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The 4 Best Performing Dow Jones Stocks in 2020

The Dow Jones Industrial Average (DJIA) hit record highs at the end 2020, driven by investor optimism around the potential for a COVID-19-vaccine-driven economic recovery and passage of a second U.S. fiscal stimulus package. Microsoft (MSFT), Nike (NKE), Walt Disney (DIS) and Apple (AAPL) were the best performing DJIA stocks in 2020. We think these stocks are poised to keep gaining in the coming months based on their impressive revenue and earnings outlook.

The Dow Jones Industrial Average (DJIA) ended 2020 with gains for the second consecutive year. The index hit a record  30,637.47 on the last trading session of a tumultuous year before closing at 30,606.48, representing a 6.9% gain for the year.

Even faced with the lingering negative economic effects caused by  the coronavirus pandemic, many DJIA stocks closed the year with strong returns. The Federal Reserve’s support through low interest rates, coupled with the launch of a slew of lending facilities to ensure market liquidity and safeguard the economy, helped many index member companies weather the year’s business challenges. But investor optimism around the efficacy new vaccines in reviving the economic activities was the primary factor that helped the index close the year on the upswing.

As the ongoing vaccine roll out and an additional $900 billion pandemic bail-out package are expected to speed up economic recovery, the possibility of a big stock market rally in the coming months is high we believe. So, we expect the best performing DJIA stocks of 2020 to achieve fresh highs in the coming months.

Apple Inc. (AAPL), Microsoft Corporation (MSFT), Nike, Inc. (NKE), and Walt Disney Company (DIS), were the biggest gainers in the DJIA in 2020. Along with positive market sentiment, growing market share and fundamental strength should help these stocks keep climbing.

Apple Inc. (AAPL)

AAPL is one of the world’s largest tech companies. It designs, develops, and sells consumer electronics, computer software, and online services. Despite COVID-19 headwinds, AAPL has grown its revenue in every segment and capitalized on the fact that its products are viewed as essential services amid a public lockdown.

On December 8, the company announced the launch of AirPods Max with high-fidelity audio, active noise cancellation, and spatial audio. AAPL has also recently introduced Apple Fitness+, which gives users the option to work-out anywhere and at any time with the screen that best suits them. These breakthrough products will broaden AAPL’s market reach and give a boost to its revenue.

AAPL has also recently unveiled a new line of Mac products. The company has introduced a new MacBook Air, 13-inch MacBook Pro, and Mac mini powered by the M1 Processors–its first generation of internally produced chips. It is hoped that the new features of the new lineup will allow the company to provide seamless experiences to all its customers and drive business growth.

AAPL’s services revenue has increased 16.3% year-over-year to $14.55 billion in the fourth quarter ended September 30, 2020. Net Mac sales rose 29.2% from the prior-year quarter to $9.03 billion, while cash flow from operating activities rose 16.3% from the year-ago value to $80.67 billion.

A consensus EPS estimate of $4.35 for the next year represents a 9.3% improvement from the year-ago value. Moreover, AAPL has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $332.33 billion for 2022 represents  5.3% growth from the same period last year. The stock has gained 74% over the past year.

AAPL’s promising outlook is reflected in its POWR Ratings. It is rated a “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, and Industry Rank, and a “B” for Peer Grade. It is ranked #1 of 32 stocks in the Technology – Hardware industry.

Microsoft Corporation (MSFT)

MSFT is one of the most prominent and successful players in the technology industry. Operating through three segments — Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, the company has been thriving amid the pandemic, buoyed by demand for internet-based software and cloud services needed to accommodate a shift to remote working.

On December 10, MSFT and Deutsche Telekom Group announced a seven-year strategic partnership to help enterprises and individual customers accelerate digitalization and enhance productivity. This will enable MSFT to accelerate its innovation and deliver high-quality services based on customer demand.

The company recently collaborated with Johnson Controls to digitally transform how buildings and spaces are conceived, built, and managed. MSFT also announced the availability of Microsoft Azure Digital Twins to support the entire ecosystem of building and device management technologies. This will allow MSFT to better meet the evolving needs of its customers.

MSFT’s revenue has increased 12.4% year-over-year to $37.20 billion in the fiscal first quarter ended September 30, 2020. Revenue from its intelligent cloud segment increased 19.7% year-over-year to $13 billion, driven by growth in consumption-based services. And net income rose30.1% from its year-ago value to $13.90 billion, while EPS has grown 31.9% year-over-year to $1.82.

The consensus EPS estimate for the next quarter ending March 31, 2021, indicates a 12.9% improvement from the year-ago value. Moreover, MSFT has an impressive earnings surprise history, with the company beating Consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $38.71 billion for the next quarter represents  a 10.5% growth from the same period last year. The stock has gained 41% over the past year.

How does MSFT stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

A for Overall POWR Rating.

The stock is also ranked #1 of 102 stocks in the Software – Application industry.

Nike, Inc. (NKE)

NKE is widely known for its athletic shoes and apparel. It has retained the top spot in both favorite apparel and footwear brands within its industry for many years. The company’s ability to resonate with both young and old shoppers is reflective of its large-scale online sales, which have boomed during the pandemic as its consumers turned to its website and app to buy sneakers and workout apparel in lieu of purchasing them from brick-and-mortar outlets.

Earlier last year, the company announced senior leadership changes to support Consumer Direct Acceleration. This strategic leadership change will allow the company to accelerate its digital transformation across all operating segments and enhance client experience.

NKE’s revenue has increased 9% year-over-year to $11.20 billion in the fiscal second quarter ended November 30, 2020. This revenue increase is attributable primarily to strong double-digit growth in direct sales and  growth in Sportswear. Its net income rose 12% from the prior-year quarter to $1.30 billion, while EPS grew 13% from the year-ago value to $0.80. Its gross profit increased 7% year-over year to $4.85 billion over this period.

The consensus EPS estimate of $0.75 for the current quarter ending February 28, 2021 indicates a 41.5% increase year-over-year. The consensus revenue estimate of $11.03 billion for the current quarter represents  a 9.1% increase from the same period last year. The stock has gained 37.5% over the past year.

NKE’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Peer Grade, Buy & Hold Grade, and Industry Rank. It is ranked #1 of 35 stocks in the Athletics & Recreation industry.

Walt Disney Company (DIS)

DIS operated primarily in the fields of studio entertainment and theme parks before the pandemic hit. However, since the beginning of 2020, as the global economy shut down, the entertainment giant has focused on developing its streaming platform. The company launched Disney+ last November, which has been  a major source of revenue  since.

On December 11, the company announced its plans to launch 100+ new titles per year for Disney+. DIS shared details regarding its international general entertainment content brand, Star, which will be launched in Europe and several other international markets in February. This product line-up is expected to significantly boost the company’s direct-to-consumer services revenue.

DIS plans to launch Star in select overseas markets in February 2021 as a fully integrated part of Disney+. This will double the company’s content catalog  and should accelerate its direct-to-consumer business significantly.

DIS’s media networks’ revenue for the fourth quarter ended October 31, 2020 has increased 11% year-over-year to $7.21 billion. Direct-to-Consumer and International revenues have increased 41% from the year-ago value to $4.85 billion. Segment operating income from the media network grew 5% from the prior-year quarter to $1.86 billion, while free cash flow rose 224.4% year-over-year to $3.59 billion over this period.

The consensus EPS estimate of $4.75 for the next year represents  a 202.5% improvement year-over-year. Moreover, DIS beat the Street EPS estimates in three of the trailing four quarters, which is impressive. The consensus revenue estimate of $86.11 billion for 2022 represents  a 23.3% increase year-over-year. The stock has gained 21.3% over the past year.

It is no surprise that DIS is rated “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Buy & Hold Grade, Peer Grade and Industry Rank. Among the 15 stocks in the Entertainment – Sports & Theme Parks industry, it is ranked #1.

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MSFT shares were trading at $217.41 per share on Tuesday morning, down $0.28 (-0.13%). Year-to-date, MSFT has declined -2.25%, versus a -1.08% rise in the benchmark S&P 500 index during the same period.



About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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