The Dogs: A Contrarian Value Strategy

Various studies show buying out of favour stocks can be a good strategy. Investors tend to over rate their ability to extrapolate stock prices based on recent price performance. They become too optimistic when prices are high and too pessimistic when low. The Dogs aims to take advantage of the effect of this kind of investor emotional overreaction, using stocks which are drawn from a high quality blue chip population.

Our Dogs of the FTSE ^TM strategy involves investing into the fifteen stocks with the highest prospective yields in the FTSE ^TM 100 Index. The portfolio is rebalanced quarterly, to align with changes in the FTSE ^TM 100 as determined by the FTSE ^TM Actuaries.

Companies generally try to avoid reducing dividends, so those with high yields tend to be those whose prices have fallen and are usually out of favour. In a population of smaller sized stocks, many high yielders could be in danger of financial collapse. This is much less likely in the group of the 100 largest stocks listed on the London Stock Exchange, which are often global giants with enormous resource and whose sheer size amply demonstrates an ability to prosper. This population of large robust stocks is likely to be a safer place to look for excessive undervaluation than a population of small less secure ones.

Dogs of the FTSE^TM 100 Fund' is a sub-fund of the Elite Henderson Rowe Portfolio Fund. The Company is an investment company with variable capital incorporated under the OEIC Regulations.

The Authorised Corporate Director of the Fund is WAY Fund Managers Limited (Authorised and Regulated by the Financial Services Authority).

The Investment Advisor to the Fund is Henderson Rowe Limited (Authorised and Regulated by the Financial Services Authority).