Dogs of the Dow 2012

Read this year’s stock selection from the Dogs of the Dow, a theory that uses yield and price to determine stock selection.

The single stock selection, RSA Insurance Group Plc, turns out to be the same as last year. Despite the fact that the performance has not lived up to expectations (-16% compared to -5.6% in the FTSE 100, though 9.04p in dividends reduces the loss to -6.9%), we believe the stock warrants further attention and holders should remain invested.

For those who did not invest last year, the company is rated as a “Buy” by most analysts (Citigroup has a 145p price target, indicating 34.9% potential upside not including the 8.8% projected dividend yield). Despite its exposure to bad weather and other global disasters, RSA had £1.3bn surplus capital which represents twice its regulatory requirement and 89% of its investment portfolio is invested in high-quality bonds, with less than 1% in Eurozone Government bonds.