Less than two years ago, the notion of the Dow Jones Industrial Average reaching a level of 30,000 wasn’t on anyone’s radar. Indeed, headed into 2016’s Presidential election, the Dow was stuck in neutral below a then-monumental 20,000, with investors unsure which candidate posed the biggest threat to the stock market.
What an incredible turn of events since then. The Dow Jones stocks are collectively up nearly 40% for the past two years, and rather than wondering what might get the market going again, investors are wondering what — if anything — might even be able to merely slow the advance down. And, with the Dow over 25,000, that 30,000 mark seems within reasonable reach.
If the blue chip index gets there before this bull market finally comes to a close though, some Dow Jones stocks are going to help more than others.
With that as the backdrop, here’s a run-down of the 10 Dow Jones stocks poised to do the most heavy lifting in the effort to get the Dow Jones Industrial Average up and over the big technical hurdle.
Top Dow Jones Stocks: DowDuPont (DWDP)
It’s arguably one of the most forgettable stocks in the Dow Jones Industrial Average; chemicals just aren’t all that riveting. But, DowDuPont Inc (NYSE:DWDP) can ride the wave of economic growth just as well as any other organization can. In fact, given the company’s decision announced last month, don’t be surprised if DWDP outperforms its peers and other Dow components.
How’s that? CEO Ed Breen has decided the company’s going to stop taking expensive “moonshots” — R&D projects with great reward potential but also great risk of failure — and instead just focus on the company’s most promising and profitable prospects. It may not be sexy, but there’s plenty of sexiness in putting real cash in investors’ pockets right now.
As of the latest look, analysts were expecting last year’s bottom line of $3.36 per share to swell to $4.16 per share. That outlook, however, may not fully reflect the associated cost savings of killing some of its developmental projects.
Top Dow Jones Stocks: Goldman Sachs (GS)
Once a bulletproof name that could do no wrong, Goldman Sachs Group Inc (NYSE:GS) has lost some of the magic it sported in the past. It has not been a bad stock, to be clear … just not the GS of yesteryear.
At a forward-looking P/E of 9.5 though, coupled with a recent hire that points to at least one direction Goldman Sachs is now headed, the company doesn’t have to be the hero it used to be to be a top-notch opportunity.
That new hire is former Honeywell International Inc. (NYSE:HON) CEO David Cote. His new role is simply to find companies for Goldman to acquire. There’s an angle though. The impending purchases are going to look and feel more like private equity funding rather than deals sought out for the purpose of integrating those profit centers.
This fresh approach may well turn things around for this underestimated stock, which is down 9% year-to-date.
Top Dow Jones Stocks: United Technologies Corporation (UTX)
One of President Donald Trump’s campaign promises was to beef up the nation’s military, and there’s no denying he has worked hard to make that happen. This year’s budget for the Department of Defense was beefed up to the tune of 10%, growing by $61 billion to a total of $700 billion. It’s the biggest allocation the nation’s military has ever seen (outside of wartime).
It’s a budget, and a message, that bodes well for the entire aerospace and defense industry, but one of the picks of the litter is United Technologies Corporation (NYSE:UTX). Not only is the company well diversified within and outside of the defense industry (it also makes everything from elevators to climate control equipment), it also isn’t overly-reliant on risky high-profile weapon systems like the expensive and perpetually-controversial F-35 fighter jet from Lockheed Martin Corporation (NYSE:LMT) … a project some DoD decision-makers have grown altogether tired of.
Top Dow Jones Stocks: Travelers (TRV)
Of all the Dow Jones stocks investors are likely to forget about, Travelers Companies Inc (NYSE:TRV) is at the top of the list.
Don’t be fooled though. This insurer has lots to offer. More than anything though, the stock brings consistent performance to the table. Since 2009, TRV has only logged one losing year — 2011 — and that one was a “just barely” situation. Granted, none of its yearly gains have been screamers.
It’s a name you can really rely on though, and its slow and steady march will likely make it one of the unsung heroes of the Dow’s march towards 30,000.
Top Dow Jones Stocks: Caterpillar (CAT)
Its fortunes are almost entirely tied to the strength of the commodity and construction markets. But, in that neither seems to be slowing down despite more-than-a-little tariff talk, heavy earth-moving equipment maker Caterpillar Inc. (NYSE:CAT) just keeps on truckin’.
The numbers: Spending on nonresidential construction — where the big bucks are made — in the United States is projected to grow 4% this year and grow another 3.9% next year. The global market’s growth is a bit tougher to pin down, but Compass International says it should expand to the tune of 3.5% this year and keep growing at the pace for the next ten years. Economic growth will likely override any trade war impacts (and the trade war talk is more posturing than promises).
As for commodity prices, if trade war chatter, inflation fears, rising interest rates and the like haven’t quelled the slow-and-steady increase of the CRB (Core Commodity) Price Index yet, it’s probably not going to happen. The index is up nearly 14% for the past twelve months despite the lull since last month’s multi-year high.
Top Dow Jones Stocks: Cisco Systems (CSCO)
Cisco Systems, Inc. (NASDAQ:CSCO) has been labeled a has-been by some observers … a company well past its prime that has been lapped by younger, hungrier and more innovative competitors. And, truth be told, it’s not a completely unfair assessment.
On the other hand, this old outfit still has a few tricks up its sleeve. What Cisco may lack in nimbleness and creativity it makes up for in experience and size … enough of both to drive a 10% improvement in last quarter’s bottom line.
And, who knows? The organization may have gotten some of its innovation chops back too. Just this week Cisco’s senior vice president of cloud platform and solutions Kip Compton took a detailed look at the company’s custom-built “container” solution for Google Cloud. It’s a partnership that a year ago few would have thought would take shape.
More such innovations are in the works too, as Cisco learns how to be competitive in the modern era of computing.
Top Dow Jones Stocks: UnitedHealth Group (UNH)
Between the rise and fall of the Affordable Care Act, burgeoning healthcare costs and sheer uncertainty about the future of healthcare in the United States, it would be understandable if investors chose to steer clear of healthcare plan providers.
Yet, UnitedHealth Group Inc (NYSE:UNH) has consistently defied the odds and shrugged off the industry’s problems. UNH just hit yet another record high, and is still going strong,.. supported by impressive fundamentals. Analysts expect this year’s projected revenue growth of 12% to increase last year’s operating profits of $10.07 per share to $12.62 per share next year, with comparable growth in the cards for next year.
Top Dow Jones Stocks: 3M (MMM)
Admittedly there’s not much interesting about Post-It notes, Scotch tape and Filtrete HVAC filters. 3M Co (NYSE:MMM) is so much more than just home and office supplies though. Its more industrialized product lines include oil well cement, aircraft parts, hospital sterilization equipment and more. It’s a mutual fund in and of itself.
Its built-in diversity and solid company management have largely been ignored since late January. MMM shares peaked when everything else did five months ago, but didn’t rebound with everything else beginning in May.
That’s not necessarily a bad thing though. With per-share earnings on pace to grow from last year’s $9.17 to $10.39 this year to $11.42 next year, investors will eventually figure out 3M is well-positioned to overcome the adverse impact rising interest rates often have on dividend-oriented stocks.
Top Dow Jones Stocks: Merck & Co. (MRK)
Not that it hasn’t enjoyed a few moments of glory on the way, but Merck & Co., Inc. (NYSE:MRK) has been nothing but frustrating for long-term investors to own over the course of the past four years. MRK shares are up a paltry 11% since June of 2014. The S&P 500, for perspective, is up 43% for the same time period. Merck’s dividend yield of 3.1%, while respectable, doesn’t make up for that kind of performance disparity.
Something unexpectedly bullish may be brewing though. Its cancer treatment Keytruda has been an even bigger success than expected, with sales of it exceeding revenue driven by its diabetes drugs last quarter (for the first time), prompting Merck to raise its full-year revenue guidance. In the meantime, Keytruda is being tested in several Phase 3 trials that will permit its use for an even wider range of cancers.
Better yet, Merck has been busy developing other drugs. Its pipeline alone is worth an estimated $37 billion, and as it stands right now could drive $7 billion worth of revenue in 2024.
Investors just aren’t appreciating just how potent that pipeline is … yet.
Top Dow Jones Stocks: Exxon Mobil (XOM)
Last but not least, while most investors acknowledge and respect the fact that oil giant Exxon Mobil Corporation (NYSE:XOM) has finally worked its way past the industry-wide woes of 2014 and 2015, they may not fully realize just how much healthier the company could become with just a little more time, and with oil prices lingering above $60 per barrel just a little while longer.
Take a closer look at some of the recent headlines. Between natural gas in Russia, offshore opportunities in Brazil and the beginning of drilling in Guyana (just to name a few), Exxon Mobil is on the precipice of a production surge that dramatically bolster its bottom line.
The longer crude and gas prices stay firm, the more investors will believe in XOM.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.