IBM was the best-performing Dow Jones stock in September, as the tech company gains traction in the emerging quantum computing field.
Caterpillar and UnitedHealth Group also were winners in the Dow Jones Industrial Average last month.
IBM shares rose 15.9% last month, with more than 5% coming just on Sept. 25. That's when U.K.-based bank HSBC said IBM's Quantum Heron processors delivered a 34% improvement in predicting the chances of filling a bond trade at its quoted price vs. current algorithmic techniques. It was an early glimpse into how quantum computing could serve financial markets.
In June, IBM announced plans to build a large-scale quantum computing center in Poughkeepsie, N.Y. by 2029. And in August, the company teamed up with Advanced Micro Devices to develop next-generation computing architectures that use a combination of quantum computers and high-performance computing.
IBM has an IBD Composite Rating of 85, below the 90 or higher usually found in leading growth stocks.
The stock is forming a cup base with a 296.16 buy point. It has a 21-day average true range (ATR) of 2.37%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should not be too concentrated in such stocks.
Dow Jones Stock: Caterpillar
Caterpillar added 13.9% in September, its best month since December 2023. The stock is up 13% from the 441.15 buy point of a flat-base breakout on Sept. 17.
On Friday, Erste Group upgraded Caterpillar to buy from hold, citing above-average operating margin and other pluses. The company's earnings should increase significantly in the coming year due to strong incoming orders, especially in energy systems, TheFly.com reported.
Caterpillar, which makes bulldozers and other heavy equipment, is a cyclical play and often viewed as an economic bellwether. It is also a fringe AI play because its generators provide backup power for AI data centers. Plus, some analysts say the company benefits from the data center construction boom.
In its Aug. 5 earnings report, the company said higher tariffs hurt results. EPS and sales have declined for four consecutive quarters. Still, executives saw strong orders for energy and infrastructure projects.
The Dow Jones stock has a Composite Rating of 91 and ATR of 2.17%. It is up 38% year to date.
UnitedHealth Stock
Also running high among Dow Jones stocks, UnitedHealth. It climbed 11.3% in September, following a 24.2% rebound in August. Shares are still down nearly 30% year to date.
The managed-care company has faced a number of setbacks this year, including a Department of Justice investigation over Medicare billing practices, higher-than-expected Medicare costs, other rising costs and the resignation of its chief executive.
But UnitedHealth, the nation's largest health care company by revenue, is gaining some favor among investors.
Warren Buffett's Berkshire Hathaway disclosed on Aug. 15 the purchase of just over 5 million shares of UnitedHealth, valued at $1.57 billion as of June 30. The news sent the stock 12% higher and pushed it back above the 50-day moving average for the first time since mid-April. David Tepper's Appaloosa hedge fund and Stephen Mandel Lone Pine Capital also disclosed new or increased stakes in UnitedHealth.
Although the stock has a weak 34 Composite Rating, its Accumulation/Distribution Rating of A- suggests even more major investors are buying the beaten-up stock.
UnitedHealth stock has an ATR of 2.94%, MarketSurge shows.
The Dow Jones industrials rose nearly 2% in September for its fifth consecutive monthly gain. September was the index's fifth-best month so far this year. Historically, September is the worst month for the Dow, falling an average of 0.9%, according to the Stock Trader's Almanac.
