NKE

Nike, Inc.

97.02
USD
-1.55%
97.02
USD
-1.55%
95.34 179.10
52 weeks
52 weeks

Mkt Cap 123.97B

Shares Out 1.28B

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This Easy-to-Use Stock Strategy Is Crushing the Market

When it comes to investing in stocks, it's been a tough year in 2022. The Dow Jones Industrial Average (DJINDICES: ^DJI) is down 6% for the year, and other major market indexes have seen even bigger losses. Yet there's a deceptively simple investing approach that has outperformed the Dow and its fellow stock market benchmarks. The Dogs of the Dow strategy is a mechanical approach that just about anyone can follow easily, and as it turns out, it's doing a great job of beating the overall market so far this year. Let's look more closely at the Dogs of the Dow and why they're doing so well in 2022. How the 2022 Dogs of the Dow have fared so far What's behind the Dogs of the Dow strategy? A lot of investors like to keep things simple, and it's easy to use the Dogs of the Dow method to pick stocks. In particular, the portfolio samples 10 stocks from the 30 companies that make up the Dow Jones Industrials, and it emphasizes high dividend yields and the potential for beaten-down stocks to bounce back. To use the Dogs of the Dow strategy, you look at the 10 stocks among the Dow 30 that had the highest dividend yields as of the end of the previous year. Those who follow the strategy consistently buy all those stocks at the beginning of January, and then they hold on to them for the full year. It's easy to extend the strategy beyond a single year, as all you have to do is get updated dividend yields at the end of the year and then replace any stocks that no longer make the top-yield list with the new entrants. Typically, the Dogs of the Dow strategy is strongest when investors are interested in value stocks. The Dow stocks that tend to have the highest yields are those that have suffered temporary share-price hits, and buying their shares as Dogs of the Dow is a bet that those businesses will rebound and help the stock bounce back. That's not something investors can count on from just any high-yield stock, but the higher-quality businesses that get invited to be members of the Dow Jones Industrials generally have blue chip strength that allows them to survive down economic cycles in ways that weaker companies might not. Why are the Dogs beating the market in 2022? In 2022, the strong performance of the Dogs of the Dow stems from several factors. First, energy stocks have remained strong, and Chevron (NYSE: CVX) is the best performer in both the overall Dow and among the Dogs stocks. In addition, double-digit percentage gains for healthcare companies Merck (NYSE: MRK) and Amgen (NASDAQ: AMGN) have definitely helped the Dogs as well. These stocks have seen renewed interest after having been left on the sidelines during the strong period for growth stocks in past years. Finally, the Dogs have avoided most of the worst performers in the Dow, including former high-growth favorites like Nike (NYSE: NKE) and Salesforce.com (NYSE: CRM) with their drops of 25% to 30%. It's important to note, though, that there are still more than four months left in the year, and anything can happen. The Dogs had a similar lead early in 2021, but that completely went away by the end of the year as the overall Dow outperformed by nearly 8 percentage points. Regardless, many investors find the Dogs of the Dow useful as a way to generate income and keep their portfolios simple. Even though the strategy won't outperform the Dow all the time, investing in the Dogs of the Dow can give your portfolio a value tilt that appeals to many conservative investors in the stock market. 10 stocks we like better than Chevron When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and Chevron wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of August 17, 2022 Dan Caplinger has positions in Nike. The Motley Fool has positions in and recommends Merck & Co., Nike, and Salesforce, Inc. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Today’s Big Picture Asia-Pacific equity indexes ended today’s session mixed. Hong Kong’s Hang Seng fell 0.67%, China’s Shanghai Composite ended the day essentially flat, down a mere 0.02% while Australia’s ASX All Ordinaries gained 0.50%, Taiwan’s TAIEX advanced 0.84%, and Japan’s Nikkei rose 1.14%. India’s markets are closed to mark the country’s Independence Day holiday and South Korean markets are closed today to mark that country’s Liberation Day. Interestingly, Liberation Day is celebrated in both South and North Korea. By mid-day trading, major European equity indices are up moderately, and U.S. futures point to a down open later this morning. Following the robust movement in equities over the last few weeks, as we start the new week off, they look to give back at least some of those gains. The surprise rate cut by the People’s Bank of China this morning raises fresh questions over the speed of the global economy, especially after July economic data for China missed expectations. Even though we have a sizable downshift in the number of companies reporting their quarterly earnings this week, we see a meaningful pivot toward retail companies, the majority of which were plagued with bloated inventories when they reported their prior quarter. Expectations are for margin and bottom line pain as they look to clear out those inventories in time to prepare for the important holiday shopping season. As these reports roll in, we’ll know how bad the pain is and whether consumers are biting. Data Download International Economy The People's Bank of China surprised by cutting its one-year lending facility rate by 10 basis points to 2.75% and cut the seven-day lending rate, the same amount to 2%. The move preceded weaker than expected July data for the country. China's July Industrial Production rose 3.8% YoY, below the expected 4.6%, and slightly lower than June’s 3.9% figure. Retail sales increased 2.7% YoY in July below the 5% forecast. Manufacturing hubs and popular tourist spots imposed lockdown measures in July after fresh outbreaks of the more transmissible Omicron variant were found. On Friday, China reported more than 2,000 local Covid-19 cases as infections in the southern Hainan island edged higher with mass testing and several lockdowns resulting. Japan’s preliminary GDP for 2Q 2022 came in at 2.2% YoY, better than the 0.1% reading for the prior quarter but below the expected 2.5% figure. On a QoQ basis, the preliminary reading was 0.5%, up from 0.0% in 1Q 2022 but again below the expected figure of 0.6%. Wholesale prices in Germany increased by 19.5% YoY in July of 2022 following the 21.2% gain the prior month. Compared with the previous month, wholesale prices fell 0.4% in July, the first decline since October 2020. Domestic Economy At 8:30 AM ET, we’ll get the NY Empire Manufacturing Index data for August and the headline reading is projected to fall to 5.5 from July’s 11.1 reading. AT 10 AM ET, the NAHB Housing Market Index for August will be published, and the consensus view has it unchanged MoM at 55. The U.S. House of Representatives voted 220 to 207 along party lines on Friday to pass the Inflation Reduction Act, paving the way for wide-ranging reforms in healthcare and clean energy. President Biden is expected to sign the bill into law. Data from AAA put the national average gas price at $3.959 over the weekend, but Goldman Sachs (GS) sees the price surging back to $5 by the end of the year with Brent crude returning to $130 a barrel as the market still needs to balance rising demand and tight supplies. Following last week’s inflation data, markets see a 50% chance the Fed will hike by 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year. Meanwhile, the bond market continues to question if the Fed can deliver a soft landing, with the yield curve remaining deeply inverted. Markets Markets closed the week on a strong note with Friday seeing almost all sectors up over 1.00% and Consumer Discretionary names well over 2.00%. The Dow rose 1.37%, the S&P 500 advanced 1.73% and both the Nasdaq Composite and the Russell 2000 posted a 2.09% gain on the day. In reviewing top contributors to returns across the sectors, Apple (AAPL) and Microsoft (MSFT) combined to account for about 48% of Technology sector returns, while Tesla (TSLA) managed to do that all on its own for the Consumer Discretionary sector. Here’s how the major market indicators stack up year-to-date: Dow Jones Industrial Average: -7.09% S&P 500: -10.20% Nasdaq Composite: -16.60% Russell 2000: -10.19% Bitcoin (BTC-USD): -48.93% Ether (ETH-USD): -48.19% Stocks to Watch Before trading kicks off for U.S.-listed equities, Clear Secure (YOU), Li Auto (LI), Tufin Software (TUFN), and Weber (WEBR) will be among the companies issuing their latest quarterly results and guidance. Bloomberg reports Wells Fargo (WFC) is looking to shrink its once dominant mortgage business. Shares of PlayAGS (AGS) jumped in after-hours trading on Friday after confirming Inspired Entertainment (INSE) made a $10 per share offer for the slot machine maker. IPOs GigaCloud Technology (GCT) and Innovative Eyewear (LUCY) could price their respective IPOs this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page. After Today’s Market Close Fabrinet (FN), Global-E Online (GLBE), Navitas Semiconductor (NVTS), World Wrestling (WWE), and ZipRecruiter (ZIP) are expected to report their quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. On the Horizon Tuesday, August 16 UK: Employment Change, Average Hourly Earnings – June Germany: ZEW Current Conditions & Economic Sentiment – August Eurozone: ZEW Economic Sentiment – August US: Housing Starts & Building Permits – July US: Industrial Production & Capacity Utilization – July Wednesday, August 17 Japan: Core Machinery Orders – June Japan: Imports/Exports – July UK: CPI, PPI – July Eurozone: 2Q 2022 GDP US: Weekly MBA Mortgage Applications US: Retail Sales – July US: Business Inventories – June US: Weekly EIA Crude Oil Inventories US: Federal Reserve FOMC Meeting Minutes - July Thursday, August 18 Eurozone: CPI - July US: Weekly Initial & Continuing Jobless Claims US: Philadelphia Fed Index – August US: Existing Home Sales – July US: Weekly EIA Natural Gas Inventories Friday, August 19 Japan: CPI – July UK: Retail Sales – July Germany: PPI - July Thought for the Day “People who avoid failure also avoid success.” ~ Derrick Lewis Disclosures Tufin Software (TUFN) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index Tesla (TSLA), Li Auto (LI) are constituents of the Tematica BITA Cleaner Living Index Tesla (TSLA), Li Auto (LI) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index Apple (AAPL), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars Index The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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