For 2014: Go With the Dogs of the Dow

Back in 1991, Michael O'Higgins was in his 13th year of running his O'Higgins Asset Management when he published a book that got millions of casual investors interested in the stock market. O'Higgins claimed that by investing in the 10 highest-yielding stocks in the Dow Jones Industrial Average at the beginning of every year, one could outperform the market. Because the Dow represents stocks of solid, well-entrenched companies, the highest-yielding stocks are usually the ones that have fallen on hard times or are at the bottom of a business cycle. By buying these stocks -- the theory goes -- investors are getting bigger dividend payouts and investing in companies that will soon be on the upswing.

The theory was back-tested all the way back to 1929. If someone had invested $1 in the "Dogs of the Dow" back then, they would now be sitting on $9,451 -- not including commissions and taxes. That's a whopping 600% more than if the money were simply invested in the S&P 500. Now, the year isn't quite over yet, so this list could change. But if 2013 were to end today, here is the list of stocks you'd need to buy to follow the Dogs of the Dow strategy: AT&T (NYSE: T) 5.2%, Verizon (NYSE: VZ) 4.3%, Intel (NASDAQ: INTC) 3.6%, Merck (NYSE: MRK) 3.5%, McDonald's (NYSE: MCD) 3.4%, Chevron (NYSE: CVX) 3.3%, Cisco (NASDAQ: CSCO) 3.2%, Microsoft (NASDAQ: MSFT) 3%, Pfizer (NYSE: PFE) 3% and DuPont (NYSE: DD) 2.9%.

Source: Motley Fool

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