5 Picks to Tap Dow’s Longest Winning Streak Since 2017

After lagging the S&P 500 and Nasdaq for most of the year, the Dow Jones Industrial Average is finally making a comeback. The blue-chip index climbed for the ninth consecutive session, marking the longest winning streak since Sep 20, 2017.

Investors seeking to participate in the index’s comeback may consider the stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy), suggesting their continued outperformance. Some of the stocks include JPMorgan Chase & Co. (JPM), Salesforce Inc (CRM), Caterpillar (CAT), McDonald’s (MCD) and Honeywell International Inc. (HON).

The comeback has been mainly driven by rotation to value stocks. Value stocks and other previously lagging sectors of the market are rebounding over the past two weeks as investors are looking for undervalued or underperforming stocks. The Dow Jones is currently valued at a P/E ratio of 18.64 times forward 12 months compared with that of S&P 500’s 20.37 and Nasdaq 100’s 29.32, according to the data from Barron’s.

Earnings optimism adds to the strength. Positive earnings reports from individual companies within the blue-chip index are instilling optimism among investors and driving the index higher. Further, improving economic indicators, such as strong job numbers, rising consumer spending, and robust manufacturing activity, helped Dow Jones to move higher. Being cyclical in nature, the blue-chip index outperforms when economic growth improves.

U.S. consumer prices in June registered their smallest annual increase in over two years, reviving hopes that the Fed was nearing the end of its interest rate increases. The Consumer Price Index rose 3% year over year and 0.2% over the last month. Easing inflation indicates that the economy is stabilizing and interest rates may decline. Consumer sentiment, as indicated by the University of Michigan preliminary index, jumped to an almost two-year high in July. Meanwhile, homebuilder sentiment also climbed for the seventh straight month and is hovering at the highest level since June 2022.

Stocks to Buy

JPMorgan is one of the biggest global banks with assets valued at $3.74 trillion and stockholders’ equity worth $303.1 billion as of Mar 31, 2023. With operations in more than 60 countries, the company is one of the largest financial service firms in the world.

JPM has seen solid earnings estimate revision of $1.12 over the past 30 days for this year, with an estimated earnings growth of 25.8%. It has a Zacks Rank #1 and a Momentum Score of A.

Salesforce is the leading provider of on-demand Customer Relationship Management software, which enables organizations to better manage critical operations, such as sales force automation, customer service and support, marketing automation, document management, analytics and custom application development.

The stock saw solid earnings estimate revision of 30 cents over the past 60 days for the fiscal year (ending January 2024) and has an estimated growth rate of 42%. Salesforce has a Zacks Rank #1 and a Growth Score of A.

Caterpillar, known for its iconic yellow machines, is the largest global construction and mining equipment manufacturer.

Caterpillar saw a positive earnings estimate revision of 15 cents over the past 30 days for this year and has an expected earnings growth rate of 29.1%. It has a Zacks Rank #2 and a VGM Score of B.

McDonald’s is a leading fast-food chain that currently operates more than 39,000 restaurants in more than 100 countries. The company mainly operates and franchises quick-service restaurants under the McDonald’s brand. The company saw a positive earnings estimate revision of 3 cents over the past 30 days for this year, with an estimated earnings growth rate of 9.7%.

MCD has a Zacks Rank #2 and a VGM Score of B.

Honeywell is a global diversified technology and manufacturing company, with a wide range of aerospace products and services. It has a solid footprint in the aerospace industry, with commercial aviation and defense being two major business areas.

Honeywell saw a positive earnings estimate revision of a penny over the past 30 days for this year and has an expected earnings growth rate of 4.57%. It has a Zacks Rank #2 and a Momentum Score of A.

JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

Salesforce Inc. (CRM): Free Stock Analysis Report

Caterpillar Inc. (CAT): Free Stock Analysis Report

Honeywell International Inc. (HON): Free Stock Analysis Report

McDonald’s Corporation (MCD): Free Stock Analysis Report

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