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Dow Posts Longest Winning Run in Two Months: 4 Top Picks

Nalak Das
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Dow Posts Longest Winning Run in Two Months: 4 Top Picks

A strong bunch of 15 stocks out of the portfolio of 30 in the Dow has provided positive returns year to date.

The Dow has witnessed robust performance in July so far. On Jul 18, the closely watched 30-stock index recorded a bull-run for five straight trading days. Notably, global trade war concerns and fear of escalating inflation in the U.S. economy has been plaguing the U.S. stock markets for the first half of 2018.

In fact, stock market momentum has remained largely unhindered despite recent volatility. Solid macro-economic fundamentals, government’s tax reform and deregulation proposals along with sustained strong earnings performance are acting as primary tailwinds. At this stage, investment in Dow stocks with favorable Zacks Rank with attractive year-to-date return will bode well for investors.

The Dow in Green for Five Successive Days  

On Jul 18, the Dow 30 gained 0.3% or 79.40 points to close at 25,199.29. This was the index’s fifth straight winning session since May 14, when its eight-day long winning run came to an end. Moreover, the Dow ended in the green in nine of the last 10 trading days. In the first two weeks of July, the index rose 0.6% and 2.3%, respectively.

Strong performance of the Dow 30 in July enabled the index to return to positive territory year to date (up 1.9%). A strong bunch of 15 stocks out of the portfolio of 30 in the Dow has provided positive returns year to date. The blue-chip index is currently above both its 50-days and 200-days moving average. These are important psychological barriers, indicating both short-term and long-term momentum of the Dow.

Powell, Kudlow Bullish on Economy

On Jul 17, while testifying in front of Congressional lawmakers, the Fed Chairman Jerome Powell stated that the U.S. economy is on a strong foothold with robust job market and inflation close to Fed’s target range of 2%.

On Jul 18, Larry Kudlow expressed his confidence in the U.S. economy by stating that U.S. GDP is likely to grow at 4% for a quarter or two. Moreover, in order to sustain long-term economic growth, the Trump administration is considering a second round of tax cuts this year.

Strong Earnings Momentum

Market participants are expecting strong showing by American corporates as second-quarter earnings season slowly gathers steam. So far, 48 S&P 500 members have reported earnings results. For those companies, earnings were up 23% from the same period last year on 10% higher revenues.

Total earnings of the S&P 500 index is expected to be up 20.4% in second-quarter 2018 from the same period last year driven by 8.3% year-over-year growth in revenues. (Read More: Positive Start to Q2 Earnings Season)

Our Top Picks

Gradual easing of trade conflicts, steady economic activities and business-friendly policies adopted by the government will pave the way for further upside.

At this stage, we narrowed down our search to four stocks in the Dow 30 index each carrying either a Zacks Rank #1 (Strong Buy) or 2 (Buy). Further, these stocks have provided fabulous returns so far this year and flaunt strong growth potential.

The chart below shows price performance of our four picks year to date.



Intel Corp. INTC: The company generated positive earnings surprise of 22.5% in the last reported quarter. The stock has gained 12.1% year to date. It has expected earnings growth of 16.5% for current year. The Zacks Consensus Estimate for the current year has improved by 4.7% over the last 60 days. Intel sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

UnitedHealth Group Inc. UNH: The company generated positive earnings surprise of 3.6% in the last reported quarter. The stock has gained 15.9% year to date. It has expected earnings growth of 25.4% for current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days. UnitedHealth carries a Zacks Rank #2.

Cisco Systems Inc. CSCO: The company generated positive earnings surprise of 1.5% in the last reported quarter. The stock has gained 10.2% year to date. It has expected earnings growth of 8.4% for current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 days. Cisco carries a Zacks Rank #2.

Apple Inc. AAPL: The company generated positive earnings surprise of 1.5% in the last reported quarter. The stock has gained 12.5% year to date. It has expected earnings growth of 24% for current year. The Zacks Consensus Estimate for the current year has improved by 0.1% over the last 60 days. Apple carries a Zacks Rank #2.

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