The Dow's Top 5 Stocks in February

February was another great month for the stock market. The Dow Jones Industrials (INDEX: ^DJI  ) closed above the 13,000 level for the first time since before the financial crisis, and other major market indexes also scored multiyear highs.

But to figure out whether the Dow's latest advance will last, you need to drill down on the stocks that drove its gains. So let's take a look at the five Dow stocks that performed the best in February -- and search for secrets that could help you decide whether the stock market is primed for even further gains.

Bank of America (NYSE: BAC  ) , up 11.9%
After a horrendous 2011, Bank of America was up strongly for the second month in a row, with a total gain of more than 43% in the first two months of 2012. B of A and its fellow mortgage-lending bank peers agreed to a $26 billion settlement with states and the federal government that should hopefully put the industry's foreclosure scandals behind it -- and let B of A get back to the business of making money.

But before you get too excited, bear in mind that even with this huge advance, B of A has only grown to levels seen last September. This time last year, the stock was well above $14 per share. Bulls will argue that gives B of A plenty more room to run -- but it also shows just how far the bank has fallen.

Microsoft (Nasdaq: MSFT  ) , up 8.2%
Many have viewed Microsoft as having missed out on the revolution in new technology. The company retains a healthy cash flow from its legacy operating system and office software franchises, but it fails to excite investors the same way that some of its competitors do.

But recent signs point to Microsoft moving ahead. Its Windows 8 operating system doesn't just represent an upgrade opportunity for PC owners; it's also targeting mobile users as well. And with Windows Phone-powered offerings starting to emerge, Microsoft definitely hasn't given up on staking its claim in the smartphone market. Even after the rise, the stock's valuation is still attractive -- especially if you think renewed growth could be around the corner.

Disney, up 7.9%
Disney shares benefited early in the month from an analyst upgrade that cited an improving economy as a big driver of potential future growth for the entertainment giant. But even though Disney delivered on the bottom line in its quarterly report, it reported essentially flat sales -- a troubling trend.

What could push Disney higher is continued strength in its media offerings. As cable operators fight it out with alternative content-delivery companies for supremacy, Disney's content creators should have the upper hand, as their offerings fetch premium prices. With appeal to viewers of all ages, Disney has a unique position to capitalize on content-hungry companies.

United Technologies (NYSE: UTX  ) , up 7.7%
For United Technologies, stock movements lately have largely been tied to strategic moves related to its coming buyout of airplane-part maker Goodrich. The company is trying to finance the acquisition by issuing as little stock as possible to avoid shareholder dilution, while also not taking on so much debt that it jeopardizes the company's bond rating. Asset sales appear imminent, but until they're completed, uncertainty could give the stock a turbulent ride.

Looking forward, though, the aircraft engine business looks particularly promising for United Technologies. Big aircraft orders are pouring in, which bodes well for the entire aerospace-component industry. Unlike many of its peers that rely substantially on defense contracts, United Tech seems best poised to prosper even in a tight budget environment.

Procter & Gamble (NYSE: PG  ) , up 7.3%
Oddly enough, it was bad news for Procter & Gamble that provided the lion's share of the stock's lift in February. The company announced job cuts of about 5,700 as part of a planned $10 billion five-year cost-cutting strategy.

P&G clearly has the consumer market mastered, with dozens of billion-dollar brands in its arsenal. But for the stock, a lot depends on which way the overall market goes. I'd expect P&G to lag behind the broader market if the bull continues, but it could lead the way with minimal losses in a bigger correction for the Dow.

What will March bring?
Of course, just because these stocks went up in February doesn't mean they'll keep rising in the future. March could bring a big reversal of fortune for these companies, so make sure you stay aware of all their developments by using the links next to their tickers to add them to your watchlist of promising stocks.

But looking beyond the next month, picking up high-quality stocks at reasonable prices is a great way to save for your long-term financial goals. In the Motley Fool's new special report on retirement, you'll find three smart stock picks as well as some easy-to-follow guidance for setting you a great overall investing strategy. It's free, but read it today while it's still available.

Fool contributor Dan Caplinger looked before he leaped. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Bank of America and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Procter & Gamble, and Walt Disney, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy hopes you enjoyed Leap Day!


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