10.8% five-month average gain—good dogs!

In January 2002, Christian DeHaemer recommended that you sink funds into a diversified portfolio of Dow stocks. Though battered beyond recognition, they still paid out hefty dividends in the bear market of 2001. Known as the “Dogs of the Dow,” these 2002 picks returned an average gain of only 8%. But, with the idea that 2003 would be a turnaround year, we bet money on this theory once again this past January, rode the wave of economic and war fears, and shot back out into a bull market phenomenon.

The idea was straightforward. You buy into the Dow stocks with the highest dividends and watch them rise. They were good buys for many reasons. One, a bull market would have a nice impact. Two, these stocks are not likely to go belly up. Three, the companies are financially sound. Four, they pay dividends.

The best part of our Dogs portfolio, besides the current gains listed below, is that Bush’s US$350 billion tax cut will lower taxes on dividends and re-ignite the market. Instead of playing all ten of the Dogs, we chose five that have provided us with a nice return in less than six months.

The key to making extraordinary gains with these plays is to hold them for a period of a year to 18 months. This gives management time to bring the stock values back up to par. Plus, if you sell your investments after 18 months, any gains you pull from the Dogs will be treated as long-term capital gains rather than short-term.

But wait, there’s more.

According to the US Department of Defense, Honeywell International is being awarded a US$34.6 million contract for the Capital Expansion Project, which provides capitalization funds for radiation hardened microelectronics production facilities.

Altria Group Inc. recently declared a regular quarterly dividend of US$0.64 per common share payable on July 8, 2003, to shareholders of record on June 13, 2003.

JP Morgan, up more than 44%, continues to rise amid hopes for lower interest rates and a bullish report that said strong demand for bonds in May could boost the market.

A 10.8% gain since January 3, 2003, is not too shabby. Hold them all for more. We’ll look to take profits at a later date.