The Dow Jones Index: The Story Of COVID-19 Winners

Despite not including electrifying stocks such as Amazon.com, Inc. AMZN, and therefore missing out on its historical gains, the Dow Jones Index still has quite a few winners under its umbrella. Although Apple Inc AAPL and Microsoft Corporation MSFT had their worst-performing days since March yesterday, the drop was followed by their peers Facebook, Inc. FB, Alphabet Inc GOOG and Amazon. One bad day cannot erase the massive rally of these tech stocks which literally bloomed throughout the pandemic, or more precisely, the first two quarters of the year.

Apple shares rose nearly 70% to date with the market value surpassing a $2 trillion market cap. Moreover, Apple is no longer dependent on its ‘sacred cash cow', iPhone, as it showed it is successfully reshaping its business model to services. But even the iPhone is doing well, as Omdia's research showed that iPhone 11 was the most popular smartphone during the first half of 2020.

Microsoft's latest revenue of $38 billion exceeded expectations of $35.5 billion. Earnings per share of $1.46 exceeded the estimate of $1.36. If we look at Intelligent Cloud alone, revenue amounted to $13.4 billion. The story of Microsoft's rebirth is greatly owed to its Intelligent Cloud business. During the fourth quarter, Intelligent Cloud brought in a revenue of $13.4 billion. This a 17% increase compared to the same quarter last year. If the pandemic has shown us anything is that tech is crucial for business resilience and faster recovery. Coca-Cola Co KO and Walgreens Boots Alliance Inc WBA also turned to Microsoft for its simplicity and seamless integration.

Microsoft's gaming business also saw skyrocketing growth of 64%, amounting to 1.3 billion, as Xbox hardware revenue jumped 49%. The Xbox Series X is also coming in November. Microsoft has over a billion enterprise users and it can be found in nearly every enterprise of the planet. From early March to the end of April, Microsoft Teams grew from 11 million to over 75 million users. Users want systems that can work together without complexity and Microsoft delivered on that promise.

Although AstraZeneca plc AZN is the leader in the vaccine race, Johnson & Johnson JNJ has ample financial resources along with an array of brands to boost its chances. Yesterday, Reuters reported that Johnson & Johnson announced its coronavirus vaccine prevented hamsters from getting severely ill. Although we need to wait for human trials to begin next month, this is something to be excited about. Its pharmaceutical segment still stood strong amid the devastating second quarter. Despite falling earnings, the company continued to pay dividends. Johnson & Johnson is a Dividend Aristocrat, a company that not only continuously pays dividends but also keeps increasing them. The bottom line is that it is diversified enough to survive the storm while also expecting to expand earnings for fiscal 2020 despite delivering losses in the second quarter.

Despite the focus on performance chemicals, Dow Inc DOW portfolio is actually quite diversified. During the second quarter, some of Dow's sales did suffer as it was the worst quarter of the year all over the globe. But despite plummeting sales of big items such as new homes, furniture, and cars, sales of cleaning and disinfecting products, which also use Dow's chemicals, increased. People started cooking at home, increasing the demand for food packaging. Professional construction chemical sales dropped, but do-it-yourself home improvement rose and pulled paints and coatings along. This diversified portfolio allowed Dow to outperform expectations. More importantly, it generated plenty of cash to fund its dividend.

Pharma titan Merck & Co., Inc. MRK and recently expelled from the Dow, Pfizer Inc. PFE, appear to be two of the most evenly matched competitors in the pharmaceutical sector. But unlike Merck, Pfizer is limping besides the pandemic creating an opportunity for a vaccine. Merck also has two vaccine candidates. Chief executive Kenneth Frazier announced on Thursday that human testing is starting fairly soon. Over the last half of a decade, Merck's stock has consistently outperformed Pfizer's. Merck's value grew by 6% whereas Pfizer's dropped 3.1%.

Over the next three years, Merck will invest $19 billion into expanding its oncology, vaccine, and animal health segments. Its cancer immunotherapy is expected to continue fueling its sales as Keytruda sales were 46% year-over-year.

The Procter & Gamble Co PG had its best fiscal year in more than a decade. Despite all of us being germ-conscious in this new pandemic era, we still have cravings such as donut and coffee. Procter & Gamble has already teamed up with Dunkin' Brands Group Inc DNKN owned Dunkin' Donuts to promote the use of its cleaning products in restaurants, but it is looking for more partners with fast-food, hospitality, transportation and healthcare companies. At the end of the day, it's more than revenue- it's free publicity. Sales gains managed to beat management's target for the fourth consecutive quarter, and cash flow and profitability reached new highs. But most importantly, the outlook is even brighter with further market share expansion. Fiscal 2020 results are evidence that P&G can invest aggressively in growth strategies while still boosting profitability.

So, there you have it. Big Tech, medical devices, pharmaceutical and consumer goods Dow winners of the pandemic. And there's no reason to doubt that the post-COVID era will be just as kind to them as they provided meaningful service and products that actually made a difference during these unprecedented circumstances.

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