Rising trade tensions have hit the market since we last looked at this year’s Dogs of the Dow, and while the Dogs have also moved lower, this year’s group of stocks continues to outpace the and have held up better than the overall market.
When we last looked at this year’s stocks the overall Dow Jones was up 12.2 percent and the Dogs were up 12.8 percent. At the current time the Dow Jones is up 7.2% on the year while the Dogs are up 9.2% including dividends.
The earnings season is virtually behind us which creates a good opportunity to check in this year’s stocks for a better view of which stocks are driving the group and which are holding the group down.
The strategy of the Dogs of the Dow is to buy the ten highest yielding stocks in the Dow Jones an hold them for the year regardless of individual performance, but it is important to watch the group for clues they give on the stock of the overall market.
Cisco Systems and Procter & Gamble
Cisco Systems (CSCO) has been the top performing stock in the group all year, with the position up 15.1% on the year including the company’s first two distributions. Cisco posted better than expected Q3 numbers on both the top and bottom line in May and the stock was nearing its 52-week high before trade tensions pulled the broader market lower over the last two weeks. CSCO is currently trading at $53.14 with a $58.06 average price target.
Procter & Gamble (PG) moved up the list of top performers in this year’s group. PG was up 13.2% at our last checkup, and despite the overall market volatility the stock has managed to edge higher is up 15.0% year to date. PG has been one of the strongest stocks over the last year and is now trading just shy of its all-time high. In late April the company posted better than expected Q3 earnings and sales and the stock is trading at $104.54 with an average price target of $105.00.
International Business Machines at JP Morgan
IBM (IBM) is currently up 14.6% year to date. The stock roared back to life at the start of the year but has trended steadily lower over the last month. In April the company reported mixed Q1 numbers with an earnings beat and weaker than expected sales. Trade tensions with China and the revenue miss are hurting the stock but the recent selling has pulled IBM’s forward P/E to just 9.1 which should help the stock start to find support and shares should recover as strength returns to the overall market. Analysts see a lot of upside in the stock with an average price target of $154 versus its current price of $129.27.
Banking giant JP Morgan Chase (JPM) has appreciated 12.7% on the year. JPM was trading at a 52-week high just before the overall market sold off over the last month after posting positive Q1 surprises on both the top and bottom line. The stock is currently trading at just 11 times earnings which are expected to rise 11.8% for the year. With earnings behind it, the stock will likely trade in sympathy to the overall market into the summer months. JPM trades at $107.99 with an average price target of $121.73.
Chevron and Verizon
Oil and gas giant Chevron (CVX) has steadily fallen since the start of April, but with a strong first three months the position remains up 7.7% on the year, and slightly ahead of the overall market. Chevron posted a big revenue miss in April while profits were above estimates. Oil prices are down over the last several weeks as oil traders worry about the potential impact of the U.S./China trade war on demand for the previous crude. Oil prices are likelyl to remain under pressure while the U.S. and China work to negotiate a deal, which will hurt CVX’s chances of regaining their strength. CVX is trading at $116.03 with an average price target of $141.29.
Verizon (VZ) has been somewhat volatile over the last year, but the overall trend has been bullish and the stock is currently trading just shy of its all-time high. VZ has an attractive price with a forward P/E of just 12, but earnings are expected to rise at just 2.5% per annum over the next five years. Verizon has managed to post better than expected earnings each of the last five quarters which has helped push shares higher and the position is up 6.9% on the year, barely below the overall market at this time. VZ trades at $58.28 with an average price target of $58.64.
Exxon Mobil and Merck
Oil and gas giant Exxon Mobil (XOM) was up just over 20% at the start of April when we last looked at the group, but shares are down sharply over the last two months are the position is currently up just 6.3% on the year. Oil prices have fallen as trade negotiations between the U.S. and China have deteriorated, and until progress is made between the two nations pressure will remain on oil prices and oil stocks as a result. The company posted a wide earnings miss in April which has hurt the stock and led to sharp profit taking after the strong gains from earlier in the year. XOM trades at $72.20 with an average price target of $88.00.
Pharmaceutical giant Merck (MRK) is currently underperforming the market with a gain of 4.3% on the year. While the stock is one of the weaker performers in the group, it has been less volatile and has not experienced either a big run up or selloff during the year. Merck posted big Q1 positive surprises on the top and bottom line at the end of April which has helped it remain steady as the overall market moved lower over the last month. MRK trades at $79.21 with an average price target of $86.33.
Coca-Cola and Pfizer
Soft drink maker Coca-Cola (KO) is up 3% year to date. After selling off sharply in the first part of February after the company’s Q4 report, KO shares have recovered and shares are currently trading just shy of KO’s all-time high. KO’s valuation is a bit high with a forward P/E of 21.5 and earnings expected to rise at 5.1% annually over the next five years. Analysts see additional upside in the stock with an average price target of $51.46. KO is currently trading at $48.67.
Drug maker Pfizer (PFE) is the only stock in this year’s group that is down on the year, with the position down 4.2%. The stock remains in the red for the year, but shares are up over the last month, fueled in part by a strong quarterly report at the end of April. PFE has a low valuation with a forward P/E of 13.8 and profits expected to rise at 5.5% annually over the next five years. PFE is trading at $41.66 with an average price target of $45.86.