Hey, friend, listen.
Ed Ponsi has been watching the stock market for quite some time and has some ideas about an investment strategy known as Dogs of the Dow.
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the idea, the <a target="_blank" href="https://pro.thestreet.com/trade-ideas/heres-why-im-buying-one-of-the-most-hated-stocks-on-the-planet”>veteran trader
Financial manager Michael B. O'Higgins is credited with coining the term Dogs of the Dow in his 1991 book “Beating the Dow.”
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“It's a defensive strategy, and playing defense is not popular nowadays,” Ponsi said. “Risk has been rewarded in recent years. There is an entire generation of investors who have not experienced a serious recession, a fact that makes me wonder how they will handle it when it comes.”
In difficult times, Ponsi said, the Dow provides a less volatile alternative to other major indexes.
In 2022, for example, the S&P 500 lost 19.44%, while the Dow Jones fell 8.78%.
The Dow hasn't had a double-digit negative year since 2008, when it fell 33.84%. But that year it still managed to outperform the S&P 500, which fell 38.49%.
Ponsi said one version of the strategy involved buying only the worst-performing stocks in the index.
Veteran trader highlights Boeing's tough year
He was surprised to see that Boeing (bachelor of arts) It had a decent stock chart and had outperformed the major indices over the last month.
“I know what you're thinking,” he said. “How can Ed even mention Boeing when it's one of the most hated stocks on the planet? Boeing stock lost about 30% in 2024, while the S&P 500 gained 23.3%.”
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“Believe it or not, Boeing is exactly the kind of name that could be in play by using this strategy,” Ponsi added. “Boeing is so reviled, it could surprise us in 2025.”
This observation might come as a bit of a surprise to investors, given the dire headlines that have been following in Boeing's footsteps.
“While Boeing had a difficult year, it greatly outperformed the indexes in December, gaining almost 14%,” Ponsi said. “Shares of the Virginia-based aircraft manufacturer and defense contractor recently hit a four-month high.”
Really tough year. The aerospace stalwart, the Dow's worst performer in 2024, is freshly recovering from the Dec. 29 crash of a Jeju Air Boeing 737-800 in South Korea, which killed 179 people.
The video showed the plane, without its landing gear deployed, making a forced landing upside down and overtaking a runaway runway at Muan International Airport in southern South Korea, before crashing into a concrete fence and exploding in flames
GE Aerospace (G.E.) part of a joint venture that made the engines of the Boeing plane involved in the crash, joined the investigation as Seoul extended special inspections of all 101 Boeing 737-800 planes for a week, Reuters reported.
Inspections were initially scheduled to conclude on Jan. 3, but a Transport Ministry official said further checks would investigate issues such as whether airlines spent enough time on maintenance and secured parts for repairs, the news agency reported.
In addition to the Jeju Air disaster, a fuselage panel on an Alaska Airlines plane exploded in early 2024, Boeing's largest union went on strike for seven weeks, and two astronauts were trapped in orbit when their Boeing Starliner space capsule failed. it worked correctly.
Analyst reviews Boeing stock price target
In July, Boeing agreed to plead guilty to conspiracy to commit fraud for misleading Federal Aviation Administration regulators who approved the 737 Max, the company's best-selling plane. The Max was involved in two fatal crashes in 2018 and 2019.
Boeing said in a news release that it had made improvements “in multiple areas, including safety culture, training, streamlining its processes and eliminating defects.”
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“We're all aware of Boeing's problems, but the stock had a great December,” Ponsi said. “Why did this happen? Since retail traders typically can't move the market, I would speculate that one or more institutions have decided to buy the stock.”
Other analysts have recently published research reports on Boeing.
On Jan. 2, Deutsche Bank analyst Scott Deuschle raised the investment firm's price target for Boeing to $215 from $184 and affirmed a buy rating on the stock.
The analyst said Deutsche Bank was positive about the OE aerospace and defense complex entering 2025, citing improved production momentum at Boeing coming out of the union strike and ample reserve inventory of clean engines and airframes. to support the ramp.
Additionally, improved engine availability from CFM International, the joint venture between GE Aerospace and Safran Aircraft Engine, should support Airbus' narrowbody ramp. (EASY) which in turn helps meet demand, Deuschle said.
The analyst said the risk/reward profiles appear more favorable at Carpenter technology. (C.R.S.) and Howmet Aerospace (AMM) within the commercial field in a broad sense. But he added that if Boeing can continue to build operational momentum, then its return prospects “could also be excellent.”
JP Morgan analysts noted Dec. 30 that the 737NG family, which includes the 737-800, was first delivered in 1997, has a strong safety record and has been one of the most frequent aircraft in the global fleet.
And Wolfe Research said that, aside from the name's association of being a Boeing 737, or more specifically a 15-year-old 737-800, the tragic crash of Jeju Air Flight 2216 should have no interpretation of Boeing's actions and the company. current struggles to increase production” of the 737 Max.
“We can only speculate whether those purchases will continue,” Ponsi said. “If not, the stock will fall back below its key moving averages and we will know it is time to exit the trade. If the buying continues, we may have boarded Boeing just before takeoff.”
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