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7 Blue-Chip Stocks to Buy as Dow Touches a New Milestone
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On Feb 24, the Dow touched a milestone of 32,000 for the first time before closing at 31,961.86. In fact, Wall Street rebounded sharply last day, after nearly a week of volatile trading. The Dow climbed 1.4% or 424.51 points erasing a loss of 110 points at an intraday low. The S&P 500 gained 1.1% after wiping out intraday loss of 0.6%. Likewise, the Nasdaq Composite advanced 1%, reversing its intraday loss of 1.3%.
Wall Street has been witnessing a spike in volatile trading this month primarily owing to soaring yields on U.S. sovereign bonds and investors' expectations of growing inflation. A section of market participants have already raised concerns regarding a bubble in the market. However, we believe that plenty of near-term catalysts are available that will drive Wall Street's northbound journey. At this stage, it will be fruitful to invest in Dow stocks with a favorable Zacks Rank.
Dow Gains Momentum in February
The Dow — popularly known as the blue-chip index — regained momentum in February after closing January in negative territory. Month to date, the index has rallied 6.6% compared with the S&P 500's gain of 5.7% and the Nasdaq Composite's rise of 4%. Year to date, the blue-chip index is up 4.4% compared with 4.5% of the S&P 500 and 5.6% of the Nasdaq Composite.
At its current level of 31,961.86, the Dow is well above its 50-day and 200-day moving averages of 30,775.29 and 28,172.99, respectively. In financial literature, the 50-day moving average line is generally recognized as the short-term trend setter, while the 200-day moving average is considered a long-term trend setter.
It is widely recognized in the technical analysis space that whenever the 50-day moving average line surges ahead of the 200-day moving average line, a long-term uptrend for the index becomes a strong possibility.
Near-Term Catalysts
The U.S. government has ramped up nationwide deployment of COVID-19 vaccines. Moreover, new cases of coronavirus infections and hospitalization have declined significantly this month. The combined effect of these two factors should lead to the gradual reopening of the U.S. economy, which has been operating at a sub-optimal level since lockdowns were imposed last year.
Moreover, the Democrats are moving ahead with President Joe Biden's proposed $1.9 trillion coronavirus-aid package to make it a law. Furthermore, last week, Goldman Sachs reported that currently U.S. citizens have nearly $1.5 trillion in excess savings that could climb to $2.4 trillion by mid-2021. Reopening of the economy with massive savings and stimulus are likely to boost personal spending, which in turn will raise demand for businesses, especially those in the cyclical sectors.
Meanwhile, the impressive rally of stock markets and positive factors mentioned above have prompted a large-section of investors to switch their funds from safe-haven government bonds to risky assets like equities, resulting in soaring yields of U.S. Treasury Notes.
Higher risk-free return is detrimental to high growth industries like technology. Most of the growth companies depend on easy borrowing at cheap rates. A higher market interest rate will raise their cost of projects. As a result, market participants have started to reallocate their funds to cyclical stocks from growth stocks.
Notably, unlike the market's benchmark S&P 500 or the teach-heavy Nasdaq Composite, the composition of the Dow is mostly inclined toward cyclical stocks. Reopening of the economy along with high bond yields is likely to benefit the blue-chip index the most.
Our Top Picks
We have narrowed our search to seven Dow stocks with strong growth potential for 2021 and have witnessed solid earnings estimation revisions in the last 7 to 30 days. Moreover, all these stocks have strong long-term (3-5) growth prospects and are regular dividend payers providing an important income stream during a market downturn. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our seven picks in the last three months.
The Goldman Sachs Group Inc. (GS - Free Report) has an expected earnings growth rate of 15.8% for the current year. The company has a long-term growth rate of 19.2%. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 30 days. It has a current dividend yield of 1.58% and the stock price has soared 40.1% in the last three months.
Caterpillar Inc. (CAT - Free Report) has an expected earnings growth rate of 21.3% for the current year. The company has a long-term growth rate of 12%. The Zacks Consensus Estimate for the current year has improved 3.8% over the last 30 days. The company has a current dividend yield of 1.89% and the stock price has jumped 27.8% in the last three months.
Johnson & Johnson (JNJ - Free Report) has an expected earnings growth rate of 18.1% for the current year. The company has a long-term growth rate of 7.7%. The Zacks Consensus Estimate for the current year has improved 6.6% over the last 30 days. It has a current dividend yield of 2.50% and the stock price has rallied 13.2% in the last three months.
Dow Inc. (DOW - Free Report) has an expected earnings growth rate of more than 100% for the current year. The company has a long-term growth rate of 19.3%. The Zacks Consensus Estimate for the current year has improved 3% over the last 7 days. It has a current dividend yield of 4.48% and the stock price has climbed 12.9% in the last three months.
The Travelers Companies Inc. (TRV - Free Report) has an expected earnings growth rate of 10.6% for the current year. The company has a long-term growth rate of 6.4%. The Zacks Consensus Estimate for the current year has improved 2.2% over the last 30 days. It has a current dividend yield of 2.30% and the stock price has surged 11% in the last three months.
Microsoft Corp. (MSFT - Free Report) has an expected earnings growth rate of 27.4% for the current year (ending June 2021). The company has a long-term growth rate of 11.9%. The Zacks Consensus Estimate for the current year has improved 8.5% over the last 30 days. It has a current dividend yield of 1% and the stock price has advanced 9.5% in the last three months.
Apple Inc. (AAPL - Free Report) has an expected earnings growth rate of 36.3% for the current year (ending September 2021). The company has a long-term growth rate of 11.5%. The Zacks Consensus Estimate for the current year has improved 10.9% over the last 30 days. It has a current dividend yield of 0.65% and the stock price has gained 7.8% in the last three months.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
7 Blue-Chip Stocks to Buy as Dow Touches a New Milestone
On Feb 24, the Dow touched a milestone of 32,000 for the first time before closing at 31,961.86. In fact, Wall Street rebounded sharply last day, after nearly a week of volatile trading. The Dow climbed 1.4% or 424.51 points erasing a loss of 110 points at an intraday low. The S&P 500 gained 1.1% after wiping out intraday loss of 0.6%. Likewise, the Nasdaq Composite advanced 1%, reversing its intraday loss of 1.3%.
Wall Street has been witnessing a spike in volatile trading this month primarily owing to soaring yields on U.S. sovereign bonds and investors' expectations of growing inflation. A section of market participants have already raised concerns regarding a bubble in the market. However, we believe that plenty of near-term catalysts are available that will drive Wall Street's northbound journey. At this stage, it will be fruitful to invest in Dow stocks with a favorable Zacks Rank.
Dow Gains Momentum in February
The Dow — popularly known as the blue-chip index — regained momentum in February after closing January in negative territory. Month to date, the index has rallied 6.6% compared with the S&P 500's gain of 5.7% and the Nasdaq Composite's rise of 4%. Year to date, the blue-chip index is up 4.4% compared with 4.5% of the S&P 500 and 5.6% of the Nasdaq Composite.
At its current level of 31,961.86, the Dow is well above its 50-day and 200-day moving averages of 30,775.29 and 28,172.99, respectively. In financial literature, the 50-day moving average line is generally recognized as the short-term trend setter, while the 200-day moving average is considered a long-term trend setter.
It is widely recognized in the technical analysis space that whenever the 50-day moving average line surges ahead of the 200-day moving average line, a long-term uptrend for the index becomes a strong possibility.
Near-Term Catalysts
The U.S. government has ramped up nationwide deployment of COVID-19 vaccines. Moreover, new cases of coronavirus infections and hospitalization have declined significantly this month. The combined effect of these two factors should lead to the gradual reopening of the U.S. economy, which has been operating at a sub-optimal level since lockdowns were imposed last year.
Moreover, the Democrats are moving ahead with President Joe Biden's proposed $1.9 trillion coronavirus-aid package to make it a law. Furthermore, last week, Goldman Sachs reported that currently U.S. citizens have nearly $1.5 trillion in excess savings that could climb to $2.4 trillion by mid-2021. Reopening of the economy with massive savings and stimulus are likely to boost personal spending, which in turn will raise demand for businesses, especially those in the cyclical sectors.
Meanwhile, the impressive rally of stock markets and positive factors mentioned above have prompted a large-section of investors to switch their funds from safe-haven government bonds to risky assets like equities, resulting in soaring yields of U.S. Treasury Notes.
Higher risk-free return is detrimental to high growth industries like technology. Most of the growth companies depend on easy borrowing at cheap rates. A higher market interest rate will raise their cost of projects. As a result, market participants have started to reallocate their funds to cyclical stocks from growth stocks.
Notably, unlike the market's benchmark S&P 500 or the teach-heavy Nasdaq Composite, the composition of the Dow is mostly inclined toward cyclical stocks. Reopening of the economy along with high bond yields is likely to benefit the blue-chip index the most.
Our Top Picks
We have narrowed our search to seven Dow stocks with strong growth potential for 2021 and have witnessed solid earnings estimation revisions in the last 7 to 30 days. Moreover, all these stocks have strong long-term (3-5) growth prospects and are regular dividend payers providing an important income stream during a market downturn. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our seven picks in the last three months.
The Goldman Sachs Group Inc. (GS - Free Report) has an expected earnings growth rate of 15.8% for the current year. The company has a long-term growth rate of 19.2%. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 30 days. It has a current dividend yield of 1.58% and the stock price has soared 40.1% in the last three months.
Caterpillar Inc. (CAT - Free Report) has an expected earnings growth rate of 21.3% for the current year. The company has a long-term growth rate of 12%. The Zacks Consensus Estimate for the current year has improved 3.8% over the last 30 days. The company has a current dividend yield of 1.89% and the stock price has jumped 27.8% in the last three months.
Johnson & Johnson (JNJ - Free Report) has an expected earnings growth rate of 18.1% for the current year. The company has a long-term growth rate of 7.7%. The Zacks Consensus Estimate for the current year has improved 6.6% over the last 30 days. It has a current dividend yield of 2.50% and the stock price has rallied 13.2% in the last three months.
Dow Inc. (DOW - Free Report) has an expected earnings growth rate of more than 100% for the current year. The company has a long-term growth rate of 19.3%. The Zacks Consensus Estimate for the current year has improved 3% over the last 7 days. It has a current dividend yield of 4.48% and the stock price has climbed 12.9% in the last three months.
The Travelers Companies Inc. (TRV - Free Report) has an expected earnings growth rate of 10.6% for the current year. The company has a long-term growth rate of 6.4%. The Zacks Consensus Estimate for the current year has improved 2.2% over the last 30 days. It has a current dividend yield of 2.30% and the stock price has surged 11% in the last three months.
Microsoft Corp. (MSFT - Free Report) has an expected earnings growth rate of 27.4% for the current year (ending June 2021). The company has a long-term growth rate of 11.9%. The Zacks Consensus Estimate for the current year has improved 8.5% over the last 30 days. It has a current dividend yield of 1% and the stock price has advanced 9.5% in the last three months.
Apple Inc. (AAPL - Free Report) has an expected earnings growth rate of 36.3% for the current year (ending September 2021). The company has a long-term growth rate of 11.5%. The Zacks Consensus Estimate for the current year has improved 10.9% over the last 30 days. It has a current dividend yield of 0.65% and the stock price has gained 7.8% in the last three months.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>