Thursday, December 31, 2009

Dogs will be dogs!

In December last year, I compiled a list called the "Dogs of Bursa Malaysia" for 2009, which include Digi.com, Maybank, Public Bank, YTLPower, KLKepong, Sime Darby, Berjaya Sport Toto, BAT, Tanjong & Petronas Dagang. The "Dogs of Bursa Malaysia" is based on the investment strategy popularized by Michael O’Higgins in 1991 which is called the "Dogs of the Dow". This strategy proposes that an investor annually selects for investment the ten Dow Jones Industrial Average stocks whose dividend is the highest fraction of their price. For more, see my earlier post (here).

Over the past one year, our FBM-KLCI has gained 45% from 876.75 as at 31/12/2008 to 1271.12 as at 30/12/2009. From the table below, we can see that the top 5 "dogs" (Digi.com, Maybank, Public Bank, YTLPower & KLKepong) gained 45% but the 2nd batch of "dogs" (Sime Darby, Berjaya Sport Toto, BAT, Tanjong & Petronas Dagang) managed to etch out a gain of only 31%. On average the Top 30 stocks gained only 40%. If the dividend received is included, their average gain is 46%- just 1% point more than FBM-KLCI.

The top 5 performers amongst the Top 30 stocks are MMC, CIMB, AMMB, Genting & KLK. The poorest performers are MAS, BAT, MISC, Petronas Gas & YTL Corp. The stock with the highest dividend yield is Berjaya Sport Toto at 16.8%.


Table: Dogs of Bursa for 2009

Based on this poor result, I think there is no need to compile a list of "Dogs of Bursa Malaysia" for 2010.

2 comments:

PEGGY Method said...

Hi Alex, just for common understanding, if the KLCI is 1000, after one year 1200.

That means if i hold all the KLCI stocks weighted % (some more some less due to weightage) in my portfolio, I made 20% gain INCLUDING dividend, right?

There was once a financial analyst said excluding dividend. But after explaining to him with a workout, he agreed that it is including dividend.

That is why we didn't see any big changes in KLCI when there is a big dividend because KLCI always adjusted for dividend.

Alex Lu said...

Hi Polite Market

If FBM follows S&P500, then it would adjust for the following:

* Stock split
* Share issuance#
* Share repurchase#
* Special cash dividends
* Company change
* Rights offering
* Spin-offs
[# Change greater or equal to 5%]

So, our index is not adjusted for Normal dividends. It is only adjusted for Special cash dividends.