Which companies can take the Dow Jones average where it has to go? Who is fore-ordained to get the venerable one to 20,000?
First, before I go on, you need to know I am writing this with the idea that I think that whole idea that 20,000 is in the cards is a little silly, for several reasons. One, 20,000 means nothing other than a signpost that shows we are up more than 8% since the election and are about to hit a big round number. The percentage is outsized, the number is just a number.
Second, I almost feel like we are being drawn to this number like zombies from "The Walking Dead." Stalkers. I wish it didn't seem so inevitable, because it is stretching way too many stocks' valuations.
Third, it just seems so damned forced. I seriously do want stocks to do nothing for a bit. Shake some people out. Get rid of the momentum players.
Still, though, we all recognize the kind of swaggering "logic" behind the thrust.
So, to bow down for a moment to the altar of 20,000, here's a scenario that the uber enthusiastic -- and to some degree, I think, too enthusiastic -- bulls could use to get there.
First, at this point, it's really not as easy as you think to get this index to 20,000. Many of these companies in the last few weeks have given you an outlook that doesn't get you there, or are not Trump stocks -- think drugs -- or are so hamstrung by currency and higher interest rates that they may be regarded as shortfall candidates.
But let me take an alphabetical swing at the roadmap and prospects that the 20,000ers may need to fall into place with the "logic" behind each one.
First is Disney (DIS) . This one's not all that hard. You start off with Rogue One, which is blowout. Then you start to hear about better theme park attendance. Then we get some sign that there is "something going on at ESPN" that neuters the bear story. Throw in something involving Disney's $1 billion investment in BAMtech, where the CEO Bob Bowman just yesterday stepped down, and you have a decent story that could take this stock to $110.
Next is DuPont (DD) . You have Ed Breen in there working tirelessly to get Dupont to merge with Dow Chemical (DOW) . One quick nod that the deal's about to get approval can probably get you to $80 from $75, which is it's 52-week high. Even a whisper will work. (DOW is a holding of Action Alerts PLUS)
Home Depot's (HD) been moving up relentlessly since that so-called disappointing last quarter, and I think that you can make a case that this is two-thirds a Trump stock, lower corporate taxes and deregulation -- sorry, it's a domestic company, so not a lot of overseas assets beyond North America.
Home Depot's got a bunch of things going for it:
1. Not at a 52-week-high.
2. A dearth of good retail non-apparel stories.
3. Deregulation means more building. Remember all it takes is for a story to be crafted.
IBM's (IBM) so easy to tell a compelling tale about. It is at 12x earnings when the average stock's at 20x. A yield of 3.3% when 10-years are still well below that. The fact that the company is moving aggressively to the cloud. Watson's getting talked about. Mostly sells and holds. That's a winning scenario.
UnitedHealth (UNH) doesn't need to do anything. The market, somehow, has seized on this health-care cost controller as the only really safe big-cap name in the space. The estimates are repeatedly too low. You know, it will figure out how to be a winner in the non-Affordable Care Act world. It's competitors have been so busy merging that they have taken their eye off the ball.
People want to own Walmart (WMT) . They are itching to do so. They don't even have a reason, other than it looks like it is always about to break out and because next year is Jet.com 's year. Walmart's the kind of stock where you can say, forever, "Hey, it's an investment year, they have to catch up to Amazon (AMZN) ," and therefore alibi any shortfall.
Finally, there's Microsoft (MSFT) . The market's liking cloud again. The market's liking big data. The market's liking gaming. Heck, after listening to Western Digital (WDC) , the market's even liking personal computers.
Microsoft has all of those. You can pile into it knowing that it's a winner on repatriation and on lower taxes.
You see how it can go here. You just need to buy into a thesis that says: "got some Trump, got no possibility of a shortfall, got some GDP growth, hasn't preannounced or given soft guidance," and you have a win. These are the stocks that can get us there.
Oh, and if they don't?
Then J.P. Morgan (JPM) , which has been tireless in its rally, will just have to take up the slack.
Okay the "logic" may be facetious. But I guess I am so sick of hearing "Dow 20,000" that I at least wanted to "google maps" it for you. And nothing more, because I wish there were better groundings than "stories." Yet, that's what it will take to get there in the last trading week of the 2016.