May 2024 Buy-Sell Guide for Dow Jones 30 Stocks and Modified Omega Criterion

Abstract

We study recent monthly data to help long-term investors buy or sell from the 30 Dow Jones Industrial Average (DJIA) Index components. The recommendations are based on six stock-picking algorithms and their average ranks. We explain the reasons for ignoring the claim that the Sharpe ratio algorithm lacks monotonicity. Since the version of “omega” in the literature uses weights that distort the actual gain–pain ratio faced by investors, we propose new weights. We use data from 30 stocks using the past 474 months (39+ years) of monthly closing prices, ending in May 2024. Our buy-sell recommendations also use newer “pandemic-proof” out-of-sample portfolio performance comparisons from the R package ‘generalCorr’. We report twelve sets of ranks for both out-of- and in-sample versions of the six algorithms. Averaging the twelve sets yields the top and bottom k stocks. For example, k=2 suggests buying Visa Inc. and Johnson & Johnson while selling Coca-Cola and Procter & Gamble.