The bull market lives on in 2016, and it is now nearing six and a half years of age. Stock market valuations are high at about 18 times forward year earnings estimates for the S&P 500 Index. So how is it that the market keeps going higher and higher? It turns out that there is underlying bid as investors have literally bought every sell-off. Also, right at half of the S&P 500 Index members are yielding 2% or more (versus a yield of 1.51% for the 10-year and 2.23% for the 30-year Treasuries).

24/7 Wall St. has seen that the Dow Jones Industrial Average (DJIA) recently hit a new high of 18,622. The reality is that the Dow could hit 20,000 in 2017, within reason, and perhaps rather easily in 2018 if the wheels do not come off the economic cart. The Dow is still the largest index used for quoting “the stock market” by the public.

Before thinking that 20,000 is elusive or just too grand, just remember that many stunt pilots felt that the sound barrier was impossible to break. Now consider that DJIA 20,000 would be only 8.1% higher than the most recent close and would be only 7.4% higher than the recent all-time high.

What makes the Dow unique versus other major stock market averages (Russell, S&P indexes, and Nasdaq) is that the Dow is price-weighted based on a stock’s price. Almost all other indexes have a market cap-weighting or a modified market cap-weighting. According to IndexArb, just 10 (11 for a tie) of the Dow’s 30 stocks make up about 55% of the total Dow’s weighting.

24/7 Wall St. has identified that it would take the performance of just seven of these 30 Dow stocks to get the index to 20,000. They might lead it there alone, or they may create a halo-effect around peers that could even more easily do the job. To get an upside of an upside, please understand that this is bull market analysis. It is also so long since selling pressure and volatility (the VIX) is so low that we probably are due for a sell-off before DJIA 20,000 could be reality.

We took three points into consideration here for a three-way bull market upside to DJIA 20,000. We evaluated the highest analyst price target from reputable brokerage firms. Then we looked at the consensus analyst price target tracked by Thomson Reuters. Finally we looked at the 52-week high. By taking the mean (average) of these three points, we created upside implied price targets. Generally these were higher than the consensus.

If this seems aggressive, you have to consider that we are in a bull market and that is still short of the most optimistic analysts. The long and short of the matter is that these stocks have to keep rallying if the Dow wants to hit 20,000. The average implied bear market upside targets of these seven Dow stocks is almost 16%.

Here are the seven stocks that could likely make DJIA 20,000 a reality in 2017 or 2018.

Apple

So far, Apple Inc. (NASDAQ: AAPL) has failed to live up to expectations laid out in our bullish and bearish outlook for 2016. The good news is that its shares are back up to $108.00. Apple is tied with United Tech as the 10th largest Dow weighting at 4% of the index. Its 52-week high is $123.82, and its consensus analyst price target is $124.06 — the highest current price target is from FBR Capital and is still up at $185.00.
The three-way price target for Apple would be $144.29. That would be some 33.6% higher than the $108.00 current share price. This may sound high, but this is just where analysts expected it to go when 2016 started out.

Any innovative changes to the iPhone might make this happen. Or any new product launches, like a car or in-home entertainment system. Apple has a massive stock buyback plan, and it is valued at only 12 times expected 2017 earnings estimates. What if Apple managed to command a market multiple? Apple shares already have started recovering from their lows, but the mighty Apple is up barely 4% so far in 2016. Upside of 33% for any Dow stock seems excessive, but we are talking about the world’s largest and favorite company. If Apple lives up to its expectations or rises further, it could be the third, fourth or fifth highest Dow weighting.

3M

With 6.6% of the entire Dow’s point value, 3M Co. (NYSE: MMM) is now the highest weighting of the 30 Dow stocks, due to its $178.80 share price. That makes 3M the current most important Dow stock in the quest for DJIA 20,000. Its consensus price target is $179.50 and its 52-week high is $182.27. Jefferies currently has the highest price target, after reiterating a Buy rating and raising its above-consensus target of $190 at the time to $210. The prior street-high analyst target was $200.

3M’s three-way bull market target would be $190.59, which would imply a 6.6% gain if that is seen. 3M shares are already up 20% so far in 2016. That means perhaps a back-and-fill might be needed before expecting a run toward $190, and $200 might be needed.

The reality is that 3M has so many moving parts that it is hard to predict where its upside in 2017 might come from. It has navigated international issues better than peers in some quarters. It also has room to support dividend hikes and buybacks ahead. This company has surprised over and over, and it has been a while since a big acquisition has been made. Its yield is 2.5%, and its market cap at $108 billion is not so large that it cannot rise.

Goldman Sachs

Due to its heavily regulated too big to fail bank holding company status, Goldman Sachs Group Inc. (NYSE: GS) remains a laggard. It still has a weight in the Dow of 6.01%, with its $162.19 share price. That makes it barely the second highest Dow stock by weighting, and therefore the second most important Dow stock in the quest for DJIA 20,000. Goldman Sachs has a consensus price target of $181.00 and a street-high target from Oppenheimer that is still up at $222. Oppenheimer is actually not the only firm calling for a valuation of over $200.

This three-way value would be $194.59, up almost 20% from the current price. Now consider that Goldman Sachs has been very slow to create an at-market dividend yield.

Goldman Sachs might not be regulated quite as harshly as banks in the years ahead, but that remains to be seen. Much still is unknown about future regulations and how the financials are treated by the future administrations. And to make matters more interesting, Goldman Sachs shares are down 9% so far in 2016, despite the market being up. Its $65 billion market cap could go higher without much buying pressure needed, and it screens out as being valued at less than one times book value and less than 10 times expected 2017 earnings.

IBM

After being hard to like for so long, International Business Machines Corp. (NYSE: IBM) could accidentally end up being a contrarian investor’s dream. Despite being so depressed from past highs, at $162.08 IBM’s weighting is right at 6.00% of the Dow, making it the third most important stock in the DJIA 20,000 quest. Its 52-week high is $163.60, with a consensus target price that is lower at $153.90. IBM’s highest price target is $186 at Drexel Hamilton.

The three-way price would generate an IBM target of $167.83, which would imply upside of 3.5%. What investors need to imagine is if IBM’s turnaround actually begins to show more rewards in 2017. This cannot occur overnight, and IBM has lagged for years. It used to be a $200 stock and was once called to rise as high as $250.

It was just in July that Drexel Hamilton was pleased with IBM’s earnings and saw it continuing to turn the corner. IBM is called dirt cheap by value investors at less than 10 times expected earnings, but many investors and analysts believe the core IBM is facing a long slow death. IBM doesn’t even report its services backlog any longer. What if the bull market changed sentiment here and IBM went north of $200 again?

Boeing

Boeing Co. (NYSE: BA) has come down handily from the post-Dreamliner highs. Trading at $132.28, its Dow weighting is about 4.9%. Boeing’s consensus price target is $149.00, and its 52-week high is $150.59. The highest analyst price target is from Bernstein, up at $188.
Boeing’s three-way target would be $162.53, some 23% higher than the current share price of $132.28. This implied bull market target may seem high, but Boeing has proven that it can rise over 20% in a year before. Now consider that Boeing shares are down by 6% so far in 2016.

Boeing trades at less than 14 times next year’s consensus earnings estimates. It also has room for more dividends, despite a 3.3% yield, and could easily pursue more continued stock buybacks. What if Boeing’s 787 Dreamliner business picks up again in 2017, or what if Boeing wins new defense and space-systems orders not yet priced into the stock in 2017?

Home Depot

Shares of Home Depot Inc. (NYSE: HD) have been on fire during the past year, and the $135.60 price gives it a 5% weighting in the Dow. Its consensus price target is $148.05, and its 52-week high is $139.00. Merrill Lynch has the highest street price target: $158.

Home Depot’s three-way price target would come to $148.35, some 9.4% higher than the current share price. Despite being up over 17% in the past year or so, Home Depot is up only 3.6% so far in 2016.

Home Depot is the top home remodeling and construction destination. Super-low mortgage rates and some easing of the mortgage underwriting criteria could keep people spending more and more on their homes. The thought that Home Depot could rise over 10% is not too far out of order, or it could even rise more in the next 12 to 24 months.

UnitedHealth

With a 5.24% weight in the Dow, UnitedHealth Group Inc. (NYSE: UNH) is the fourth highest weighted Dow stock. This is the king of U.S. health care, even if it is exiting some exchanges. UnitedHealth’s $142.19 share price compares with a 52-week high of $144.48. Its consensus price target is $160.87, and its highest analyst target is $184.

UnitedHealth’s three-way target would imply a price of $163.11. That would be upside of 14.7% from the current $142.19 share price. Its shares are up 21% so far in 2016, so perhaps it needs a back-and-fill before climbing the next wave higher in 2017.

What is amazing is that UnitedHealth is a Dow component at all, considering that it was at ground-zero for the targeting of Obamacare. The company is making steps to get out of just the health insurance aspect, and the trend of insurance companies exiting the public exchanges in states may remove more liability overhang ahead. There are also international opportunities. Its $135 billion market cap is the king of health insurance players by far, and UnitedHealth has all but formally eliminated the chance it would make a massive health insurance acquisition effort. At less than 16 times expected 2017 estimates, it still yields just 1.8% and could afford higher dividends ahead.

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Many other Dow stocks also could make a big dent here in the performance of the Dow and the quest for 20,000. Johnson & Johnson has a 4.5% weighting and is ranked as seven of 30 by weight. McDonald’s is ranked as number eight, and Travelers is number nine. United Tech is tied at ten with Apple, and its shares are already up 14% so far in 2016.

What if oil somehow manages to go back to $60 or higher in 2017 — or is expected to in 2018? Then all of a sudden oil giants like Chevron and Exxon Mobil could launch the Dow higher. What if Disney stops being punished over cord-cutters, and what if the combined theme park launches (Star Wars, Shanghai) and movies (Star Wars, Frozen, Marvel and Pixar) or a stealth recovery in its cable/networks all add another 25% to earnings ahead?

Again, this is purely a bull market view. Each of these companies had a bull-bear view for 2016 that was more down to earth at the start of the year. It’s just amazing to see this market crawl a wall of worry.

It seems like a huge barrier to get the Dow to 20,000. The reality is that, even with a high base market value, the Dow could hit 20,000 without any crazy predictions needed.

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