Top DJIA stocks ex­pected to keep ris­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

The Dow Jones In­dus­trial Aver­age (DJIA) and the S&P 500 have hit new all-time highs. What is amaz­ing is that the mar­ket just doesn’t feel as ex­u­ber­ant as the head­lines might have in­di­cated in this ex­tended bull mar­ket con­tin­u­ing in 2014. De­spite the gains, the Dow is up less than 3% in 2014. Maybe the fi­nan­cial me­dia is right that the rag­ing bull mar­ket has mor­phed into a stock picker’s mar­ket.

It turns out that as of Fri­day’s clos­ing bell, seven of the 30 Dow stocks were trad­ing up by more than 10% year-to-date in 2014 in a per­for­mance screen.

In­clud­ing where the shares are now, what their val­u­a­tion is ver­sus the con­sen­sus an­a­lyst price tar­gets and what sort of div­i­dend yields they of­fer for in­vestors, six of these seven dou­ble-digit DJIA gain­ers still have upside to their re­spec­tive con­sen­sus price tar­gets and are ex­pected to keep ris­ing over the next year.

Nine of the DJIA stocks were neg­a­tive so far for the year. That be­ing said, four of the losers were down by less than 2%, and only one of the year-to-date DJIA losers was down by more than 5%, and that was Gold­man Sachs.

Cater­pil­lar Inc. has been the top Dow stock of 2014. This is shock­ing when you con­sider that the sen­ti­ment on Cater­pil­lar was very neg­a­tive as this year kicked off. The stock is up 20.62% this year. Cater­pil­lar yields about 2.2% for its com­mon stock div­i­dend. With shares hit­ting a 52-week (not all-time) high of $108.93, its con­sen­sus price tar­get is al­most $112.

Merck & Co. is an­other sur­prise win­ner as the num­ber-two Dow stock. The big pharma gi­ant is up 16.49% so far in 2014. Merck’s div­i­dend is still close to 3%, even af­ter the rally. Trad­ing at $57.85, it has a con­sen­sus price tar­get up at $59.22.

John­son & John­son may not be the most ex­cit­ing com­pany, con­sid­er­ing its phar­ma­ceu­ti­cal, med­i­cal and con­sumer prod­ucts op­er­a­tions. Still, its stock was up by 14.25% so far in 2014. Shares were just un­der an all-time high, and its div­i­dend is now 2.7%. At $103.10, it has a con­sen­sus price tar­get of $104.84. A com­par­i­son for John­son & John­son is not avail­able for the start of 2014.

Cisco Sys­tems Inc. has got­ten lit­tle love up un­til re­cently for its earn­ings prob­lems. Still, John Cham­bers and his team now have their share­hold­ers up by 12.51% so far in 2014. Shares have come up to $24.90, and the yield here is still a high 3.1%. The con­sen­sus an­a­lyst price tar­get is $25.43.

Mi­crosoft Corp. is now un­der new lead­er­ship with Satya Nadella and with a fo­cus on mo­bile and cloud. Steve Ballmer is gone, and shares were up 12.50% - barely be­hind Cisco. Mi­crosoft shares are around $41.40, but its con­sen­sus tar­get price is only $41.87.

Walt Dis­ney Co. just keeps on chug­ging higher. The Mouse House shares have risen yet an­other 10.75%, so far in 2014. At $85.60, Dis­ney shares hit a new all-time high, and the con­sen­sus an­a­lyst price tar­get is now up at $88.54.

In­tel Corp. continues to sur­prise, even as the PC mar­ket it dom­i­nates re­mained ir­rel­e­vant. The pro­ces­sor gi­ant’s stock is up 10.47% so far in 2014. In­tel’s share price of $28.20 is the only one above the con­sen­sus an­a­lyst price tar­get, which is $26.92.

What is so amaz­ing here is that projections at the start of 2014 called for a loss of 5% rather than a gain of more than 10%.

The moral of the story is that the bull mar­ket has con­tin­ued in 2014. A re­al­ity check is that the bull mar­ket just might not be quite as strong as what the head­lines from the fi­nan­cial press may have in­di­cated. In­vestors still keep hear­ing that the bull mar­ket has now turned into a stock picker’s mar­ket. The dou­ble-digit win­ners in 2014 have all sig­nif­i­cantly out­per­formed what an­a­lysts were call­ing for at the start of 2014.

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