Investing

The Five Best-Performing DJIA Stocks of 2013

The bull market is alive and thriving now that Congress and the White House managed to cobble together a temporary agreement to end the government shutdown and the debt ceiling debate temporarily. The real driver is that the United States is still growing, and corporate earnings season has shown more positive surprises from major companies than negative ones. The Dow Jones Industrial Average (DJIA) is up more than 14% and the S&P 500 Index is up about 18% year-to-date.

24/7 Wall St. recently showed 10 major trends that the D.C. settlement will not change at all. We also showed the DJIA laggards as the five worst-performing DJIA stocks so far in 2013. Now we are making a list of the five best-performing DJIA stocks so far this year. Frankly, the names of the gainers were more surprising than the laggards.

Stocks hardly sold off during the peak fears of the D.C. panic, with the DJIA only down 6% from the peak at the worst point. That is a market telling you that it wants to go higher, and momentum traders generally bet on the strongest horses rather than the weakest ones.

Five of the DJIA stocks are not living up to the performance expectations of the broader stock market at all, but the range of gains in 2013 for the five best stocks is from 34% to almost 65%. If posting gains of this magnitude is not representative of a major bull market for stocks, then what on earth is?

Here are the five best-performing of the 30 DJIA stocks so far in 2013.

Boeing Co. (NYSE: BA) was somewhat surprising to see as a best-performing DJIA stock when you consider all the woes from the spending sequestration and from the 787 Dreamliner problems. That was then, and now analysts expect serious growth ahead, with one analyst forecast making Boeing perhaps the most important of all DJIA stocks as far as the bull market is concerned. The gains coming into Friday were 64.9% for 2013, and the gain year-over-year was even better at 73%. Boeing hit another all-time high on Friday, and at $122, its consensus price target is still higher at about $130. One recent analyst upgrade took the highest Boeing price target all the way up to $164.00. Boeing trades at almost 19 times expected 2013 earnings.

Nike Inc. (NYSE: NKE) is another surprise to see as one of the best five gainers, because this was one of the most recent additions to the DJIA. We cannot help but imagine how well Nike would be doing if emerging markets were running strong, but we still are looking for another dividend hike above and beyond the paltry 1.1% yield it is paying to new shareholders now. Trading near $75 or so, it has a consensus price target from analysts of $77.95, and one analyst has a price target all the way up at $90.00 for the swish-maker. Note that Nike trades at almost 25 times expected 2013 earnings.

American Express Co. (NYSE: AXP) is the third best DJIA gainer so far in 2013. Its target is on the higher-end customer base, and that has insulated it from some of the woes that many peers have seen. At about $80.20, America Express shares trade above the consensus analyst price target of $80.68. At least the highest price target is up at $92.00, and the median target rather than the mean target price is up at $82.00. American Express has a very low dividend yield at 1.2%, compared to other DJIA stocks and other major financial giants, and its valuation of more than 16 times expected 2013 earnings is a premium to peers as well.

You know it is a bull market when DuPont, or E.I. du Pont de Nemours & Co. (NYSE: DD), is the fourth best-performing stock on the DJIA. This one is highly cyclical and its stock had been muted previously. The biggest part of the gains came earlier in 2013, yet here it sits, up 35.9% so far this year. Investors still get a 3% dividend yield here as well. DuPont trades at $59.64, and its value has now caught back up to the market at about 15.6 times expected 2013 earnings. We would caution that the consensus price target is now about $58.60, even if the highest price target is still listed as $70.00.

3M Co. (NYSE: MMM) is the fifth best-performing DJIA stock so far in 2013, with year-to-date gains of 34.4%, making it the best-performing conglomerate of the DJIA. This stock keeps chugging along and making bolt-on acquisitions when it sees fit. One issue is that its dividend yield is somewhat low for a DJIA stock at 2.1%, but note that it is a dividend aristocrat that raises dividends year after year. It trades near $122.62, and note that the consensus price target is $122.60, so analysts will have to catch up if that target can rise. 3M also comes with a slight value premium to the market at 18.3 times expected 2013 earnings.

We would like to make an honorable mention here for Hewlett-Packard Co. (NYSE: HPQ), even if it is still in turnaround mode and still gutted from the Mark Hurd days. It would have made the list of the greatest DJIA gainers so far in 2013 and still ranks among one of the best stock gains in major technology companies this year. HP’s gain of 52% is very impressive, and its latest guidance sure signaled higher dividends and better shareholder targeting ahead, even if it has a multiyear business turnaround ahead of it.

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