How Caterpillar and Intel Led the Dow to 17,000

The top two stocks on the Dow this year are Caterpillar and Intel, which aren't blowing investors away with growth; but they keep increasing expectations.

Jul 3, 2014 at 3:30PM
Longview

The Dow Jones Industrial Average (DJINDICES:^DJI) passed 17,000 for the first time today in another symbolic milestone for the market. One major driver today was the Department of Labor's non-farm payroll report: It showed that 288,000 jobs were created last month, and that the unemployment rate fell to 6.1%.

But throughout 2014, two stocks have stood out as top performers, pushing the Dow to new highs. Caterpillar (NYSE:CAT) and Intel (NASDAQ:INTC) have led the market most of the year, and both companies are hoping they can continue gains as financial performance improves.

^DJITR Chart

^DJITR data by YCharts.

How Caterpillar topped the Dow
Caterpillar came into 2014 with fairly low expectations, because the mining industry has slowed down dramatically from a post-recession boom, and construction spending wasn't expected to pick up much, either.

Cat Image Tmf

Big equipment orders in energy and construction are starting to pick up. Source: Caterpillar.

But when first-quarter results were released, the mood from Caterpillar itself changed. Management said construction sales were expected to grow 10%, and energy and transportation would post a solid 5% gain, as well. Mining is still struggling, and revenue overall is expected to be flat in 2014 as a result; but the profit outlook was bumped up by $0.25, to $5.55 per share, and the rally was on. 

Caterpillar will be one of the macro winners if the economy continues to pick up pace, particularly in the housing industry. So, keep an eye on economic growth and new home construction, because those two factors will likely drive the stock for the rest of the year.

Intel charges back
Intel is also not going to be a huge growth stock in 2014, but it's performing far better than expected coming into the year.

Intc Mimo Image

Wearable devices like this baby monitor are what Intel is betting its future on. Source: Intel.

The decline of the PC was priced into Intel's stock and, with little exposure to smartphones and tablets, the company was left with flat to slightly declining revenue. But in mid-June, Intel said that PC sales were better than expected, and increased second-quarter revenue guidance by $700 million, to $13.7 billion, plus or minus $300 million. For the full year, management expects light growth versus a previous expectation of flat revenue.

Long term, there's also upside when Intel releases new chips in the second half of 2014 that will include system on a chip capabilities, lower energy consumption, and boost performance for mobile devices. If Intel can gain a foothold in the Internet of Things early on, it will be a huge win in a new market. I think there's a good chance it can.

Winning more mobile devices will be key for the stock's performance for the rest of the year but right now Intel is doing well because its operations are slowly improving, something we should expect more of as the year goes on.

Preparing for the second half of 2014
Caterpillar and Intel led the Dow in the first half of the year, and they've now increased expectations for investors. For both to continue to lead, they'll need to perform operationally; but I'd rather bet on these two highly profitable companies than take a flier on a higher-growth stock. Long term, those profits matter and this year is proving that.

How to beat the market long-term
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Travis Hoium manages an account that owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. 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 Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers