Most Attractive Blue Chips For 2017: Is Dow 22,000 In The Cards?

With 2016, some investors are looking back to see what worked and what did not. With a 14% increase in the Dow Jones Industrial Average (DJIA) this year, the most important issue to consider is what investors should expect for 2017. The Dow has been within 1% of 20,000 for several days. What happens if the Dow hits 22,000 in 2017? It can be much more possible than most investors could imagine.

24/7 Wall St. has evaluated many of the preliminary views for key companies and industries in the future. Regardless of which candidates voted in favor, it is now very difficult to find investors who do not see markets more favorably and who are more favorable to companies with a higher growth environment. After all, the 8.5% rebound in the Dow since the November 8 election is almost unprecedented and too large to simply be assigned as a coincidence or as a relief rally.

Investors have bought all the major setbacks in the market for about six years, and the bull market is rapidly approaching eight years. Investors are looking for value and growth that is overlooked, and they are even looking upward in popular names that simply have more potential to work. It turns out that many of DJIA's 30 shares have a Thomson Reuters consensus price target that requires a substantial increase in the next 12 months. And then investors can add dividends too.

The strategies in favor of growth have been a boom for the infrastructure companies linked to all sides of the main engineering projects and those that process or extract materials. Then there is an environment of less regulation and higher rate that drives finance and cyclicals. And, of course, companies that are ready to repatriate more than $ 1 trillion in cash abroad are expected to face a much more reasonable corporate tax environment than in other countries.

Before assuming that Dow 20,000 will come and turn into 22,000, it is important to reflect on some real problems. Rallies of this magnitude rarely, if ever they follow, are followed by a higher straight line. Many investors postpone the traditional profit taking at the end of the year because they expect lower capital gains taxes in 2017. Many shares of Dow and S & P are now also valued above or very close to the target prices of their analysts. of consensus. Many of Trump's beneficiary shares have also recovered to the point that much or all of the good news for 2017 may already have taken place. What happens if the Federal Reserve raises rates more than expected? Will the internal political struggles of the last decade continue? In addition, and unfortunately, analysts can simply end up wrong. And we almost never hear about geopolitical risks at this time. All these are risks for the rally that does not face a setback.

24/7 Wall St. showed a preliminary bull-bear case for the Dow in 2016 at 19,700. The Dow Jones was valued just above 19,200 on December 6 when we first saw a Dow 20,000+, and the Dow now peaked at 19,987 through December 29.

These are some of the key driving forces that could help the Dow Jones Industrial Average approach 22,000 in 2017.

Goldman Sachs

Goldman Sachs Group (GS) has already risen to more than $ 240.00 in 2016, and shares have risen 32% since November 8. Its stock price has exceeded its analyst consensus price target of $ 229.00. One reason why the Dow outperformed the S & P 500 since the election is that the Dow's weighted valuation (instead of market weighting for other indices) is dominated by Goldman Sachs's 8.3% weighting of the index, almost three times the average of Dow shares. weighing. It has accounted for about a quarter of the earnings after the Dow elections.

Some analysts see even more bright skies for Goldman Sachs. Outside the company that landed in two main positions in the next administration, HSBC is asking for a goal of $ 250 and Deutsche Bank now has a goal of $ 255. If a lower regulation allows more transactions, the earnings record of Goldman Sachs it could dictate even better profits and much more bullish than its insignificant 1% dividend yield.

Apple

Apple Inc. (AAPL) was last operated at about $ 116, and its maximum of 52 weeks is only $ 118.69. Apple's consensus price target now rises to $ 132.00 and has gone up slowly for months. Apple's 2% dividend yield could easily increase if the company repatriates its huge amount of cash abroad close to $ 200 billion, and Apple is valued at only about 11 times next year's earnings estimates.

Credit Suisse just confirmed on December 6 its Outperform rating and the target price of $ 150 for Apple with the hope of a supercycle for iPhone 8. Recent reports that the great product is an iPhone 7s in 2017 could endanger that, but Apple has the largest cash treasure of all companies (at the moment) and buys large amounts of shares. Apple's 52-week trading range is $ 89.47 to $ 118.69, its market capitalization is $ 622 billion and its weighting of 4.03% in the Dow ranks tenth among the 30 components of the index.

Cisco Systems

Cisco Systems Inc. (CSCO) has recovered to $ 30.22, and its analyst consensus target is $ 33.11. It also has a dividend yield of around 3.4%, and the company is a monster when it comes to repurchasing shares. Cisco shares are valued at 12 times future earnings. They are still close to 10% lower than their 2007 highs, and the stock price is still less than half of its historic record at the peak of the technology bubble in 2000.

The range of 52 weeks here is $ 22.46 to $ 31.95, and the limit in the market is $ 153 billion. RBC named him among the best technology selections for 2017 and the company is requesting a price of $ 35 for Cisco.

Coca Cola

Coca-Cola Co. (KO) has been sleeping, but what if 2017 is the most important year for the giant of water and sugar? Its share price of $ 41.46 is much lower than the consensus price target of $ 45.75, and the dividend yield of 3.4% would imply a north gain of 15%. The stock is valued at 20 times the expected earnings per share.

Despite being more dependent on sugary drinks than rival Pepsi, the reality is that Coca-Cola has been diversifying for years. The stock has been a sleeper for so long, and has mostly been in a trading band of $ 39 to $ 44 over the past three years. Coca-Cola still has opportunities for global expansion and cost containment opportunities, and it is possible that value investors begin to focus on what could be a defensive action with limited handicaps. Coca-Cola has also raised its dividend for more than 50 years and has a market value of close to $ 180 billion.

Home Depot

Home Depot Inc. (HD) has recovered to $ 134.08 at the end of December, and its consensus price target has now risen to $ 147. That and its dividend yield of 2% would generate an increase of more than 10%. The stock is valued at 18 times the expected earnings for next year.

Home Depot ran into some problems after reaching a peak in the summer. But weak consumers and the housing slowdown have now been replaced by an euphoric consumer and the expectations of a strong housing market will continue. It seems difficult for Home Depot not to participate in this retail and housing. Home Depot has a 52 week range of $ 109.62 to $ 139.00 and a market capitalization of $ 164 billion.

Intel

Shares of Intel Corp. (INTC) were last traded at $ 36.30, and their consensus target price is now almost $ 40. Intel's dividend yield is also close to 3%, and is valued at less than 13 times the gains of 2017.

What has happened is that the personal computer market has finally returned due to games, virtual reality, artificial intelligence and machine learning. Intel has also expanded far beyond desks; It is deep in the servers and on the Internet of things, and even now it is a growing partner for many chip companies. Intel's market capitalization is $ 174 billion, and has traded in the 52-week range from $ 27.68 to $ 38.36.

Nike

Nike Inc. (NKE) was the worst stock in 2016, with a decline of 17% in the year. With the shares last seen at almost $ 51, the consensus target price is $ 62, and that implies a 20% increase, with a lot of room to grow, in addition to share buybacks.

Nike is the leader in the sportswear market and there have been concerns that the "athleisure" has peaked. Brands like Under Armor, Adidas and Reebok also want their share of the Nike market. What is surprising about all the negativity here is that analysts expect Nike to increase sales to $ 41 billion in 2019 from around $ 32 billion in 2016, with expected earnings growth of around 40% in the same period. What if everyone has been very negative here? Nike's 52-week trading range is $ 49.01 to $ 68.19, and has a market capitalization of $ 85 billion.

Pfizer

Pfizer Inc. (PFE) was trading at $ 32.35, and its consensus price target of $ 37.65 implies a 16.4% increase, even before considering a dividend yield of almost 4%. Pfizer's stock is valued at only 12 times future earnings. 2016 has been a failure for Pfizer, with a gain of only 4%, compared to a 16% increase so far for its rival Merck.

Pfizer had torn apart in its long-term efforts, such as moving or acquiring abroad, deciding whether the restructuring would lead to a breakup and deciding whether to sell some assets. There was also an excess of political pressure on the prices of medicines. While stocks with low economic performance are like that for some reason, what if Pfizer has become too cheap against Merck, or what happens if it releases some unexpected news or makes a big acquisition in 2017? The market capitalization of Pfizer is $ 196 billion, and its shares have a range of 52 weeks from $ 28.25 to $ 37.39.

Procter & Gamble

Last seen around $ 84, Procter & Gamble (PG) has a consensus analyst raise of $ 91.00. This still represents almost 10% of implicit profitability, without even considering its dividend yield of 3%. The consumer products giant has restructured and reduced its brands, but future profits are still valued at 19.5 times.

Procter & Gamble has raised its dividend for more than 50 consecutive years. One problem is that it has faced tougher overseas sales due to that strong dollar, and it seems hard to imagine that the company could reduce its brands again to a growing company. Even so, this is a company that remains fairly friendly with shareholders. Perhaps your endless list of brands should speak for itself.

The 52-week range is $ 74.46 to $ 90.33, and its market capitalization is $ 225 billion, which makes the company larger than its three main pairs of consumer products in the United States combined.

UnitedHealth

UnitedHealth Group Inc. (UNH) was quoted at $ 160.04, and the consensus target price has now risen to $ 179. This implies an increase of 11%, before considering its dividend yield of 1.5%. What is surprising about the expected increase is that UnitedHealth shares have increased almost 40% in 2016, and 13% of those gains have come since the elections. The largest insurer of all of them is valued at around 17 times the expected earnings for 2017.

Being a health insurer under Obamacare turned out to be good for UnitedHealth, and now it seems that analysts have few fears surrounding a Trump effort to replace Obamacare. It has left most exchange operations vacant and focuses on the group market and other value-added opportunities. The way in which the health insurer will eventually be treated under a regime in which Obamacare is dismantled remains to be seen. Even so, even the analyst's lowest price target would imply a 5% drop and the highest target for the analyst is $ 200.

UnitedHealth has a market capitalization of more than $ 150 billion, and its weighting is 5.5% of the 30 components of the Dow.

Visa

Visa Inc. (V) was last seen at $ 78.02, and has a consensus price target of $ 94.20, for an implicit 20% increase. Its dividend yield of less than 1% could have an exponential rise, since it is less than a quarter of the profits. Visa could be a big winner of repatriation efforts, and a solid consumer spending environment should allow the registration to sound, as it wins every time there are credit card transactions. Visa shares are well away from previous highs, but future earnings are still valued at almost 20 times.

Many investors consider Visa a financial power now that it is a newer component of Dow, but Visa is actually a platform provider with ample room to increase its weak dividend. Even so, all companies under the sun seem to want a payment technology, and that has at least influenced the domain of Visa. If the analysts are right, then Visa's stock has moved away from its 52-week high of $ 83.96. Their shares are down since the elections, and have increased less than 2% so far in 2016.

Again, there are many circumstances that must occur for this recent enthusiasm to last. It would be prudent to expect some of the typical year-end takes that are delayed for next year to bring some sales from the beginning. And it is possible that the strength of the post-election rally has already borrowed from the rise of 2017.

Many analysts will surely update and issue more formal objectives for 2017 after the start of the year. The official bull-bear case for 2017 should be followed by policy and structural changes in Washington, D.C., and a return to faster economic growth. The Dow has risen 8.5% since November 8 alone, and year-to-date earnings in 2016 have been just over 14%.

For a relative value between these Dow stocks and the S&P 500 Index, the S&P 500 was last seen valued at 17.3 times expected 2017 earnings per share and at 18.7 times its 2016 estimated earnings per share.