With just over one quarter left in 2019, it has been another banner year for stock market investors, with double-digit gains in all three major averages. Barring a big end-of-the-year meltdown, those gains should hold. The question is pretty simple: 2019 was great, but what do investors do for an encore in 2020?
Most Wall Street strategists are recommending investors stay with large-cap stocks that have liquidity. If the selling starts, that last thing you want to be in is illiquid stocks with no bids to be found.
We screened the 30 stocks in the Dow Jones industrial average, which is up almost 15% year to date, for those that have lagged the venerable index in 2019. We found five that offer tremendous value and could be big fourth-quarter and 2020 winners.
3M
This top industrial could really jump with continued economic pickup, and the shares are still down big this year. 3M Co. (NYSE: MMM | MMM Price Prediction) is a diversified, global manufacturer. Its businesses are technology-driven and organized under five segments: Consumer, Safety and Graphics, Electronics and Energy, Healthcare, and Industrial. Its popular brands include Scotch, Post-It, 3M and Thinsulate. The company also holds over 500 U.S. patents.
In 2017, the company acquired Scott Safety. The deal, which was worth $2.0 billion, boosted 3M’s technology, manufacturing, global capabilities and brand. In addition, it will enable the company to expand its recent portfolio actions within the Safety and Graphics business to help position for long-term success.
Shareholders receive a 2.71% dividend. Credit Suisse has an Outperform rating and a $194 price target on the shares, while the Wall Street consensus target is $176.33. The stock closed Friday at $164.53, which is down 13.65% on the year.
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Caterpillar
This large-cap leader has been hit by trade worries and is offering a very solid entry point. Caterpillar Inc. (NYSE: CAT) is the largest manufacturer and marketer of construction equipment worldwide, and it is also a leading manufacturer of diesel engines and turbines for transport and industrial applications.
The company posted poor second-quarter results, but the long-term story is intact and the Merrill Lynch analysts said this when the company reported:
Bull/bear debate likely rages on as 2019 outlook hinges on an improvement in fourth quarter (oil & gas) and working down dealer inventories. At the end of the day, consensus likely moves to bottom end of the range and we see levers to drive EPS growth through 2020 and 2021 estimated. The company’s commitment to dividend growth provides investors a yield while central banks ease and recession risks fade over time.
Shareholders receive a very nice 3.25% dividend. Merrill Lynch has the shares rated Buy with a $145 price target. That compares with the $142.30 consensus price target. The stock closed last Friday at $126.59 a share. It is only down 0.38% for the year.
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Johnson & Johnson
With a diverse product base and very popular and solid brands, this is among the most conservative big pharmaceutical plays. Johnson & Johnson (NYSE: JNJ) is one of the top market cap stocks in the health care sector and will raise the dividend for shareholders this year for the 56th consecutive year. With everything from medical devices to over-the-counter health items and prescription drugs, Johnson & Johnson remains one of the most diversified health care names on Wall Street.
The health care giant also has one of the most exciting pipelines of new drugs in the sector. That combined with the solid over-the-counter product business makes the stock an outstanding holding for conservative accounts with a long-term investment outlook. The company generates a little over half of its sales in international markets, which are expected to see higher spending on health care over the next 10 years and beyond.
The company still faces the public relations nightmare of lawsuits and allegations over the firm’s talcum powder allegedly containing asbestos and causing ovarian cancer. In addition, Johnson & Johnson also faces some opioid litigation, and that is another headline that is keeping investors away.
Shareholders receive a solid 3.01% dividend. The Goldman Sachs analysts have a Buy rating, and their $169 price target compares with the consensus target of $149.35. The shares closed trading at $128.60 apiece on Friday. The stock is down 0.35% in year to date.
Pfizer
This top pharmaceutical stock made a gigantic splash in June with a $10.6 billion purchase of cancer drug maker Array BioPharma. Pfizer Inc. (NYSE: PFE) is a global biopharmaceutical company with a diversified portfolio of products and pipeline candidates, and it is one of the largest pharmaceutical companies in the world as measured by market capitalization and revenue. It also is a component of the Dow Jones industrial average and has one of the highest paid CEOs in America.
The company’s commercial operations are bifurcated into two business segments: Innovative Health, which focuses on the development and commercialization of medicines and vaccines, as well as consumer health care products, in various therapeutic areas, and Essential Health, which offers branded generic products, biosimilars, anti-infectives and other products without marketing patent protection.
Pfizer pays out a very solid 4.01% dividend. Credit Suisse rates the shares Buy with a price objective of $48. The posted consensus price objective is $41.82, and the shares closed Friday’s trading at $36.22. The stock is down a stunning 17% so far this year.
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Walgreens Boots Alliance
This huge drugstore chain operator is a safe retail play for investors now. Walgreens Boots Alliance Inc. (NYSE: WBA), following the completion of the Rite Aid stores acquisition, is now the largest global pharmacy, with nearly 10,000 stores in the United States alone.
The company also operates an international pharmacy business primarily composed of the Boots pharmacies in the United Kingdom, and Alliance Healthcare, an international wholesaler and distributor of pharmaceutical and medical products in Europe. Walgreens is headquartered in Deerfield, Illinois.
Walgreens investors are paid a 3.36% dividend. RBC’s Sector Perform rating comes with a $59 price target. The consensus target was last seen at $58.47, and the shares ended last week at $54.41. The stock is down right at 20% for the year.
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The last thing investors want is a value trap loser that stays stagnant, but all these top companies have solid long-term prospects. With some facing headline legal issues, and others trade issues or sector struggles, it makes sense to do your homework and ease into the shares, as well as to see how the third-quarter results fare in a few weeks.
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