Investing

How Just 7 Stocks Can Take the Dow Up to 20,000 and Beyond

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.

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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