The Dogs of the Dow stock-picking strategy failed to beat the major averages in 2013, and it’s unlikely to be in the hunt to beat the broad market in 2014, either, according to InvestorPlace .

One big reason for that rationale is that most of the so-called dogs may not be undervalued at all.

The Dogs of the Dow is a value-investing tactic in which investors buy the 10 highest-

yielding dividend stocks in the Dow Jones Industrial Average at the beginning of each year; those generally are also the ones that are beaten down the most in share price.

Editors Note: 5 Reasons Stocks Will Collapse.

According to the Dogs theory, the investors get not only a rich dividend and also an opportunity for significant capital gains when those unloved stocks bounce back.

Historically, the Dogs apparently have not performed better than the broad index for a long while, however, thus investors have been better off simply buying an index fund.

The 10 highest yielding stocks in the Dow havent beaten the blue-chip index for the two decades ended 2011, InvestorPlace reported. And last year, the Dogs of the Dow only matched the Dows gains. There was no benefit to taking this concentrated and therefore riskier approach.

In 2013, the Dogs total return, including dividends, of about 28 percent only equaled that of the full 30-stock average, and was 4 percentage points lower than that of the S&P 500.

According to InvestorPlace, the Dogs going into 2014 also dont look particularly cheap, which hardly makes this a good way to bet on value stocks.

The average forward price-to-earnings ratio of the Dogs is 13.5, which is only marginally lower than that of the full Dow average at 14.

The other problem with the Dog approach is that it ignores share buybacks, which have become a key way that companies return cash to shareholders.

For the record, the 10 Dogs of the Dow, i.e. those with the highest percentage dividends going into 2014, are AT&T, Verizon, Merck, Intel, Pfizer, McDonalds, Chevron, General Electric, Cisco Systems and Microsoft.

According to The Wall Street Journal . the Dogs strategy actually beat the Dow after all in 2013, with a 30 percent return. But thats because the Journal included the resurgent Hewlett-Packard among the Dogs for the entire year, even though H-P was kicked out of the Dow in September.

TheStreet recommended an alternative strategy of investing in half of the Dogs of the Dow for 2014. The five it predicted will do the best in 2014 are AT&T, Intel, McDonalds, Chevron and Cisco Systems.

Editors Note: 5 Reasons Stocks Will Collapse.

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