In the first days of each year, 24/7 Wall St. uses the average implied upside of each Dow Jones Industrial Average component to generate an upside price target. It has been off in some years and incredibly close in others. The peak performance price for the Dow was up at 19,700 by the end of 2016.
What has taken hold at the end of 2016 is that the Dow, S&P 500, NASDAQ, and even the Russell 2,000 all closed at record highs. That hasn’t happened since the last trading day of 1999.
It seemed too good to be true that we would see 19,700 on the Dow in 2016 when the first few weeks of the year were so ugly. The market was in a major sell-off for the worst start of any year of our lives.
Now the DJIA is all the way at 18,956, up almost 9% year to date. At the start of 2016, few were predicting a President Trump because the race had so many candidates, but the post-Trump victory rally has been massive for a whole slew of sectors: stocks tied to financials and those that win with higher interest rates, industrials, infrastructure, defense, and more.
The average Dow stock dividend was about 2.8% at the end of 2015, very close to the same at the end of 2016 due to many dividend hikes. Our peak-Dow calculation for 2015 was a 7.4% gain to 19,142. That level remains unseen as of November 22, but that 19,700 peak-Dow for 2016 would require a gain of only 3.9%.
Not all Dow stocks have risen in 2016, even though that was the consensus among Thomson Reuters analysts at the start of 2016.
Shares of Apple, Boeing, Pfizer, Nike and Disney have not lived up to expectations. As far as upside surprises, IBM, Caterpillar, and Chevron are the great winners. These have been covered in detail below with some brief color. Consensus analyst price targets are from Thomson Reuters.
Apple Inc. (NASDAQ: AAPL) is up about 8%, if you include dividends, far shy of the way-too-optimistic upside call of 42% at the start of 2016. Apple has been in limbo for some time and now the question is whether an all-out iPhone 8 launch in late 2017 will become a make-or-break event for the company as its customer refresh cycle starts to lengthen greatly ahead. Also, Apple could be one of the top overseas cash repatriation winner in 2017.
At $111.75 on last look, Apple shares have a 52-week range of $89.47 to $119.86, and the consensus analyst target price for 12-months out is roughly $131.00. Apple also yields 2.05%.
Boeing Co. (NYSE: BA) has also been disappointing with a 5% return versus almost 16% expected return at the start of this year. Boeing has seen a very large swing up and down, and any global recovery taking stronger hold should help Boeing (Ditto for defense spending boosts).
Boeing trades at $147.02, and has a consensus analyst price target of $151.22 and a 52-week range of $102.10 to $150.09.
The biggest disappointment by far has been Nike Inc. (NYSE: NKE). Nike was expected to post a return of almost 18% for 2016, and so far it is actually down by almost that much. Expectations now seem so low for Nike that maybe Nike could pull a Caterpillar-like surprise in 2017. Maybe.
Nike most recently closed at $51.28, versus a 52-week range of $49.01 to $68.19 and a consensus analyst price target of $63.05. Nike’s drop has been monumental after a great prior run, but its dividend remains a disappointing 1.3%.
Another classic disappointment has been Pfizer Inc. (NYSE: PFE), with a return of just about 1% versus a 29% expected gain for the year. Could Pfizer post a huge surprise either on a buyout or on tax changes ahead? Whether the Trump administration will go after drug prices remains an unknown. Pfizer’s latest earnings did not help matters ahead.
Pfizer is now close to $31.50, with a 52-weeek range of $28.25 to $37.39 and a consensus analyst price target of $37.86. Pfizer’s dividend yield is 3.8%. Merck has outperformed substantially versus Pfizer, and closer to expectations.