Purebreads And Fleabags - Investment Ideas

The end of the calendar year is a symbolic time for many people because it offers an opportunity to reflect on both shortcomings and achievements. This happens to be particularly true for the investment community. End-of-year results are often used as a measuring stick to differentiate between strategies that will remain unchanged and others that need to be adjusted.

Dow Trading Strategies

With this large-scale strategic evaluation in play every year, a number of high-profile trading strategies tend to be cast into the spotlight, one of the most popular being the classic “Dogs of the Dow.”

Since 1928 the Dow Jones Industrial Average (^DJI) has consisted of 30 top U.S. companies. Not only did this create a stock index for investors to follow, but it also spawned countless numbers of Dow related trading strategies. The Dogs of the Dow targets the 10 highest yielding Dow stocks to try and outperform the major indeces, with a once-per-year re-balancing.

Zacks and the Dow

But this year, we decided to put a Zacks twist on the Dow to try and unlock the power of the index. Instead of looking for the highest yielding stocks, we are going to use the Zacks screening tool Research Wizard to identify stocks with the following 2 characteristics.

• High One-year EPS Growth estimates
• Low P/E using next-year earnings estimates

This screen captures two key ingredients of a great stock, growth and value. Out of the ten stocks from the Dow 30 that we asked our screen to return, we chose 4 that had the most attractive combination of our two featured components. Take a look below.

Awesome Dow Stocks

IBM Corp.’s (IBM) next-year estimate is pegged at $9.23 per share, a very respectable 6% earnings growth projection in a tough market. With shares trading at $83, this stock’s forward P/E multiple of 9X makes it an attractive value proposition. IBM is operating in a Zacks Industry Rank #36 out of 217. Take a look at the full research report below.

McDonald’s Corp. (MCD) has plenty of momentum going into the new year, fresh off the heels of an impressive performance in 2008. Analysts are looking for full-year earnings of $3.81 per share, a 5% earnings growth projection. McDonald’s multiple runs a little higher, but keep in mind, this stock pays a dividend to help cushion your bottom line.

Johnson & Johnson (JNJ) has been able to produce consistent earnings in a choppy market, having beat estimates in each of the last four quarters. JNJ operates in a Zacks Industry Rank #9 and is yielding a 3% dividend.

Wal-Mart Stores (WMT) is one of only 2 Dow stocks that is trading in the green since the market topped off in October 2007. Analysts expect more of the same in 2009, with the next-year estimate projecting 8% earnings growth. This stock carries a dividend as well and trades at 15X forward earnings.

Conclusion

The new year is the perfect time to re-balance your portfolio. When you have access to powerful tools and resources you can build a portfolio perfectly tailored to your individual investment needs.

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