A Fresh Year, a New Underdog: My Dogs of the Dow Strategy for 2026
Last year's Dogs of the Dow trade, Boeing, yielded a 26% return. Now this undervalued laggard steps into the spotlight.
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Happy New Year!
There is a Wall Street investing strategy that some traders apply at the beginning of a new year. Often referred to as the “Dogs of the Dow,” the strategy involves buying the worst-performing stocks in the Dow Jones Industrial Average for the previous year.
There are numerous variations on this theme. The belief is that after a year of poor performance, some of these names might be undervalued.
This underperformance is exacerbated by year-end tax-loss selling. Traders take losses in order to offset gains and lower their tax burdens. Now that the calendar has turned to 2026, tax-loss selling is less of a concern.
The strategy proved effective last year, as it led to a 26% return in Boeing (BA) , the worst-performing Dow stock of 2024. Boeing was truly a hated stock at the time, but the strategy doesn’t take sentiment into consideration. You hold your nose and buy.
This Year's Pick
The worst-performing stock in the Dow Jones Industrial Average in 2025 was UnitedHealth Group (UNH) , which fell by 34%. UnitedHealth isn’t hated by any means; if it were, I’d be more attracted to it, because negative sentiment eventually fades.
UnitedHealth doesn't have a great chart. This stock is absolutely flatlining. This sideways activity indicates a lack of a catalyst, as well as failure to participate in a bull market.
UNH is trading below its 50-day (blue) and 200-day (red) moving averages, both of which are falling. On the bright side, the stock has broken a bearish trend line that extends back to April (black dotted line).
Strategy Time
Here’s our strategy for UNH: we’ll take one-third of a normal sized position at market today (point A). We’ll add another third if the stock climbs above $350 (point B). We want to see if UNH can break above its 200-day moving average, currently at $349.
The third and final portion of the position will be added if the stock can reach $367. This would place UNH above its Oct. 28 high (point C), thus creating a six-month high as well as a higher high.
A Return to the Glory Days?
In the midst of a bull market, UNH shareholders have suffered for three consecutive years. Prior to losing 34.66% in 2025, shares of UnitedHealth fell by 2.41% in 2024, and gained less than 1% in 2023.
However, prior to 2023, UnitedHealth shareholders experienced 14 consecutive years of gains. In 12 of those years, the stock saw double-digit gains.
This strategy is reasonably conservative. Even if the stock fails to perform as anticipated, UnitedHealth boasts a current dividend yield of 2.68%, which should act as a cushion against downside risk.
My New Year's wish is that this strategy will be as successful in 2026 as it was last year.
At the time of publication, Ponsi was long UNH and BA.
