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Top 6 Dow Stocks to Boost Portfolio in a Capricious Market

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Just three days of trading are left in September and the myth about the month’s volatility is likely to have repeated this year too. This year, not only is history being repeated but also a storm is blowing, making investment decisions extremely hard for market participants.

Notably, the Dow and the S&P 500 have recorded four consecutive weeks of loss. This has happened for the first time since August 2019. Meanwhile, the Nasdaq Composite managed to exit correction territory on Sep 25.

The stock-market volatility is likely to continue in the days to come. Despite an unpredictable market, six Dow stocks with a favorable Zacks Rank are likely to provide solid returns in the near term. These stocks are currently available at attractive valuations. Investment in these stocks at this juncture is likely to be prudent.

Markets Likely to Remain Volatile

Wall Street is expected to continue fluctuating in the near future primarily due to a spike in new coronavirus cases in several countries of Europe and some states in the United States, lack of vaccine or a line of treatment for  COVID-19, uncertainty regarding a fresh round of fiscal stimulus from the U.S. government, intensifying geo-political conflict between the United States and China, and the U.S. presidential election scheduled on Nov 3.

This is evident from the COBE VIX reading  — popularly known as the best fear-gauge of Wall Street. In a nutshell, the VIX indicates market's expectation of a 30-day forward-looking volatility based on the near-term S&P 500 Index options (both puts and calls).

Notably, VIX is currently hovering in the range of 25 to 30 while it was in the range of 21 to 23 in mid-August and surged around 35 to 36 in mid-September. At its current level, the fear gauge is well above its last year's average range of 12 to 15 and its long-term reading around 20.

At its current level of 26.38, the VIX is higher than its 50-day moving average of 25.14. In financial literature, the 50-day moving average line is generally recognized as the short-term trend setter. This clearly indicates that the market will remain volatile and stocks will swing widely in either direction in the near future.  

Our Top Picks

We have narrowed down our search to six Dow stocks with strong short-term and long-term (3-5 years) growth potential. All these stocks witnessed robust earnings estimate revisions in the last 7 to 60 days, indicating solid business prospects. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our six picks in September.

 

NIKE Inc. (NKE - Free Report) is engaged in the business of designing, developing and marketing of athletic footwear, apparel, equipment and accessories, and services for men, women and children worldwide. Despite the volatile macroeconomic and geopolitical environment, NIKE expects to continue investing in key capabilities to aid digital transformation and deliver robust growth in fiscal 2021 (ending May 2021)and beyond.

The Zacks Rank #1 company has an expected earnings growth rate of 73.8% for the current year. Its long-term growth rate is 16.7%. The Zacks Consensus Estimate for the current year has improved by 17.3% over the last 7 days. The stock is currently trading at a 5% discount to its 52-week high price of $130.38 recorded on Sep 23.  

Dow Inc. (DOW - Free Report) provides various materials science solutions for consumer care, infrastructure, and packaging markets in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. It operates through the Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials and Coatings segments. Dow is investing in several high-return growth projects including the expansion of downstream silicones capacity.

Although, the company's current-year expected earnings growth rate is negative, it has an estimated earnings growth of more than 100% for the next year. The Zacks Consensus Estimate for the current-year and next year has improved 4.3% and 2.2%, respectively in the last 7 days. This Zacks Rank #1 company has a long-term growth rate of 5%. The stock is currently trading at a 22.2% discount to its 52-week high price of $56.25 recorded on Nov 11, 2019.

salesforce.com.inc. (CRM - Free Report) is the leading provider of on-demand Customer Relationship Management software, which enables organizations to better manage critical operations such as sales force automation, customer service and support, marketing automation, document management, analytics and custom application development.

The Zacks Rank #1 company has an expected earnings growth rate of 25.1% for the current year (ending January 2021). Its long-term growth rate is 18%. The Zacks Consensus Estimate for the current year has improved by 1.4% over the last 30 days. The stock is currently trading at a 17.2% discount to its 52-week high price of $284.50 recorded on Sep 2.

Apple Inc. (AAPL - Free Report) designs, manufactures and sells iPhone, iPad, iPod, Apple TV, Mac personal computers, Apple Watch, HomePod and AirPods. These devices are powered by the iOS, macOS, watchOS and tvOS operating systems.

The Zacks Rank #2 company has an expected earnings growth rate of 9.1% for the current year (ending September 2020). Its long-term growth rate is 10.7%. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 30 days. The stock is currently trading at a 22.9% discount to its 52-week high price of $137.98 recorded on Sep 2.  

Walmart Inc. (WMT - Free Report) operates retail stores, restaurants, discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, apparel stores, Sam’s Clubs, and NeighborhoodMarkets, as well as the websites, walmart.com and samsclub.com.

The Zacks Rank #2 company has an expected earnings growth rate of 8.5% for the current year (ending January 2021). Its long-term growth rate is 5.6%. The Zacks Consensus Estimate for the current year has improved 1.3% over the last 7 days. The stock is currently trading at a 10.2% discount to its 52-week high price of $151.33 recorded on Sep 2.  

UnitedHealth Group Inc. (UNH - Free Report) is the largest health care services company globally, serving over 50 million individuals in the United States and over 5 million internationally. It operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx.

The Zacks Rank #2 company has an expected earnings growth rate of 9.7% for the current year. Its long-term growth rate is 12.7%. The Zacks Consensus Estimate for the current year has improved 0.7% over the last 60 days. The stock is currently trading at a 7.3% discount to its 52-week high price of $324.57 recorded on Aug 11.  

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