Dogs of the Dow

Examples of Dogs of the Dow in the following topics:

• Value of a High Dividend

  • The Dogs of the Dow strategy is a well known and rather extreme strategy that incorporates high dividend yields.
  • The strategy dictates that the investor compile a list of the 10 highest dividend yielding stocks from the Dow Jones Industrial Average and buying an equal position in all 10 at the beginning of each year.
  • At the end of each year, the investor finds the 10 highest dividend yield stocks again, and reallocates their positions so as to have an equal position in all 10 Dogs of the Dow.
  • The Dogs of the Dow made a compounded annual return of 18% from 1975 to 1999 outperforming the market by 3%.
  • Proponents of the Dogs of the Dow strategy argue that blue chip companies do not alter their dividend to reflect trading conditions.

• Learn as you go

  • Lack of experience in a change situation is not an excuse for inactivity.
  • Indeed, most successful efficiency initiatives begin with a handful of individuals stepping into the unknown with little more than common sense, a healthy understanding of their business (and its customers) and an overwhelming desire to succeed.
  • Ken Tannenbaum, a technology associate at Dow Chemical who has successfully led several efficiency projects, explains this concept as follows: Most of the work on efficiency [at Dow Chemical] is done by Dow employees.
  • We have utilized consultants from time to time to validate our assumptions or to give us an opportunity to ensure we did not miss anything, but in most of our plants, [because] the processes are very specific, external experts cannot bring much additional help. ' (Communication with Ken Tannenbaum [formerly] of Dow Chemical)
  • Ken went on to say that the same techniques used every day to change, improve and maintain Dow Chemical's numerous plants are the same techniques Dow uses to foment sustainability initiatives because when it comes to change there is no sense reinventing the wheel every time.

• Preparing for change

  • Breadth means that the change must take place across the entire organization (e.g. every department and/or person must be made aware of the need for change).
  • Involving employees also taps into a wider knowledge base, initiates motivation and reduces the chances of something being overlooked.
  • In 2003, for example, Dow Chemical achieved hundreds of millions of dollars in cost savings thanks to the pursuit of employee-led efficiency practices at its facilities in Texas and Louisiana.
  • As part of the change process, employees worked alongside managers from the highest levels of the company.
  • (Communication with Ken Tannenbaum [formerly] of Dow Chemical)

• Putting benefit perception and service together

  • Safechem, a division of Dow Chemical, is a solvent distribution company that incorporates benefit perception and service into a portfolio range offered to general industries across Europe.
  • (www.dow.com/safechem/about/story.htm) These services include waste collection and refinement, parts washing, oil collection, and chemical recovery and disposal.
  • Instead, Safechem focuses on the benefits its customers seek by travelling to the place where its customers work and applying their needed solvents for them.
  • Afterwards, Safechem cleans up the work site, transports the used solvents back to Safechem, and cleans and/or recycles everything that was used – including the solvents, the washers, the spray guns and the steel drums – in preparation for the next customer.
  • By selling square metres of cleaning' rather than gallons of solvents, Safechem: (1) extends the life of its materials, (2) focuses on the benefits its customers seek, and (3) reduces waste and costs by reusing its materials instead of having to make (or buy) more.

• "Black Monday" and the Long Bull Market

  • On Monday, October 19, 1987, the value of stocks plummeted on markets around the world.
  • The Dow Jones Industrial Average fell 22 percent to close at 1738.42, the largest one-day decline since 1914, eclipsing even the famous October 1929 market crash.
  • In the early 1990s, the Dow Jones Industrial Average topped 3,000, and in 1999 it topped the 11,000 mark.
  • What's more, the volume of trading rose enormously.
  • Swings of more than 100 points a day occurred with increasing frequency, and the circuit-breaker mechanism was triggered on October 27, 1997, when the Dow Jones Industrial Average fell 554.26 points.

• Ensuring that proper goals and objectives are established

  • When establishing its sustainability objectives, Dow Chemical could boast support from the company's CEO as well as shop-floor workers, clients, suppliers and environmentalists.
  • (Email correspondence with Ken Tannenbaum [formerly] of Dow Chemical) Excluding input from any one of these groups was seen as asking for trouble – something the Monsanto corporation discovered only too well during the 1990s.
  • Around this time, Monsanto developed a bold new vision of providing sustainable agricultural products that could resist pests and diseases without the use of chemicals.
  • This seemed to be an admirable objective from the viewpoint of business administrators; however, the company started developing genetically modified seeds to achieve its aims without first asking its customers what they thought about this plan.
  • In other words, by giving its customers what it thought they wanted instead of asking what they actually wanted, Monsanto set off in the wrong direction and paid a heavy price for it.

• Chapter Questions

  • Please explain the purpose of the Dow Jones Industrial Average and its usefulness.
  • Identify examples of moral hazard and adverse selection for a person buying car insurance.

• Hypothesis testing when H0 : p1 = p2

  • Set up hypotheses to test whether 2,4-D and the occurrence of cancer in dogs are related.
  • In your hypotheses for Exercise 6.14, the null is that the proportion of dogs with exposure to 2,4-D is the same in each group.
  • We will use p to represent the common rate of dogs that are exposed to 2,4-D in the two groups:
  • H 0 : the proportion of dogs with exposure to 2,4-D is the same in "cancer" and "no cancer" dogs, p c −p n = 0; H A : dogs with cancer are more likely to have been exposed to 2,4-D than dogs without cancer, pc −pn > 0.
  • Summary results for cancer in dogs and the use of 2,4-D by the dog's owner.

• Basic Principles of Classical Conditioning: Pavlov

  • The best-known of Pavlov's experiments involves the study of the salivation of dogs.
  • Pavlov was originally studying the saliva of dogs as it related to digestion, but as he conducted his research, he noticed that the dogs would begin to salivate every time he entered the room—even if he had no food.
  • The dogs were associating his entrance into the room with being fed.
  • After a period of time, Pavlov began sounding the buzzer without giving any food at all and found that the dogs continued to salivate at the sound of the buzzer even in the absence of food.
  • The conditioned response, therefore, was the salivation of the dogs in response to the ringing of the bell, even when no food was present.

• Historical Returns: Market Variability and Volatility

  • Historical analysis of markets and of specific securities is a useful tool for investors, but it does not predict the future of the market.
  • For example, the Dow Jones Industrial Average (DJIA) has generally followed an upward trend from 1900-2009 .
  • The failure of one company affects all the companies who purchase from it or sell to it, which in turn affects all the companies that rely on them.
  • These types of interlinkages are a cause of the overall market variability and volatility.
  • The Dow Jones Industrial Average has generally increased overall since 1900, but its past performance is not a guarantee of future performance.