The Dow Jones Industrial Average is one of the most widely quoted and discussed stock indices. Two of the most widely asked questions I see each day are “How did the Dow do today?” and “What do you think the Dow will do tomorrow?”
Those are exactly the wrong questions to ask, if you ask me.
The right question to ask is “Which Dow components should I be buying and which should I be selling right now?”
The individual components of the index are spread across several industry groups and sectors, and they will not all perform well in the same environment. Fortunately, using my Portfolio Grader, we can quickly see which Dow stocks exhibit the type of strong fundamentals and technical positioning that should allow investors to maximize performance. Ranking the 30 stocks produces a bell curve with most companies in the middle of the pack, as you would expect, but at the ends of the curve we find those stocks with superior prospects — and at the opposite end, those we should avoid or sell.
Right now, three Dow components receive an A grade from Portfolio Grader and thus should be on blue-chip investors’ shopping lists. These companies have strong earnings and revenue growth, and analysts have been upgrading them and raising earnings estimates because of their superior performance.
Johnson & Johnson (NYSE:JNJ) is one of the best-run companies in the United States, in my opinion. The company is well-represented in just about every corner of the medical industry, from prescription drugs and biotechnology to over-the-counter products and medical devices. JNJ has a total of 250 companies selling its products all over the globe, and despite its size, it’s a leader in the development of new drugs and medical products. A solid 3% dividend yield makes JNJ even more attractive.
Pfizer (NYSE:PFE) is the largest prescription drug company in the word today. The company just pulled off a public offering of 20% of its animal health business, Zoetis (NYSE:ZTS), that raised more than $2 billion, and last year Pfizer sold its nutritional business to Nestle (PINK:NSRGY) for $11 billion. The cash will be used to continue to develop the R&D pipeline and reward shareholders with a buyback program. New drugs for arthritis and cardiovascular problems should help drive growth this year, and a 3.4% yield should appeal to income investors.
Travelers (NYSE:TRV) is one of the largest property and casualty insurance companies in the U.S. The company has more than $22 billion in force, with about 65% of its business in professional lines and the rest in personal lines coverage. The stock has been roaring to new all-time highs as the insurance industry improves along with the economy.
These are the three best of the best DJIA stocks. Also take a look at the three Dow stocks you simply must avoid or sell.
Louis Navellier is the editor of Blue Chip Growth.