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%
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