The Five Stocks That Are Driving the Dow Dow
November 02 2016 - 12:55PM
Dow Jones News
By Corrie Driebusch
Five stocks are responsible for 81% of the gains in the Dow
Jones Industrial Average so far this year.
UnitedHealth Group Inc., Caterpillar Inc., International
Business Machines Corp., Chevron Corp. and 3M Co. have each
contributed more than 100 points to the Dow Jones Industrial
Average's 717-point gain in 2016 through the end of October,
according to WSJ Market Data Group.
There is no similar cluster at the bottom end of the index --
not a single stock took more than 85 points off the Dow
industrials.
Last year, the five worst-performing companies took off more
than 780 points from the Dow industrials, offset by the five
biggest contributors, which added 757 points to the index. (The
index finished 2015 down 398 points, or 2.2%.) Wal-Mart Stores
Inc., Apple Inc. and Caterpillar were the biggest decliners that
year.
"That's the magic of stock picking," said Nicholas Colas, chief
market strategist at global brokerage Convergex. While there are
often outsize winners in the index, the problem is "you just rarely
know which they're going to be in any given year."
One reason for those five stocks' gains this year: a scramble by
investors for securities that generate income. The five companies
have an average annual dividend of about 3.2%, according to
FactSet. That is slightly below the average 3.6% dividend yield for
the S&P 500 utilities sector, which has rallied this year as
investors sought income while bond yields were low. The average
dividend yield for the broader S&P 500 is 2.2%.
Mr. Colas said the lack of impact by Apple's stock on the Dow
may surprise some investors. Apple replaced telecommunications
giant AT&T Inc. in the Dow industrials on March 19, 2015.
Apple's stock is up 5.5% in 2016, more than the broader market, but
it has contributed only 57 points to the index.
It has, however, been a top contributor to the S&P 500,
which is weighted by market capitalization rather than stock price
like the Dow industrials. Apple has the highest market cap in the
U.S., meaning even small shifts in its stock price have a big
impact on the S&P 500.
The S&P 500 has gained 82.21 points or 4% in 2016 through
October, with the biggest contributions coming from Facebook, which
added 5.09 points; Johnson & Johnson, 3.9 points; and Apple,
3.83 points, according to S&P Dow Jones Indices.
Last year, growth stocks Facebook Inc., Amazon.com Inc., Netflix
Inc. and Google parent Alphabet Inc. -- commonly referred to as the
"FANG" stocks -- were outsize gainers in the S&P 500.
In another twist, this year's worst-performing sector in the
S&P 500, health care, includes the Dow industrials' biggest
point contributor.
Shares of U.S. health insurer UnitedHealth have risen 20% this
year as of Monday's close and added 162 points to the Dow
industrials in 2016, even as the broader S&P 500 health-care
sector fell 7% in the same period.
Investors wondering which stocks could swing the Dow industrials
in the last two months of the year should look to the companies
with the biggest weighting, Mr. Colas says. In addition to 3M, IBM
and UnitedHealth, that includes Goldman Sachs Group Inc., which has
a roughly 6.7% weighting, and Boeing Co., with a roughly 5.4%
weighting, he said.
So far this year, those latter two stocks haven't moved the
index much. Both are roughly flat, each taking nearly 15 points off
the index through the end of October.
(END) Dow Jones Newswires
November 02, 2016 12:40 ET (16:40 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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