Questioning the Dogs of the Dow Theory

[Post Summary]

Let my beloved come to his garden
—Song of Solomon

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The logic behind the Dogs of the Dow Theory advises you invest in the highest yielding of the 30 stocks in the Dow Jones Industrials Average.

Yet one wonders ... have we entered a period in which one should fear the reasons why most high yielding Dow stocks have made the list?

Now, it's normal analytical practice to be suspicious of a once high-flying stock that has been sold off to single digits. A well-recognized, widely held company selling for less than $10 a share is "a bargain" for a reason.

And the reason might more likely foretell prospective danger rather than impending opportunity. So, buyer beware.

Extending this thinking, then, should the same caution apply to the Dogs of the Dow Theory, now that an expansive era in speculative finance has ended?

Might most of 2009's "Dogs of the Dow" be dogs for reasons not yet near being resolved?

What do you think?

—Tom Chechatka