Using Performance To Identify The ‘Dogs Of Tech’

Value investing has become more popular, as evidenced by the record low PE dispersions we’ve had for months now, but buying the cheapest stocks on the market may not work equally well in every sector. “Our analysis suggests that a Dogs of the Dow/S&P strategy works differently for technology – historically the least expensive stocks in tech have not yielded outperformance in the following year, but the 10 biggest underperformers in tech in a given year have collectively materially outperformed the following year,” writes Bernstein Research senior analyst A.M. Sacconaghi Jr.

Dog strategy for tech stocks

According to Sacconaghi, following a dog strategy (buying the 20 cheapest stocks at the beginning of every year) beats the market by 700 – 1000...