But, if you had held only the best performing 27 of the 30 (removing GM, DD, and INTC), the performance would have been +8.83 pct. With dividends, your total return would have exceeded +10.0 pct, which is not bad.

But how many traders would have the precise good fortune to do that?

Conversely, if you were invested in the worst performing 27 of the 30 (removing CAT, HPQ and BA), the performance would have been just +1.36 pct. With dividends, your total return would have been only about +3.0 pct, which is much less than a risk-free return from Treasury Bonds.

So, it pays to be in the right stocks. Better still, it pays to be in good quality stocks at the right time.

This week's new Value Line reports for the Dow 30 components are the Telco's Verizon (NYSE: VZ) and AT&T (NYSE: T).

I'll discuss them today.

In the 12 Months ending with 1Q06, the common stock of AT&T (including the old AT&T plus SBC and soon Bell South) was up +14.14 pct, whereas Verizon (including the old Bell Atlantic, GTE and MCI) was down -4.06 pct. An equal weighting would have put you up +10.08 pct, which with dividends averaging +5.03 pct (including +4.563 pct for VZ and +5.496 pct for T) would have produced a solid total return of about +15.1 pct.

How many professional traders enjoyed +15.1 pct total returns in the past 12 months? Not many I'd say.

Am I surprised at the performance of the U.S. telco services sector in the past year? You bet. With costs of mergers (pre and post) plus a slow economy and all kinds of competition from cable and VOIP and so on, plus a rising interest rate condition, which is a negative factor for these debt laden beasts, I am surprised that VZ and T have done so well.

But the question is why?

Well actually VZ has under-performed. One reason is clearly the expectation of disappointments regarding future earnings growth. Value Line for example compares a 10-year earnings history for Verizon of +5.0 pct pa to a future 5-years annualized earnings growth rate of just +0.5 pct. That would be a remarkable negative turnabout,

I think the jury is still out re Verizon's long-term earnings potential, but traders must be concerned. I think the answer to the question why has the stock held up over the past 12 months (with just a small loss) has to be in the very high dividend yield of +4.563 pct.

Still, I have to shudder when I look at that current ratio. At Dec-05, Verizon's current liabilities amounted to $23.6 billion versus current assets of just $15.3 billion.

The AT&T situation is different in some respects.

The balance sheet is apparently even worse than Verizon's. At Dec-05, AT&T's current liabilities amounted to $25.4 billion versus current assets of just $14.7 billion.

So why has T stock performed so well? Well, one major driver has been expectation of much higher future earnings growth here. Value Line compares a 10-year earnings history for AT&T of just +1.5 pct pa to a future 5-years annualized earnings growth rate of +9.5 pct. If it happens, that would be a remarkably positive turnaround, quite the opposite of Verizon.

Either the Value Line analyst has been snowed or there are big things to come from this telco giant. Moreover, the Value Line analyst states that the probable future $64 billion all-stock merger with Bell South (NYSE: BS) has additional positive implications that have not been considered in their current assessment of AT&T.

Clearly, one reason for traders liking the Big T has been the dividend yield in the past 12 months of +5.496 pct. Still, I have to shudder when I look at that current ratio, or the industry competition, or the rising interest rates, and so forth.

I am also concerned that the enthusiasm of the past 13 weeks for these two stocks has been far over-done. The long-term RSI has topped out and is declining. So, traders beware. The high dividend yield may protect you, but these companies badly need to restructure their balance sheets, so I'm not too sure in a broad market pullback, where the then current dividend yield could be even much higher, that directors would not vote to cut the dividend rate " something similar to GM.

Here are the data files I use for Verizon and AT&T.

(VZ) (VZ) Financials (Here is the Mar. 31 Value Line report on VZ: next one is due May 30)

(T) (T) Financials (Here is the Mar. 31 Value Line report on T: next one is due May 30)

In fact, there is no reason for the Little People not to have a big picture understanding and appreciation of all these 30 major Dow stocks that is every bit as complete as the best people on Wall Street. You must also understand that once your thinking with respect to even the simplest trading strategies and tactics is grounded in reality, then you hold the advantage over the Gnomes and the capital managers and salespersons who work for them.

You, for example, can easily spot mass distribution or accumulation soon after it starts (from the Gnomes) and before they complete their selling or buying programs, you can be well positioned.

Once you get the basics of trading down, you just have to get into their heads. You have to understand what happens in their investment committee meetings and why they are likely to deploy capital this way or that.

Trust me; it's not rocket science. These people have MBA's from Harvard and Wharton School for Pete's sake. Most of them have never owned a store, worked in a factory or operated a real estate business, and many have staff or spouses who have to pay their bills. They live in a cloistered world where "inside" information is king, and all the rest of it are just trappings to make things look professional.

The bottom line however is what Charles Dow said 100 years ago, and what I first wrote in my Web published Dow 30 Journal about 2055 days ago, on Aug. 14, 1999, when the Dow index stood not too far (10973.65) from where it is today:

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At the turn of the century, Charles Dow in fact said: "The man who is prudent and careful in carrying on a store, factory or real estate business seems to think that totally different methods should be employed in dealing with stocks. Nothing is further from the truth." "

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Here is the full data file list I compiled for the Dow 30 components. I make constant reference to them, as I suggest you do.

(AA) (AA) Financials (Here is the Jan. 20 Value Line report on AA: next one is due Apr. 21)

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(AIG) (AIG) Financials (Here is the Feb. 25 Value Line report on AIG: next one is due May 26)

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(AXP) (AXP) Financials (Here is the Feb. 25 Value Line report on AXP: next one is due May 26)

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(BA) (BA) Financials (Here is the Mar. 24 Value Line report on BA: next one is due Jun. 23)

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(C) (C) Financials (Here is the Feb. 25 Value Line report on C: next one is due May 26)

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(CAT) (CAT) Financials (Here is the Jan. 27 Value Line report on CAT: next one is due Apr. 28)

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(DD) (DD) Financials ( Here is the Jan. 20 Value Line report on DD: next one is due Apr. 21)

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(DIS) (DIS) Financials (Here is the Feb. 18 Value Line report on DIS: next one is due May 19)

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(GE) (GE) Financials ( Here is the Jan. 13 Value Line report on GE: next one is due Apr. 14)

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(GM) (GM) Financials Here is the Mar. 3 Value Line report on GM: next one is due Jun. 2)

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(HD) (HD) Financials (Here is the Jan. 6 Value Line report on HD: next one is due Apr. 8)

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(HON) (HON) Financials (Here is the Jan. 27 Value Line report on HON: next one is due Apr. 28)

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(HPQ) (HPQ) Financials (Here is the Jan. 13 Value Line report on HPQ: next one is due Apr. 14)

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(IBM) (IBM) Financials ( Here is the Jan. 13 Value Line report on IBM: next one is due Apr. 14)

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(INTC) (INTC) Financials ( Here is the Jan. 13 Value Line report on INTC: next one is due Apr. 14)

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(JNJ) (JNJ) Financials Here is the Mar. 3 Value Line report on JNJ: next one is due Jun. 2)

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(JPM) (JPM) Financials Here is the Feb. 25 Value Line report on JPM: next one is due May 26)

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(KO) (KO) Financials (Here is the Feb. 3 Value Line report on KO: next one is due May 5)

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(MCD) (MCD) Financials (Here is the Mar. 10 Value Line report on MCD: next one is due Jun. 9)

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(MMM) (MMM) Financials (Here is the Feb. 18 Value Line report on MMM: next one is due May 19)

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(MO) (MO) Financials (Here is the Feb. 3 Value Line report on MO: next one is due May 5)

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(MRK) (MRK) Financials ( Here is the Jan. 20 Value Line report on MRK: next one is due Apr. 21)

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(MSFT) (MSFT) Financials (Here is the Feb. 25 Value Line report on MSFT: next one is due May 26)

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(PFE) (PFE) Financials (Here is the Jan. 20 Value Line report on PFE: next one is due Apr. 21)

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(PG) (PG) Financials (Here is the Jan. 6 Value Line report on PG: next one is due Apr. 8)

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(T) (T) Financials (Here is the Mar. 31 Value Line report on T: next one is due May 30)

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(UTX) (UTX) Financials (Here is the Jan. 27 Value Line report on UTX: next one is due Apr. 28)

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(VZ) (VZ) Financials (Here is the Mar. 31 Value Line report on VZ: next one is due May 30)

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(WMT) (WMT) Financials (Here is the Feb. 11 Value Line report on WMT: next one is due May 12)

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(XOM) (XOM) Financials (Here is the Mar. 17 Value Line report on XOM: next one is due Jun. 16)

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At the end of the day, I think readers of my blog are catching on to what is important in trading. Above all, we trade prices. There are drivers to prices. We have to try to understand what those drivers are, and after we make a best guess, we have to confirm that with actual prices in the market place.

This is why each week in the WIR, I talk around 140 charts and tables of prices.

Price comes first, second, and third. Everything else is talk, including mine.

My talk however is confined to price drivers, and expectation for change in future prices, and then an attempt to see why my expectations worked out or not. In effect I am modeling the entire capital market in my head, and I am constantly asking myself the question ‘why?'

I don't care about personalities like Goldman Sachs, or James Cramer. I don't care about investment styles like Deep Value, Growth at A Reasonable Price, or whatever. That's all marketing. None of it should matter to you. Get it out of your head.

The only thing that is important to you is the study of prices and trading of them. The Dow 30 is a great place to do that.

BCara@BillCara.com