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The 2 Best Investment Ideas on the Dow Today

By Anders Bylund - Apr 9, 2013 at 1:04PM

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Even an elite club like the Dow has leaders and laggards. Here are two of the best investment ideas on the Dow right now.

The Dow Jones Industrial Average (^DJI -0.42%) is packed with 30 of the finest stocks on the market. Each ticker is a leader in its respective field, and every single one pays a dividend. But in a pack of 30 winners, some stocks must still rise above the rest -- the best of the best. Here are two of the best investment ideas I see on the Dow today.

Home Depot (HD 1.67%) has delivered the second-largest 52-week returns on the Dow with a 44% dividend-adjusted rise. The home improvement retailer also added more points to the Dow's overall value in the post-2008-crisis era than any other blue chip. The stock poses a daily threat to its former all-time highs.

And here's the kicker: I think Home Depot still has its best days ahead.

The housing market has started to recover, but it's still far from healthy. In reaction to the long, painful crisis, Home Depot has fine-tuned its operating model to generate strong cash flows even under restricted top-line sales. That fiscal discipline is translating into massive results in today's moderately improved market -- and the stock will spike even higher when the market rebound is complete.

HD Total Return Price Chart

HD Total Return Price data by YCharts.

Home Depot was always a strong investment idea, and this stock has tripled over the last five years on a dividend-adjusted basis. Check back another five years from now, and it may have doubled or tripled again.

You'll find another fine investment idea in the tech sector. The market is treating Intel (INTC 0.96%) like a redheaded stepchild these days: The stock has plunged 21% over the last year as investors saw smartphones and tablets taking over the jobs of traditional desktops and notebooks. Intel dominates the old-school computing markets but does not have a strong presence in mobility.

But even if the PC died overnight, Intel would still keep ticking. There are two big reasons for this:

  • Intel rules the server market with an iron fist, and all those mobile gadgets must still be fed data from central repositories. A rise in mobile and cloud computing is automatically a catalyst for server growth.

  • And who's to say that Intel won't join the mobile bandwagon? The company's smartphone chips are getting more competitive and may still open doors in as-yet unexplored markets.

It would only take one of these two catalysts to restart Intel's stalled growth engines, and I see a good chance that both engines will fire right up. In the meantime, you can enjoy a drastic share-price discount and inflated 4.2% dividend yields. This investment thesis is so convincing that I recently bought Intel shares myself.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$30,967.82 (-0.42%) $-129.44
Intel Corporation Stock Quote
Intel Corporation
INTC
$36.69 (0.96%) $0.35
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$283.73 (1.67%) $4.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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