The current market environment certainly looks less than bullish. Valuations were already stretched thin thanks to the big rally from lows hit in March of last year when the pandemic was starting to spread in earnest. The recent weakness…
topped off by Monday’s meltdown, however, sends a message.
That message is: investors are nervous enough to start locking in their profits. The fact that it’s September — typically one of the worst months of the year for stocks — only adds to the market’s woes.
If you can look past the present and into the future though, you’ll find there are plenty of blue-chip names poised to end the year on a bullish foot and start 2022 with the same momentum. Here’s a rundown of three such names that also happen to be components in the Dow Jones Industrial Average (DJINDICES:^DJI).
1. Merck & Co.
It’s interesting. While shares of Merck & Co. (NYSE:MRK) participated in the initial rebound rally in March of last year, it dropped out of the effort by April and has been a laggard ever since. In fact, Merck’s stock is a mere 14% above its March-2020 low, and down 17% from its pre-pandemic peak. Not being a real contender in the race to create a COVID-19 vaccine only exacerbated investors’ disinterest in Merck; the pharmaceutical giant was already out of favor due to the sheer logistical challenges caused by the pandemic itself.
Lost in all the recent noise of the coronavirus contagion, though, is the fact that this is Merck, which still boasts an incredible drug portfolio that includes cancer-fighting drug Keytruda. This drug alone accounted for $14.4 billion of Merck’s 2020 revenue of $48 billion, upping the therapy’s total sales by 30% year over year. But that’s nowhere near the drug’s full potential. As more and more uses are identified, some analysts believe Keytruda could produce annualized revenue on the order of $22 billion while other analysts have tossed around a peak-sales figure of $30 billion. It’s a stretch goal to be sure, but even if Merck only gets halfway to that target it would still be a big victory.
Nothing about Merck stock’s recent performance indicates Keytruda’s potential is being factored in. But, as the pandemic fades and allows investors to renew their focus on other matters, Merck shares are in a position to perk up.
The kicker: Newcomers will be stepping in while Merck’s dividend yield is a healthy 3.6%.
2. Walt Disney
Much like Merck, shares of Walt Disney (NYSE:DIS) have been oddly poor performers of late. While the stock soared over the course of most of last year and into early this year, it’s been mostly stagnant since April — stagnant at a price that’s 12% below March’s peak. It’s arguably one of the market’s best reopening plays, but that nuance may also be over-reflected in the stock’s 150% rally from last March’s low to this March’s high.
There may be more meat on the bone left to eat, though, so to speak. This Dow component may be ready to rekindle its bullishness as things ease back to normal this year and into the next.
One hint of this impending renormalization is the recent…
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