of rules. First, all chosen stocks are part of Barron's 400 Index. The Barron's 400 Index contains 400 companies which are ranking highest based on fundamentals-related scores. DOTS strategy evaluates certain fundamental indicators to select the 4 stocks to buy. The evaluation proccess is the main reason why the strategy hasn't suffer losses even in the 2008-2009 recession when Dow,S&P,Barron's 400 etc. had double-digit negative returns.
THE PERFORMANCE
The DOTS performance in the last 5 years was:
2009-2010: +18.72%
2008-2009: + 2.70%
2007-2008: +25.31%
2006-2007: +37.08%
$10,000 investment in DOTS in October 2006 would have grown your portfolio 109% to $20,943 by October 2010 if gains and dividends were reinvested.
SEASON 2010-2011
The investing season 2010-2011 is almost here. If you like the strategy you can visit our site www.dogsoftheseason.com and get alerts, more info etc.
Introduction to DOTS Seasonal Investment Strategy
By: Tomo Helman
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