NEW TECHNIQUES

Beat The Market
With Cyclicals

by Paul and Carole Huebotter
"The new Dow strategy" outlined here picks a 10-stock portfolio to outperform both the Dow 30 and the well-known Dow dividend strategy.

"Economists maintain that the markets are too efficient for any system to regularly outperform the 30 stocks that make up the DJIA or the S&P 500 index. We disgree."

FIGURE 1: TRANSACTION TIMING BASED ON NORMALIZED YIELD.
Red, Green and Blue are three cyclical stocks that, because they represent different industry
groups, tend to peak at different times during an (assumed) for-year business cycle. If a stock
maintains the same dividend over the entire cycle, its yield curve will be the mirror image or
its price curve -- an assumption made here.
Excerpted from an article originally published in the August 1996 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved.
© Copyright 1996, Technical Analysis, Inc.
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