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5 Blue-Chip Stocks to Buy as Dow Breezes Past 28,000

Tirthankar Chakraborty

The Dow Jones Industrial Average steered past the 28,000 mark for the first time in its 120-year history on Nov 15. The 30-stock index closed 222.93 points higher or 0.7% at 28,004.89. In fact, the blue-chip index registered its 11th record close of 2019 and is up 20.1% on a year-to-date basis.

One of the most prominent Dow components that drove the index to a 28,000 milestone is Apple Inc. AAPL. The iPhone maker is the best performing stock in the Dow in the last four months, with shares up more than 30%. Apple is, undoubtedly, benefitting from the progress in its Services business, strong adoption of Apple Pay and higher Apple Music subscriber count. Among other significant names Intel, J.P. Morgan, United Technologies and Home Depot saw their shares rise more than 10% over the past four months.

So, what are the factors that helped the blue-chip index top 28,000 for the first time? Progress in U.S.-China trade negotiations helped the index scale north. White House economic adviser Lawrence Kudlow recently said that Washington and Beijing are getting close to an agreement. Officials from both the sides are about to finalize “phase one’’ trade deal, where Beijing would commit to buy American farm products. It will also discourage China from devaluing its currency and protect intellectual property rights.

If the phase-one deal is successful, President Trump also won’t impose new tariffs on Dec 15 as planned and officials would roll back some of the existing tariffs. Needless to say, the rolling back of such tariffs could easily improve the rapport between both the sides eventually leading them to pursue a phase-two or phase-three deal. In fact, any move to settle the trade dispute, which has affected billions of dollars of trade, squeezed corporate profit margins and impeded global economic growth, is welcome news.

Optimism about the economy from Fed chairman Jerome Powell has also lifted the blue-chip index. Recently, Powell said in a testimony before Congress’ Joint Economic Committee that “looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2% objective as most likely.”

Recent data also suggests that economic growth remains steady if not spectacular. The economy did expand at a healthy annual rate of 1.9% in the July-September quarter, surpassing several economists’ estimate. What’s more, the unemployment rate remains near a 50-year low and hiring stays promising.

5 Blue-Chip Stocks to Buy Now

Thanks to the aforementioned bullish factors, there has been a particularly sharp run up in the 120-year-old index of 30 stocks.  These companies are slated to gain in the near term as they have large market capitalization, strong balance sheet and solid cash flow. Hence, it makes sense to invest in solid blue-chip stocks that can make the most of a Dow rally. We have, thus, selected five such blue-chip stocks that have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merck & Co., Inc. MRK provides healthcare solutions. It operates in Pharmaceutical, Animal Health, Healthcare Services, and Alliances segments. The Zacks Consensus Estimate for its current-year earnings has climbed 5.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 18.9%, more than the Large Cap Pharmaceuticals industry’s projected rise of 2.7%.

Microsoft Corporation MSFT develops, licenses, and supports software, services, devices, and solutions. The Zacks Consensus Estimate for its current-year earnings has moved up 2.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.6%, more than the Computer - Software industry’s estimated increase of 2.4%.

NIKE, Inc. NKE designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories. The Zacks Consensus Estimate for its current-year earnings has moved 2.4% up over the past 60 days. The company’s expected earnings growth rate for the current year is 19.3%, more than the Shoes and Retail Apparel industry’s expected rise of 10.2%.

The Procter & Gamble Company PG provides branded consumer packaged goods to consumers. The Zacks Consensus Estimate for its current-year earnings has risen 2.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 9.3%, in contrast to the Soap and Cleaning Materials industry’s estimated decline of 0.4%.

Intel Corporation INTC offers computing, networking, data storage, and communication solutions. The Zacks Consensus Estimate for its current-year earnings has climbed 5.5% over the past 60 days. The company’s expected earnings growth rate for the next quarter is nearly 18%, more than the Semiconductor - General industry’s projected rise of 10.1%.

Shares of Merck, Microsoft, NIKE, Procter & Gamble and Intel have gained 11.1%, 47.7%, 25.5%, 31.1% and 23.5%, respectively, so far this year. Take a look —

 

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Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
NIKE, Inc. (NKE) : Free Stock Analysis Report
 
Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
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