THE O'HIGGINS STRATEGY

O'Higgins, a US fund manager, outlined his strategy in his book Beating the Dow.

The system is simple. Get a list of the 30 stocks in the index. Take the 10 highest-yielding stocks. Looking at these 10, invest equal amounts in the five stocks with the lowest share prices . Leave alone for a year. On the first anniversary of your selection, review the list again. Reinvest the portfolio plus the accumulated dividend income in the new selections. On the second anniversary do the same thing. And so on.

According to O'Higgins, shares selected according to his system had produced an average annual performance five percentage points better than the Dow Jones over the period from 1961 to 1995, when dividend income was included in the calculation. It doesn't work every year, but over time its results are impressive.

2009 List (prices as of close of 31 Dec 2008)

Standard Charted: 875p

HSBC Holding: (662p)

BP: (526p)

Barclays: (153.4p)

BT Group: (135.2p)

RBS was at number 3 in above list but has been excluded as they will not be paying any dividends this year.

Another list from FTSE 30, which is not based on the market capitilisation but average share price is

BT: (135.2p)

GKN: (97p)

ITV: (29.75p)

Ladbrokes: (185p)

Logica: (69p)

2008 list (price at start and end of year)

ITV: 85.4 - 39.75 = down 53%
BT: 272.75 - 135.2 = down 50.4%
GKN: 282 - 97 = down 65%
Logica: 117.75 - 69 = down 41%
Royal Sun & Alliance: 140.21 - 138.1 = down .7%

Grim outlook

In UK the outlook is very grim. There are more and more companies going into administration. It was Woolworth earlier this month, yesterday Whittard and today Zavvi.

Most of the stores on the high street have started the Christmas sales very early this year. The consumers are just not willing to spend.

If this continues very soon we will have ghost town centers. There won't be many business left on the high street.

The house prices continue the downward spiral.

The banks are just not lending money to anyone though they are ready to give you credit card with 0% offer for 12 months.

Current theme is spend sensibly, stick to your current job and stop listening to Robert Preston. That guy makes thing sound really awful.
Listen to Johny Walker instead...

Comparison website

Do you use comparison website to compare car insurance, best saving rate, energy or cheap mortgage rate? If yes then beware of the information you enter on these websites. Some of the small players can use your information to do a credit check even without your consent. Please note that these website are not regulated.

I also use these price comparison website but I tend to stick with market leaders and give fictitious information just to get an idea on the quote. Then I contact the insurance company or bank to get the deal.

Please note the business model these website use is that they get paid by the providers and not by the consumers.

New to investment?

Are you thinking of investing (not saving) and are lost for options, then this is the book for you.


Please note that this book covers mostly UK stock market (FTSE). It starts with very basic of investing in stocks and then goes on to explain pros and cons of more complex investment options. Some of these options are available to only institutions investing big money.

What I liked about this book was the wealth of resources it provides. I would say everyone should read this book as it helps to clear your fundamentals.

High volume breakouts

These are high volume breakouts today

RBS - after US broker Merrill Lynch resumed coverage with a “buy” recommendation and a price target of 93p.

Tesco - Third quarter sales better than expected especiallty in the current market conditions

British Airways - Merger talks with Quantas. Remeber they had been merger talks with Spanish carried Iberia in past.

In normal market conditions these shares would have been a good bet. In current market condition I would say "trade with caution".

BA has been on my watch list when it was 108p. I guess it might be too late now.

There will loads of opportunities to make money when market stabilises....