5 Dow Jones Industrial Average 2019 Laggards Could Be Big Q4 Winners

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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) 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.

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.