2005 Dogs of the Dow

I will begin to analyze some general market trends and patterns going into 2006, but I won't start trading with the virtual million dollar portfolio until January 5th, 2006.

The Dow Jones Industrial Average as a whole currently only has a price/earnings ratio of 18.98. After the typical end of year selloff period, this may present a good time to take advantage of unique buying opportunities.

A good place to start would be to rank the Dow in a list by the stocks' respective dividend yields, from highest to lowest.
This method is known as the Dogs of the Dow.
At the MSN Money Power Searches site they rank the stocks for you,
and also factor in stocks with the lowest forward price/earnings ratios.

Keep in mind that this is just a starting point, any good investor will then go on to conduct due diligence, by taking a careful look at the fundamentals and balance sheets of each of the stocks that catch their attention.

One particular bargain that jumps out from this list is Pfizer (PFE).
The dividend yield ratio (calculated by dividing the annual dividend rate by the stock price) is currently 3.90%.
This is extremely high, compared to the S&P 500's dividend yield ratio of only 1.76%.
Pfizer's current price/earnings ratio is 21 which is a bit high,
but their forward price earnings ratio is only 12.2.

Though Pfizer might not be a buy right at this particular moment because its P/E is above 20, it is definitely ranked highly on my watchlist of potential buys.

Some Great Financial Reads

Here are some great financial books about investing that I have completed recently:

The Intelligent Investor:
The Definitive Book on Value Investing, Revised Edition
- Benjamin Graham (former Columbia professor of Warren Buffett), edited by Jason Zweig

Jim Cramer's Real Money:
Sane Investing in an Insane World
- James J. Cramer

What Works on Wall Street:
A Guide to the Best-Performing Investment Strategies of All Time,
Revised and Updated Third Edition
- James P. O'Shaughnessy

Rich Dad, Poor Dad
(also Rich Dad's Prophecy, and Rich Dad's Guide to Investing)
- Robert Kiyosaki

Though by no means do I agree with every sentiment expressed in all of these books, they have proven to be a very good formation for a basic investing thought process:

• start with a grounding in the fundamentals of value investing
• allocate a portion of the portfolio to speculative investing
• continue to analyze market trending patterns
• always be looking for different types of new and creative investment vehicles
  

Managing a virtual Million Dollar Portfolio

I will use this blog to track my 10-week performance of a virtual million dollar portfolio.
This will help me remember and explain why I made certain trades when I did, and analyze my results at a later date.

During the last 10-week cycle that I analyzed my virtual portfolio performance (offline), this was my final result:

9/9/2005 - $1,000,000.00
11/18/2005 - $1,082,951.37

Over the previous 10-week period of time,
I had returned an approximate 8.3% return on my virtual investment.
If I had continued with this particular porfolio, at that rate of return,
I would have had a gain of about 43.13% by year's end.
In other words, I would have made $431,300.00,
for a total ending virtual portfolio value of $1,431,300.00.