Yo, dawg, listen up.
Ed Ponsi has been eyeballing the stock market for quite a while now and he has some thoughts about an investing strategy known as Dogs of the Dow.
Related: The 5 worst-performing stocks on the Dow Jones Industrial Average in 2024
The idea, the veteran trader said in TheStreet Pro, is that you buy last year’s worst-performing stocks in the Dow Jones Industrial Average at the start of the year, and hold the shares for one full year.
Money manager Michael B. O’Higgins is credited with coining the term Dogs of the Dow in his 1991 book “Beating the Dow.”
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“It’s a defensive strategy, and playing defense isn’t popular these days,” Ponsi said. “Risk has been rewarded in recent years. There’s an entire generation of investors that hasn’t experienced a serious downturn, a fact that makes me wonder how they’ll handle it when it comes.”
During difficult times, Ponsi said, the Dow provides a less-volatile alternative to the other major indexes.
In 2022, for example, the S&P 500 lost 19.44%, while the Dow declined 8.78%.
The Dow hasn’t had a double-digit negative year since 2008, when it fell 33.84%. But that year it still managed to outperform the S&P 500, which dropped 38.49%.
Ponsi said one version of the strategy involved buying only the worst-performing stock in the index.
A veteran trader has been tracking Boeing’s stock performance.
Veteran trader notes Boeing’s rough year
He was surprised to see that Boeing (BA) had a decent stock chart and had outperformed the major indexes for the past month.
“I know what you’re thinking,” he said. “How can Ed even mention Boeing when it’s one of the most hated stocks on the planet? Boeing shares lost about 30% in 2024, while the S&P 500 gained 23.3%.”
More stocks’ performance in 2024
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“Believe it or not, Boeing is exactly the type of name that might be in play when using this strategy,” Ponsi added. “Boeing is so widely reviled that it just might surprise us in 2025.”
This observation might come as a bit of a jolt to investors given the dreadful headlines that have been dogging Boeing’s footsteps.
“While Boeing had a rough year, it beat the indexes soundly in December, gaining nearly 14%,” Ponsi said. “Shares of the Virginia-based airplane manufacturer and defense contractor recently hit a four-month high.”
Rough year indeed. The aerospace stalwart, the Dow’s worst performer in 2024, most recently is reeling from the Dec. 29 crash of a Jeju Air Boeing 737-800 in South Korea, which killed 179 people.
Video showed the aircraft, without its landing gear deployed, crash-landing on its belly and overshooting a runaway at South Korea’s southern Muan International Airport before slamming into a concrete fence and bursting into flames.
GE Aerospace (GE) , part of a joint venture that made the engines of the Boeing plane involved in the crash, joined the investigation as Seoul extended by a week special inspections of all 101 Boeing 737-800 jets, Reuters reported.
The inspections had initially been set to wrap up on Jan. 3, but a transport ministry official said further checks would investigate matters such as whether airlines spent sufficient time on maintenance and secured parts for repairs, the news agency reported.
In addition to the Jeju Air disaster, a fuselage panel blew out of an Alaska Airlines jet in early 2024, Boeing’s largest union went on strike for seven weeks, and two astronauts were stuck in orbit when their Boeing Starliner space capsule malfunctioned.
Analyst revises Boeing stock price target
In July, Boeing agreed to plead guilty to conspiracy to commit fraud for deceiving the Federal Aviation Administration regulators who approved the 737 Max, the company’s best-selling aircraft. The Max was involved in two fatal crashes in 2018 and 2019.
Boeing said in a news release that it had made improvements “in multiple areas including safety culture, training, simplifying their processes, and eliminating defects.”
“We’re all aware of Boeing’s troubles, but the stock had a great December,” Ponsi said. “Why did this happen? Since retail traders normally aren’t able to move the market, I’d speculate that one or more institutions have decided to buy the stock.”
Other analysts have been issuing research reports on Boeing recently.
On Jan. 2 Deutsche Bank analyst Scott Deuschle raised the investment firm’s price target on Boeing to $215 from $184 and affirmed a buy rating on the shares.
The analyst said Deutsche Bank was positive about the original-equipment aerospace and defense complex entering 2025, citing improving production momentum at Boeing exiting the union strike and extensive buffer inventory of engines and clean fuselages to support the ramp.
In addition, improved engine availability from CFM International, the joint venture between GE Aerospace and Safran Aircraft Engine, should support the narrow-body ramp at Airbus (EADSY) , in turn helping meet demand, Deuschle said.
The analyst said that the risk/reward profiles look most favorable on Carpenter Technology (CRS) and Howmet Aerospace (HWM) within commercial broadly. But he added that if Boeing can continue to build operational momentum, then its return outlook “could be excellent as well.”
JP Morgan analysts noted on Dec. 30 that the 737NG family, which includes the 737-800, was first delivered in 1997, has a strong safety record and has been one of the most prevalent aircraft in the global fleet.
And Wolfe Research said that aside from the name association of being a Boeing 737, or more specifically a 15-year-old 737-800, the tragic crash of Jeju Air flight 2216 should have no read-through to Boeing’s stock and the company’s “current struggles to ramp up its production” of the 737 Max.
“We can only speculate whether that buying will continue,” Ponsi said. “If it doesn’t, the stock will slide back beneath its key moving averages, and we will know it is time to exit the trade. If the buying does continue, we may have boarded Boeing just before takeoff.”
Related: Veteran fund manager delivers alarming S&P 500 forecast
