Happy New Year – and welcome to the first trading session of 2021!

To begin a new trading year, I always love examining my favorite New Year’s trading methodology…

The Dogs of the Dow

As I’m sure you know, the “Dogs of the Dow” is an investment strategy that attempts to beat the Dow Jones Industrial Average each year by prioritizing the highest-yielding blue chips.

Basically, the strategy is to set a higher allocation to the 10 highest-dividend-yielding blue chips and rebalance at the beginning of each calendar year.

Using that strategy, here are the top three Dow components that you’d be overweighting right now…

But when I consider this methodology, I prefer to tweak the selection process a little. You see, instead of simply buying the top 10 dividend payers, I like to give a little more power to the strategy and select the worst-performing dividend payers.

That way, you potentially get a recovery bounce – combined with a high dividend payment.

And there’s been no bigger dog than Walgreens Boots Alliance (Nasdaq: WBA).

Despite its stores being deemed “essential” and remaining open during the pandemic, Walgreens was a complete underperformer, dropping 28% in 2020.

Could 2021 be the year Walgreens finally gets its act together and rebounds?

It’s quite possible…

First, the company has a major vaccine administration catalyst in play, where everyone in the entire country will soon make their way into a Walgreens store to get a shot in the arm (maybe two). This could easily trigger more sales from customers picking up some extra items while in the store. If Walgreens can get its act together, this just might be one of the most undervalued plays on the market right now.

Not to be outdone, Coca-Cola (NYSE: KO) gained less than 1% in 2020, which also makes it a candidate for my top Dogs of the Dow. Will the return of sporting events (with fans, of course) reenergize sales of Coca-Cola refreshments? If so, Coca-Cola seems like a value at these levels.

Both Walgreens and Coca-Cola have been dramatic underperformers in 2020 – and buying them at these lows also pays you these healthy dividend yields…

Action Plan: The Dogs of the Dow theory has been a time-tested methodology used to beat the markets. But by tweaking it slightly, you won’t have to buy 10 stocks. In my opinion, all you need are these two names (Walgreens and Coca-Cola) to give you the biggest bang for your buck to begin 2021.

P.S. Do you want my very best pick – complete with entry and exit levels – every single week? Then it’s time to level up! Begin 2021 on a winning note – and join Trade of the Day Plus today!