As 2024 transitions into 2025, it is important to consider which sectors and industry leaders may do well in 2025. Even after a 1,000-plus point drop in the Dow, that index was still up 13% in 2024. The S&P 500 was up 24% YTD on last look, but the equal-weight S&P 500’s gain of only 11% YTD shows how much the dominance has been due to mega-cap tech. Oggonomics has been screening stocks, ETFs and baskets that may have their chance to outperform in 2025.
A big standout in the screens for 2025 has been many of the so-called Blue Chips and industry leaders that are not all about technology, AI, and futuristic industries that are just developing. If the screen proves to have been worthy, then 2025 could be the year for many plain old-fashioned boring Blue Chips that pay dividends and have business models that have long track records.
The screen for 2025 showed good old industrials and cyclicals that might lead the way. A telecom leader, a household food name, health products, big oil, steel and an airline… They almost all have underperformed in 2024 and Wall Street sees some rays of sunshine ahead. The problem is that their stocks have all been in a funk of late. Will they be able to recapture greatness?
After screening more than 75 old-school names in the S&P 500 there were 7 stocks that stood out above their peers. They all have very long operating histories, they all pay dividends, and there are outside analysts who also believe they are poised to rise much more than the 8% to 10% that S&P 500 strategists are calling for in 2025. And if these don’t perform well in 2025, then they are going to likely be screened as “value stocks for 2026” by value investors.
SPECIAL COMPARISON TO TRUMP 1.0 YEARS
Oggonomics has also provided a rough guide for how each of these stocks performed from the start of 2017 to the end of 2019. This is an effort to see how they did under President Trump’s first administration, up to but not including the pandemic’s impact. There are of course no assurances that there will be a repeat under what the markets are calling a “Trump 2.0 economy” in 2025 and beyond. Some shareholders may not even want a repeat performance for the same stocks based on how they performed then.
Oggonomics is not endorsing each of these stocks unilaterally and at the present time there was still a month to go before inauguration day. As always, past performance and past economic trends can be quite different over time. And past performance comes with absolutely no guarantees of being repeated in the future.
DISCLAIMER
Oggonomics always reminds its readers and investors that no single analyst report or strategist report should ever be the sole basis to buy or sell a stock. Any decision to buy or sell (or hold or short sell) is up to each investor and that decision should be made with a financial advisor. There are of course no assurances that any outside analyst price predictions and the scenarios that support the views will actually come to fruition.
Oggonomics does not have any in-house internal price targets or ratings of its own for the stocks in this report. All price target data and analyst “rating” opinions are from the firms mentioned by name. Their opinions and targets may not be viewed in the same light by Oggonomics. These have been profiled in alphabetical order to avoid the appearance of any ranking or prioritization from one to the next.
AT&T — THE BIG BUT BORING DIVIDEND!
Is AT&T Inc. (NYSE: T) old-school enough for anyone? It seems to have a more focused business model than in past years. After pulling back more than 6% from its recent highs, UBS reiterated its Buy rating and raised its price target to $30 from $25. This stock’s return of 16% from the start of 2017 to the end of 2019 was largely driven by its generous dividend payments. AT&T’s current share price of $22.50 implies 33% upside to that target price from UBS and AT&T shareholders also collect close to a 5% dividend yield here.
Just don’t forget that AT&T was last seen up 34% for 2024 and up 22% in the last six months, so it is actually not exactly a “market laggard” as it may have sounded. While this target looks incredibly high on the surface, and what appears to be a “street-high” target as well, other positive calls have been seen recently:
- Morgan Stanley recently upgraded AT&T to Overweight and took a former $19 target price up to $28.
- Recent Outperform ratings and $28 price targets were also assigned in new coverage by Oppenheimer and Bernstein.
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CATERPILLAR — MOVING THE EARTH, LITERALLY
Caterpillar Inc. (NYSE: CAT) is a huge industrial equipment leader and its shares peaked just above $400 in the post-election excitement, but recently the stock has slid from $400 down to $365 or so. CAT’s total return with dividends was roughly 67% from the start of 2017 to the end of 2019. Its shares are down 13% from its high and the stock has risen 22% YTD. Multiple analysts have said not to worry about recent pressure despite a weaker China and despite what could be retaliation if Trump’s tariffs create trade wars.
Jefferies named Caterpillar a top stock pick for 2025 at the start of December, reiterating a Buy rating and raising the price target to $475 from $455. The firm sees it a reconstruction winner if and when the Ukraine war dies down and notes that it is the leading global producer of backup power for data centers. CAT also sports roughly a 3% dividend for income and total return investors. Three other calls have been seen as well since then:
- Truist (Buy) target to $471 from $454
- Citigroup (Buy) target to $460 from $435
- JPMorgan (Overweight) target to $515 from $500
CHEVRON – A ‘DRILL BABY DRILL’ SURVIVOR!
Chevron Corporation (NYSE: CVX) is smaller than rival Exxon Mobil, but Chevron is the Big Oil stock that stayed in the Dow on one of its many constituent changes. Chevron looked ready to hit $165 again in November, but its shares have slid down to $142 on last look for a -5% YTD performance. BofA came out in December and said Chevron is its top big energy stock for the next year as a new member of the prized US 1 List by specifically saying — It is our top pick going into 2025.
Chevron has had a Buy rating at BofA since October of 2023, but the firm raised its price objective to $180 from $168 a day before the US 1 List addition. BofA acknowledges lower prices in oil are likely coming under “Drill baby drill” and lower regulation but sees Gulf of Mexico, TengizChevroil, and Chevron Phillips Chemical projects all driving a cash flow inflection story that will add $5.5 billion in each of the next few years. Chevron was at $158 when BofA made this call, and its more recent $142 share price now has a 4.5% dividend yield.
If BofA’s call is not ambitious enough, a rival call from Citigroup in November was an upgrade to Buy from Neutral and the price target was raised to $185 from $145. Chevron posted a total return of about 21% from the start of 2017 to the end of 2019, largely driven by its dividends.
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DOMINO’S — ONLY WORTH $14 BILLION?
Domino’s Pizza, Inc. (NYSE: DPZ) is a household name like no other. They now offer enough different foods for delivery that some might wonder if “Pizza” should still be in its corporate name. After recently peaking at $475 in November, and being valued at $530 earlier in 2024, Domino’s stock at $425 isn’t that far above the 52-week low of $395 and is only up 3% YTD.
Right after the election pop, Loop Capital raised its rating to Buy from Hold and raised its prior $419 target all the way up to $559. And in late-November, TD Cowen reiterated its Buy rating and raised its target to $515 from $475. That is better than 20% upside to the less aggressive bullish forecast. Also, early in December, the firm BTIG, pointed out that the smaller rival Papa John’s has unit development costs of $630,000 versus $425,000 for Domino’s and that new locations cost almost 60% more than pre-pandemic levels. Domino’s rose more than 70% from the start of 2017 to the end of 2019.
J&J — LAGGING BEHIND POST-SPLIT
Johnson & Johnson (NYSE: JNJ) has been among the worst performing traditional Blue Chips as the Dow component is down 8% in 2024. Its Kenvue spin-off is now a year old. The healthcare products giant is facing an earnings contraction in 2025 but it’s valued at less than 15-times earnings since selling off so much. J&J was a $165 stock in October, but in mid-December it was down to $144. On top of having nearly a 3.5% dividend yield, J&J has a history of more than 60 consecutive years of dividend hikes. Its shares rose 36% from the start of 2017 to the end of 2019.
J&J’s consensus analyst price target of $176.21 may feel too good to be true as analysts adjust their targets heading into 2025, but don’t tell that to a couple analysts with recent calls:
- Citi (reit. Buy) trimmed its target to $175 from $185
- BofA resumed a Neutral rating but still assigned a $166 price objective
- And in November, Wolfe Research issued a new Outperform rating and $190 price target.
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NUCOR — CAN STEEL SURPRISE IN 2025?
Nucor Corp. (NYSE: NUE) has had such a rough December that it may feel like trying to catch falling knives for technical investors. Its stock was also last seen down 33% YTD. And Nucor was downgraded to Neutral from Buy and its target was cut to $156 from $171 by UBS on December 12. But just before that downgrade, on December 2, Goldman Sachs issued a new Buy rating and assigned a very bullish $190 price target. At $115 now, the $156 target still implies 35% upside so noting the $190 target may feel like overkill after it has lost over one-fourth of its value in just a month.
Nucor obviously faces risks if there is a slowdown in China continuing and if any tit-for-tat trade war moves after the Trump tariffs creates uncertainty. That said, Goldman Sachs sees the pessimism and oversupply in the steel industry as short-sighted. Steel inventories are near a recent low and the sector leaders see potential brewing catalysts that could bring large benefits. One driving factor for Nucor’s performance since November is that the low single-digit gains from 2017 to 2019 was driven solely by the dividend payments.
SOUTHWEST — FLYING HIGH IN LUV!
Southwest Airlines Co. (NYSE: LUV) has recovered some of its big losses in 2024 to $32 after having fallen down to under $25 for a quick moment. Its market cap is now just under $20 billion and its 2.2% dividend yield is better than airliners typically pay. The stock price is still only about half of its pre-Covid peak and is still valued close to the Covid lows. After an activist fight, and what made it a strategic investors pick, a boost in travel demand and lower oil prices in 2025/26 may help increase its earnings visibility as it works through business changes.
Morgan Stanley recently resumed coverage of LUV at Overweight with a $42 price target that is now $10 higher than the current share price. While Southwest was not even in Morgan Stanley’s top three airline picks for 2025, this stock remains at such a discount to peers in its share performance that the upside here seems to be a risk-reward story. It is also above the $32 consensus and Morgan Stanley appears to be the “street-high” analyst price target. Southwest’s stock gained about 17% over 2017, but the total gain from 2017 to the end of 2019 was only about 6%.
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CHARTS & TEA LEAVES
Oggonomics has taken the charts of these 6 stocks from StockCharts.com and these should show how they have performed against the S&P 500 over the same period. The 20-day and 50-day moving averages are the baselines used in their CandleGlance charts.
