Here is my version of the famous Puppies of the Dow strategy, with rebalancing completely based on coarse and fine universe selection.

The rules are simple:

Each year

  1. Select the 10 stocks with the highest total yield 
  2. From the stocks selected in 1. , select the 5 stocks with the lowest price.

The strategy basically tries to identify the 5 most undervalued stocks, based on the difference between their divident yields and prices.

The performance over a 10 year backtest period starts out promising, but then gets worse. Any ideas on how to improve the thing?