Dow Stocks That Made the Difference

Nine Dow-30 stocks made the difference in propelling the index near all-time highs. Four stocks made a significant contribution to the rise of the index above 14,000 and one of them can be considered an outstanding performer. The conclusions are yours.

The Dow Jones Industrial Average closed last Friday above 14,000 and it is only 1.10% away from its all-time closing high of 14,164.53 on October 9, 2007. Since its low value on a closing basis of 6,447 on March 9, 2009,  the index has covered a lot of ground to rise 117% as of its last close. However, not all stocks have contributed equally to the rally. The objective of this analysis is to provide some statistics about the contributions of each of the index stock components to its overall rise. The conclusions are left to the reader.

Bellow are shown the component stock returns and their deviation from the mean return calculated since the closing of March 9, 2009:

DOW_RETURNS_2007

The average return is 138.18% and the standard deviation is 99.21%. A graph of the returns and their deviations from their mean are shown next:

DOW_RETURNS_2007_DEV

It may be seen that 9 stocks outperformed the average, four of those by more than one standard deviation and one stock by three standard deviations. At the same time only one stock underperformed the average by almost two standard deviations. 

The four high performers are shown on the above charts with a return deviation greater than 100. They are AXP, CAT, DIS and HD. I estimate that had the performance of these stocks been in line with average performance, the average would have been 20% lower at around 12,900. Regardless of the actual figure which can be derived if one is willing to go through the algebra while talking into account the fact that UNH replaced KFT on September 24, 2012, it is clear that just a few stocks made the difference and helped propelled the index to its current level just above 14,000. Two of those stocks, DIS and HD, are on strong uptrends.

The rest of the conclusions are yours.

Disclosure: no relevant position at the time of this post and no plans to initiate any positions within the next 72 hours.. 

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