It's been an interesting start to the year for U.S. stocks. Twice the S&P 500 has gone into rally mode only to roughly return to where it began the year. Meanwhile, several distinct rotations appear well underway as investors grow fonder of value, cyclical, and small-cap stocks.
Things are equally interesting when we look at the Dow Jones Industrial Average. The widely viewed benchmark is up about 7% so far this year and is being led by an unlikely trio of leaders— a pharmacy, an investment bank, and a tech giant that's not named Apple.
What is Behind the Walgreens Boots Alliance Turnaround?
After finishing in the red in each of the last five years Walgreens Boots Alliance (NASDAQ:WBA) sits atop the Dow leaderboard with a 38% year-to-date return. Is this another head fake for the pharmacy chain or is a sustainable turnaround underway?
Walgreens certainly seems to be a more focused company these days. It started out the year announcing that AmerisourceBergen will be taking over most of its ailing Healthcare businesses. The market applauded the move because rather than trying to be all things health care, it shows Walgreens is committed to getting back to its pharmacy roots.
At the same time, the company is getting more into the primary care clinic game. It also announced an increased investment in VillageMD. This is expected to lead to the opening of up to 700 Village Medical clinics within Walgreens locations over the next four years. Given Americans increasing interest in convenience, this venture could make Walgreens more of a one-stop health destination—and turn into a nice growth driver.
Walgreens has also found favor with the market because it is expected to be a popular spot for COVID-19 vaccine distribution in the coming months. In an effort to ensure underserved communities are able to be vaccinated properly, Walgreens has teamed up with Uber to provide rides to individuals in remote or low-income areas.
These developments and a better than expected first-quarter earnings report have things looking up at Walgreens. If the U.K. Boots business can also start to get off the ground, there could be much more to the recent rally.
Why is Goldman Sachs Group Trading at a Record High?
The Goldman Sachs Group (NYSE:GS) is currently in the silver medal position in the Dow with a 31% year-to-date return. Unlike, Walgreen's it's been more of a steady rally for the prestigious investment banker which has blown past its pre-pandemic peak to a fresh all-time high.
Goldman Sachs has participated in the broader financial sector rally that has been supported by rising interest rates and a positive outlook for a rebound in global economic activity this year.
On the heels of a strong fourth-quarter earnings report, Goldman is expected to see strength in all business units. It's largest segment, Global Markets, recorded 23% top-line growth last quarter driven by increased demand for its fixed income, currency, and commodity products as well as ongoing strength in equities.
Meanwhile, the Investment Banking division is booming thanks to a strong IPO market that is driving higher equity underwriting income. Financial advisory revenues are also trending higher thanks to an uptick in M&A activity across several industries.
Goldman Sachs stock is where it is because the company has a well-diversified growth model and is in excellent financial health. This along with continued investments in digital technology stand to result in more new business wins and market-beating results in 2021. And despite trading near a record high, at 11x forward earnings, the Goldman rally may have only just begun.
Why is Intel Stock up This Year?
It's unusual to see a technology stock that isn't Apple among the Dow leaders but Intel's (NASDAQ:INTC) 29% surge to start the year has caught investors' attention. The old school chipmaker appears to have new life after being one of the Dow laggards in 2020.
The biggest catalyst has had nothing to do with semiconductors and everything to do with new leadership. On January 13th, Intel introduced VMware CEO Pat Gelsinger as its new CEO who took over the role after former CEO Bob Swan stepped down. This news caused Intel's stock to gap higher in heavy volume and it hasn't looked back since.
The arrival of the well-regarded Gelsinger is said to have sparked a rebirth at Intel. It prompted the company's former chip designer Glenn Hinton to come out of retirement to join in the revival. The new leadership may return Intel to its strong engineering prowess of the past after years of setbacks under the more financed-minded Swan.
Soon after the CEO news, Intel reported a strong fourth-quarter performance and outlook. This got the market buzzing again and propelled the stock to its highest level since June 2020. With the wind now at its back and a value stock rotation progressing, it may not be long before Intel challenges Walgreens Boots Alliance for the leading spot in the Dow derby.
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