CRAZY CHART: Why the Dow Could Soar 20% or More in 2021
As a trader, I’m an avid student of history.
History doesn’t repeat itself, but it certainly rhymes in the stock market.
For instance, in 1987, the Dow Jones Industrial Average saw the biggest one-day drop in history.
And while it was a rare occurrence…
The Dow’s price chart in 1987 actually looked a lot like it did back in 1929. (Another year in which the stock market violently crashed.)
How about 2020… the year of the COVID-19 crisis?
We saw a once-in-a-hundred-years pandemic and the shortest bear market in history.
But the Dow Jones chart in 2020 actually resembled 1980’s price action.
Of course, correlation isn’t causation.
But because people still behave in markets much like they did 100 years ago…
You can use the past as a guide to how stocks will move in the future.
I’ve crunched the numbers on nearly a hundred years of Dow Jones market data…
And in today’s video, I show you why the blue chip index could rise another 20% higher before the end of the year.
Click on the image below to get started.
Hey there, it’s J-Rod for Rich Retirement TV.
And today, I’m going to reveal my two favorite breakouts in the homebuilding sector — both of which pay dividends, which is great for us here at Rich Retirement Letter.
But before I get into the stocks, I want to talk briefly about the housing market.
There’s been a lot of concern that we’re in a housing market bubble right now. Some are worried that we’re going to see a blowup like we did in 2008, where we nearly took down the financial system around the world.
I can definitely say that I don’t believe we’re in a housing market bubble.
I think we’re looking at the convergence of a couple of really important factors. You have a tight supply. And there aren’t enough homes to go around for all the people that want them.
We have millennials who were unable to buy homes in the post-financial crisis market now finally able to get into these homes. And that’s not to mention very low interest rates, making homes more affordable.
The supply not meeting the demand is forcing prices higher. So you’ve got a combination of things that are just pushing prices higher.
But to say that it’s a bubble is to suggest that the demand is artificial or that there’s supply right around the corner that’s going to come and bring down prices. And that’s just not the case.
We just can’t build homes fast enough for all the folks that want to move into them.
So we’re probably going to see rising prices here for at least another year or two. I think we’ve got a very strong housing market on our hands for at least another few years.
On that note, companies in that space that are building homes and offering products and services that relate to homebuilding are just on fire.
So today we’re going to take a look at two breakouts in that space.
Before I go into the stocks, however, I want to show you the strength of this momentum right now.
We’re looking at the one-year charts of the SPDR S&P Homebuilders ETF (XHB) and the iShares U.S. Home Construction ETF (ITB) compared with the S&P 500.
And as you can see, these two ETFs are just smoking the S&P, up over 120% versus 45%.
Again, with all the factors we talked about, I don’t see that cooling off anytime soon.
In fact, my colleague Zach Scheidt did a very good video earlier this week talking a little bit more about those factors that are pushing the market higher.
On that note, let’s take a look at these two breakouts here.
Breakout Housing Stock #1: Carrier Global Corp. (CARR)
The first stock on our list is Carrier Global Corp. (CARR), a company that specializes in HVAC units for heating and air conditioning.
And as you can imagine, it’s the middle of April here and we’re just now getting to the hot part of the year for most people. So CARR has had no shortage of work in the last couple of months.
As you can see, the stock is pushing a beautiful all-time high.
The breakout point here is at $42 a share. And you see it traded in this real tight range between $42 and $36.
That gives you an $8 range, which gives you your next price target of $50.
I believe this is easily a $50 stock, which is roughly 14% higher from where it’s trading now.
But I think on the strength of homebuilding and the strength in the housing market, this could easily be a $60 or $70 stock.
So you’re looking at upside anywhere from 15% up to 30% as we move forward.
The company reports earnings next week, and they’ve beaten expectations in three of the last four reporting quarters.
And what I really love about this stock for Rich Retirement Letter is that CARR currently pays a 1% dividend. And they’re only paying out 12% of their earnings on dividends, well below the average payout rate for the S&P 500.
So as CARR does well, they’ll have more money to shell out on this dividend.
I wouldn’t be surprised at all to see their dividend increase strongly over the next year or two.
So not only do you have an advantage here on CARR’s beautiful breakout, but you also have a good-looking dividend with a lot of room to grow.
Breakout Housing Stock #2: Masco Corp. (MAS)
The second name on my list is Masco Corp. (MAS). These guys focus on water-connected products like sinks, faucets and tubs.
They also have a very strong segment of household products and they own the popular paint brand Behr.
You see a beautiful breakout in this stock here above $60 a share. And that stock has really traded in another kind of $8 range between $60 and $52.
It’s pulling back a bit, consolidating after a very strong run.
But if you take a look at the longer-term chart for the stock, you see explosive growth here off the bottom of 2020.
So we’ve got a breakout here at about $60.
MAS reports earnings here very soon. And this is easily a $70 or $80 stock, giving you again more double-digit upside.
Just like CARR, MAS pays a solid dividend of 1.5%.
They also have a very low payout ratio of earnings to their dividend. They’re paying out nearly 12% of their earnings on dividends, giving them a lot of room to grow their earnings or grow their dividend as profits come in.
MAS is expected to grow earnings by 40%, which is almost 20% higher than the S&P 500 itself.
So not only do you have accelerating growth for the stock, but you’ve also got a low payout ratio with a lot of room to grow.
You’ve got a beautiful combination of capital appreciation in the stock, meaning stock gains as well as a fat dividend to get paid while you wait for those gains, which shouldn’t be very long at all.
The housing market is still very strong and has a lot more room to run.
And both of the names we looked at today are great plays to capture the momentum in this moving market.
So take a closer look at these two names if you’re looking for that upside along with some income.
For Rich Retirement TV, I’m J-Rod. Thank you so much for watching my video.
I’ll see you again next week.