The Dow Washing Machine

The indices have taken a much needed breather. After a 6.2% run for the Dow this summer, investors are taking profits and setting up their next moves for the fourth quarter. The change is good, but it can feel like the index is stuck in a spin cycle—going around and around, but getting no where.

You can see this as clear as day in our Market Dashboard—available right on our homepage. This free tool highlights the biggest movers for the Dow, S&P 500 and Russell 2000, every trading day of the year.

When you look at Today’s Leaders, you see that the Dow stocks that are moving higher are not very highly rated in Portfolio Grader.

This morning, Bank of America Corp. (BAC) is actually the best Dow performer. The stock is up 1.6% in early trading. I give the stock a couple of failing fundamental grades and at best rate this as a hold. Sales Growth and Earnings Momentum are particularly week, though Cash Flow has been improving.

Coca-Cola Co. (KO) is also up this morning. KO’s $5 billion expansion plan for India has been big news but because these plans will take years to come together, Coca-Cola’s short-term profit prospects outweigh the long-term picture.

This summer, shares of Coca-Cola have come under pressure after New York City unveiled a plan to ban the sale of supersized sodas—opening the door for other anti-soda legislation in the U.S. And given weakness in Operating Margins, Cash Flow and Buying Pressure, I rate KO as a hold.

The one stock on today’s list of the Dow’s top three daily performers that I actually like is General Electric Co. (GE). Steady fundamental improvements in 2012 have me encouraged and I have a buy rating on shares. There is still room for improvement in Sales and Earnings Growth as well as Cash Flow, but this big Dow stock is on the right path.

Seeing strong daily performance from fundamentally strong and fundamentally weak companies is typical for transition periods for the market. When there isn’t any big news, investors go broad with their buys. They think big stocks mean safe stocks and that’s why we’re seeing companies like Coca-Cola and Bank of America lead the Dow today.

But that’s all about to change. Earnings season is coming and that is going to prevent money from flowing into big companies with poor fundamentals. I expect that we will see more A- and B-rated stocks appear in the Today’s Leaders section of our Dashboard in the coming days and weeks as investors separate out good stocks from bad.

It’s a good thing you already have access to Portfolio Grader and can get in ahead of these late comers and benefit from their tardy buying pressure that is headed this way come earnings season.

My advice to you is to check in with our dashboard daily and see the change for yourself. Do that and pick up shares in top-rated large-cap stocks and I know you’ll be one step closer to meeting your financial goals.

And, if you want more daily leaders, visit Portfolio Grader and our Dow 30 Leader Board.


Louis Navellier

Louis Navellier

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