The Dow Jones Industrials
Earning a 5% return isn't a bad showing, especially when you consider that it doesn't even include the dividends that the Dow's components paid, which added roughly another percentage point to the total return. But some Dow stocks did a whole lot better. Let's take a look at the winners to see what they've been doing right lately.
Bank of America
B of A had the distinction of being the first quarter's big winner as well. Unfortunately, since rising above $10 briefly in March, the stock has retreated nearly 20% from those highs.
But the company has made some useful progress so far this year. Although its share of the $25 billion settlement with banking regulators to settle allegations of foreclosure-related misconduct was a costly blow, it puts a lid on what could have been a much more expensive and time-consuming process that would have distracted from its continuing business.
Still, worries abound. First-quarter income fell sharply from year-ago levels, and the company's bond rating downgrade may hurt confidence in the bank in the long run. B of A needs to build on favorable conditions from the company's own divestiture of non-core assets and the Fed's low rate policy in order to sustain its gains in the second half and beyond.
Many times, a company that makes a mistake doesn't get a second chance. But Disney redeemed itself after a huge bomb.
Disney's theme parks and media outlets make up a huge part of its business, and they've largely been firing on all cylinders lately. But what makes big news for Disney are its movie offerings, and the company has had mixed success this year. John Carter performed so badly that it forced Disney to write down its first-quarter earnings by $200 million charge against earnings. But when The Avengers came out, it more than made up for Disney's earlier flop, producing more than $1.4 billion in global gross box office receipts so far.
With plenty of Marvel hits left in its stable, Disney has a promising future. Investors are justified in bidding up shares based on its potential.
Home-improvement retail has been an interesting play lately. Although the housing market has moved in fits and starts lately, Home Depot's shares have moved steadily upward even as the company missed analyst estimates on revenue in the first quarter. What seemed like a real move upward in housing demand may simply have been the impact of the warm winter in moving existing demand forward.
Clearly, Home Depot would benefit from increases in construction demand and health in the housing market. But the retailer has done an excellent job holding up even without those tailwinds, establishing a competitive advantage over its peers. If housing ever truly recovers, Home Depot's big stock move will appear completely justified.
Despite shaky economic news, consumers have done a good job of getting their credit management in better shape. Falling delinquencies and charge-offs have helped credit card issuers immensely in recent months, and as long as the economy doesn't dip back into recession, that trend could continue for quite a while.
American Express isn't as exposed to credit problems as some issuers because many AmEx cards don't allow cardholders to carry balances from month to month. It's also marketing a prepaid debit card product aimed at lower-end customers. More promising, though, is AmEx's presence in the mobile payment space, which could prove essential in managing a transition away from plastic toward using smartphones and other electronic-device-based payment systems.
Don't stop winning
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Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter, @DanCaplinger. The Motley Fool owns shares of American Express, Bank of America, and Disney, as well as a complex options position on American Express. Motley Fool newsletter services have recommended buying shares of Disney and Home Depot, as well as writing a covered strangle position in American Express. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.