While 2018 was a bad year for the Dow Jones, the same cannot be said about 2019. In fact, it’s been quite the opposite. Yes, some may argue that there have been some hiccups along the way. Thanks to inverted yield curves and trade tensions, the Dow did face a lot of gyrations. But still, the blue-chip index held through it, and eventually posted encouraging gains. In fact, the Dow steered past the coveted 28,000 mark for the first time in its 120-year history on Nov 15 (read more: 5 Blue-Chip Stocks to Buy as Dow Breezes Past 28,000).
We should remember that the Dow plunged around 12% during the last three months of 2018. However, the Dow recouped such losses and gained 22% so far this year. Progress toward a January trade agreement between the United States and China, the USMCA trade deal to replace NAFTA and promising domestic economic reports helped the Dow walk away with some solid gains in 2019.
On the trade front, the United States said that China have agreed to increase import of commodities in 2020 and 2021 by almost $200 billion, which includes nearly $40 billion of U.S. agricultural products. China also agreed to protect U.S. intellectual property rights and has given assurance of not manipulating its currency. The United States, meanwhile, has agreed not to impose extra tariffs on nearly $160 billion of Chinese consumer electronics and toys.
The House of Representatives saw both the Democrats and Republicans united in passing an updated version of the 25-year-old NAFTA that many economists believe will eventually prove favorable for the U.S. economy.
And when it comes to economic data, the U.S. GDP in the third quarter of 2019 was 2.1%, more than analysts’ expectations, and squashed fears of an imminent recession. What’s more, consumer spending that accounts for almost two-third of U.S. economic activity, is showing signs of improvement. Per the Commerce Department, consumer outlays increased 0.4% in November, its strongest gain since July.
Also, factory output bounced back after General Motor Company’s strike ended last month, per the Fed. Industrial production increased at a seasonally adjusted rate of 1.1% in November compared with the prior month. That marked the biggest month-over-month increase since October 2017. Another reading on the U.S. housing sector saw construction of new homes jump in November, a tell-tale sign of continued momentum in the housing sector.
It’s worth pointing out that the current bull run of the Dow has also been fueled by record low interest rates and easy monetary policies by the Fed that made borrowing money a lot easier. On that positive note, let us look at the top three performing Dow stocks so far this year, and the one that lost the most.
Apple
Apple Inc. AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. This year, the iPhone maker benefited from momentum in its non-iPhone businesses, particularly Services and Wearables, strong adoption of Apple Pay and growing Apple Music subscriber base.
In the wearable space, Apple Watch continues to dominate the global smartwatch market. After all, Apple Watch’s market share surged to 48% in the third quarter of 2019, up from 45% in the second quarter. During the quarter, Apple’s wireless AirPods also accounted for nearly 45% of all earbuds sold. Notably, the company expects to be a market leader in the wearables segment heading into 2020 after it recently released AirPods Pro known for its noise-canceling features.
Needless to say, that the company has done so good this year that its goal of $51 billion in services revenues is now very much within the reach. Apple’s service revenues had already grown to $46.29 billion, as of the third quarter.
Shares of Apple have climbed 80.2% so far this year, more than the Computer – Mini computers industry’s growth of 76.7%. The company’s expected earnings growth rate for the next quarter and next year is 14.6% and 15.8%, respectively.
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Microsoft
Microsoft Corporation MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. Its new subscription model, Azure and promising new products generated sizeable cash flows this year.
To top it, Microsoft’s gaming segment, including Xbox Live, Game Pass subscriptions and Mixer, also helped the trillion-dollar plus company gain traction. Notably, acquisitions like PlayFab and GitHub helped Microsoft expand its total addressable market (TAM).
Other segments of commercial cloud, including Office 365 and Dynamics 365 are also expected to have driven the software giant’s earnings. Lastly, the 10-year, $10 billion Joint Enterprise Defense Infrastructure project from the Department of Defense that Microsoft secured, bodes well.
Shares of Microsoft have soared 55% on a year-to-date basis, more than the Computer – Software industry’s growth of 43.9%. Microsoft’s expected earnings growth rate for the next quarter and next year is 8.8% and 12.3%, respectively.
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Visa
Visa Inc. V operates as a payments technology company worldwide. The company facilitates commerce through the transfer of value and information among consumers, merchants and financial institutions. From increase in business volumes to the Visa Europe acquisition to investment in digital technology, all helped improve Visa’s balance sheet.
Visa has also been hedge funds’ most preferred stock this year. A total of 132 of the hedge funds were long on Visa heading into the fourth quarter of 2019, per Insider Monkey. And that’s an uptick of 13% from the previous quarter.
Fisher Asset Management held the largest stake in Visa, with a $3474.7 million position. It was followed by Berkshire Hathaway stake of $1816.8 million. Some of the other prominent companies that has stake on Visa included Arrowstreet Capital, Akre Capital Management, and D E Shaw, a tell-tale sign that Wall Street’s astute investors are pretty much bullish on this stock.
Shares of Visa have surged 42.2% so far this year, more than the S&P 500’s gain of 27.2%. Visa’s expected earnings growth rate for the next quarter and next year is 11.5% and 16.3%, respectively.
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Walgreens Boots
Walgreens Boots Alliance, Inc. WBA operates as a pharmacy-led health and wellbeing company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale.
Unlike most of the stocks listed in the Dow, Walgreens journey this year has been disappointing. Ever since the company joined the blue-chip index, replacing Dow-stalwart for 107 years, General Electric, its shares have plunged more than 13%. This was primarily because investors were concerned about the growing competition that Walgreens may face from potential competitors like Amazon.com, Inc. AMZN. Due to such a threat, Walgreens suffered its biggest one-day drop in five years in April. The company lowered its 2019 forecast and increased its cost cutting plans, including pharmacy closures.
Strategic partnerships or acquisitions may help Walgreens bounce back, but still too many pharmacies in the United States will give the company stiff competition in the long run. Shares of Walgreens have declined 14.6% on a year-to-date basis against the Retail – Pharmacies and Drug Stores industry’s growth of 0.7%. Walgreens misery doesn’t end here! The company’s earnings are expected to decline 1.8% in the next quarter as well.
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Apple, Visa and Walgreens currently have a Zacks Rank #3 (Hold), while Microsoft has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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