The Dow: Plenty Of Dogs, But Few Standouts

Published on Thursday, 31 May 2012 22:06 Written by Todd Shriber

Those holding an ETF such as the SPDR Dow Jones Industrial Average (NYSE: DIA) or some assortment of individual Dow stocks are probably quite relieved the month of May has drown to a close. Not only did the S&P 500 lose more than 6% last month, careening to its worst monthly loss in nine months, the Dow also tumbled more than 6%. That was good enough for the blue chip index’s worst monthly run in two years.

So bad was the Dow’s May performance that only four of the index’s 30 constituents closed higher for the month. The quartet isn’t surprising and they serve as a possible indicator regarding what Dow stocks could outperform the index and broader market in June. Let’s have a look at this dynamic quartet.

Wal-Mart (NYSE: WMT):

As we said in our recap of the S&P 500’s best May stocks, the world’s largest retailer jumped 11.4% in May as investors ran away from riskier sectors into comforting arms of consumer staples. Wal-Mart’s May performance is all the more impressive when considering the Dow Jones Industrial Average, of which Wal-Mart is a member, was also down more than 6% during the month. Wal-Mart’s May 2012 performance was the stock’s best one-month run in a decade and with the market environment setting up to be even more favorable to staples stocks, Wal-Mart could be poised for more upside.

Wal-Mart’s May gains could be a sign stocks such as Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG) are also ready to lift off.

AT&T (NYSE: T):

If one opts to take a particularly dreary view of things, then it can be said that if AT&T was one of the Dow’s best performers in May. That’s not saying much as the shares were up less than 3.4%. And if one wants to be REALLY negative, then it must be said that Verizon (NYSE: VZ), with a May gain of less than 2.7%, didn’t set the world on fire either and that’s not a good thing because telecommunications giants were among the Dow’s four best performers last month.

All that said, don’t forget that both AT&T and Verizon yield in  the area of 5% and this market environment is certainly conducive to owning defensive sectors such as telecom.

Walt Disney (NYSE: DIS):

Given that Disney is a discretionary stock, its 4.4% gain could be viewed as a surprise. Not really. On the back of some strong fiscal second-quarter results reported earlier in the month and the success of "The Avengers" movie, Disney shares have not only increased, but the analysts have become increasingly bullish on the stock with several boosting their price targets last month.

Shares of Disney touched a new 52-week high on a down day for the Dow on Thursday and at their current pace and in cooperative market, could flirt with $50 by year-end.