Get Even More Bullish on the Dow, Part 2

Jim Cramer

Editor's note: This is Part 2 of Jim Cramer's review of the prospects for the stocks that make up the Dow 30. Be sure to read Part 1, Part 3 and Part 4.

Caterpillar Second-half surge

Caterpillar(CAT Quote): They killed CAT this year because of housing. I believe the first half of 2007 will look much like the last half of 2006, but this time with the engines business stalling out, too. That's because a change in environmental laws led to pullthrough of orders into 2006 in that important market. That, plus the leveling of oil at a price that doesn't spur enough alternatives, will weigh on Caterpillar. But the second half will be more bountiful because housing will have bottomed and the engine orders will flow back. Look for nothing until July and then a quick spurt to new highs, perhaps even $90, as the raw cost of steel, now that tariffs are removed, flows through to the bottom line.

Citi Needs a new leader

Citigroup(C Quote): The rumblings of Citigroup will be heard, and Chuck Prince will be gone by year-end 2007. The market thirsts for a big-thinking banker at the helm of this ship to augment the new operations chief, and the market will get it. I believe Citigroup will trade to $63 on improved management and the concomitant prospects.

Coca-Cola Fizzing up to $55

Coca-Cola(KO Quote): The new management at Coca-Cola actually has something going for it -- not something that can take the company up too much, but certainly something that can take it to the mid-$50s on solid single-digit growth and a buyback that never quits.

That dividend could be increased mightily, too. How about $55 at this time next year?

DuPont Sticky situation

DuPont(DD Quote): This one's a quandary. The stock quietly moved up almost 20% when oil moved down, and its earnings flowed up because of price increases that stuck. That raw-cost win might not be repeated throughout 2007, but it will still help during the first half of the year. The stock also just got too cheap, with that juicy 4% yield that now gives you 3% because of price appreciation. I see only a 10% gain for DuPont in 2007, and that might even be repealed by year-end. How about $53?

ExxonMobil Fund darling

ExxonMobil(XOM Quote) has become the mutual funds' favorite play, even though so many other oils are so much cheaper, including Chevron(CVX Quote) and ConocoPhillips(COP Quote). Still the multiple's only 12, with 9% earnings growth baked in at these oil prices, so let's say the stock adds on another 5 points. I know, disappointing, but what a run! Eighty's about all it can muster in 2007, though, without oil going through $70, and I don't see that happening.

GE Watch the dividend

General Electric(GE Quote): This one finally got legs when it decided to boost the dividend much more than it has for the past five years, 12% vs. 9%. I believe this is just the beginning of the big boosts, and that the company can take its yield to 4% without much problem, particularly when it unloads plastics, gets the benefit of all the Zucker-led changes at NBC and quits the inanely large buyback that did nothing for shareholders. Still, the stock's not cheap: I'd take GE to $43 and then declare victory.

GM Going nowhere

General Motors(GM Quote): GM had its chance. It had the single greatest turnaround manager in the world on its board, Jerry York, and it spurned him and Tracinda. That said it all. This stock was headed to $40 with the man who turned around Chrysler and IBM on board. Now it is going nowhere, nowhere at all. I believe this stock will close at this level, give or take a handful of points, next year at this time.

Editor's note: This is Part 2 of Jim Cramer's review of the prospects for the stocks that make up the Dow 30. Be sure to read Part 1, Part 3 and Part 4.

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