With the holidays quickly approaching, it’s time to start thinking about next year and our portfolios. For the major Dow Jones stocks, next year could be a mixed bag. On one hand, there’s plenty to be thankful for. America’s consumer’s still seem to be spending, the labor market is going strong and even the issues surrounding the trade war seem to be abating. And we can’t forget the accommodating Federal Reserve.
However, the stocks in the venerable Dow Jones Industrial Average are facing plenty of uncertainty.
The trade war seems to have done some real damage to the global economy, with Europe, China and even the United States now starting to see lower rates of growth. Data has slipped and even the mighty consumer is showing signs of fatigue. It’s a major quandary for investors. How to get play both the growth potential and protect against the uncertainty?
Not all the Dow Jones stocks will do well in this environment. Some are better than others and have the goods not only to get through the current environment, but thrive in it. We’re talking those with recession resistant business models, strong growth prospects and a hefty dose of dividends.
With that, here are three Dow Jones stocks that could be great buys in the new year.
Dow Jones Stocks to Buy: Disney (DIS)
There are plenty of reasons to consider Disney (NYSE:DIS) when looking at the Dow Jones stocks for next year. In fact, there are over 10 billion of them to be exact. That’s the amount of cash the entertainment company made off of its six, $1 billion+ grossing blockbusters this year. And next year promises to be another big one for the House of Mouse. DIS has an impressive studio line-up featuring more films in new core franchises.
As if that wasn’t enough, in distributing those films, DIS continues to win as well. Disney+ has already exceeded even the most bullish expectations of growth in just a few short weeks of launching the streaming service. Add in rising theme park and resort revenues as well as plenty of licensing opportunities for Disney merchandise and you have a recipe for success in the new year. And for the long haul too.
Morgan Stanley now estimates that Disney stock could see double earnings over the next four years, going from $6.50 per share in 2020 to roughly $12 per share by 2024. Margins, moat and continued demand will keep Disney humming right along in 2020.
And yet, despite hitting new highs, DIS stock trades for a low 22x forward earnings. With that as well, investors get a dividend that has steadily grown over the last decade. For investors, the House of Mouse continues to prove that it can win and those wins will extend into the new year. That makes the Dow Jones stock a great buy for 2020.
A souring consumer environment will be a continued boon for retailer Walmart (NYSE:WMT). As one of the real low-cost leaders, as money gets tighter, WMT generally is able to realize greater sales. The best part is that it has been pretty successful at keeping those consumers once the good times roll again. That’s thanks in part to its efforts to step-up its online and omni-channel retailing operations.
With new tech and logistics upgrades, Walmart continues to go toe-to-toe with other entrenched online rivals. During its last reported quarter, WMT reported a big 41% jump to its online sales. Leading the way, was its new initiatives in online grocery orders and pick-ups. Consumers continued to try and stay with the service for their shopping needs. That has also helped it pick up market share versus grocery rivals such as Kroger (NYSE:KR). Meanwhile, efforts for two-day shipping are bearing fruit as well and allowing it to better compete vs. online giants.
All of these efforts to win in omni-channel retailing are paying off on the earnings front as well. Last quarter, adjusted earnings came in 6.52% higher and now, Walmart predicts it should be able to earn more next year. This is despite higher spending to keep the online growth going.
With rising cash flows, sales and quickly growing omni-channel presence, WMT is a prime Dow Jones stock to own as the uncertainty reigns in the new year.
Forget about Bill Gates, and Paul Allen, Satya Nadella is going to go down as the most important person in Microsoft (NASDAQ:MSFT) history. That’s because Nadella was the main reason behind Mr. Softy’s transition into the cloud. Sensing the trend early, Nadella pivoted MSFT into a leading platform as a service (PaaS) firm. These days, both its Azure and Dynamics 365 platforms continue to rack up more and more enterprise customers as they grow by double-digits. Azure alone grew by 59% last quarter.
At the same time, MSFT has pivoted that model to the consumer and business services realms as well. Office 365 continues to be a hit across the broad and new services such as Microsoft Teams are quickly replacing entrenched rivals in many businesses.
Heck, even MSFT’s hardware is no longer a laughing stock. Gone are the days of Zune mishaps with a slate of potentially game changing devices. This includes a new Xbox gaming unit set to kick-off its ambitions in streaming and the gaming cloud.
What does it all mean? Tons of cash flows for investors. One of the best things about a cloud-based business model is that subscriptions continue to pad your bottom line for years to come and margins remain plentiful. With Nadella finding more ways to boost MSFT’s cloud potential, the firm remains a cash flow giant. And it’s sharing those cash flows with investors via big dividends and buybacks.
In the end, MSFT stock remains one of the top Dow Jones stocks to own for the long haul- not just for the next year.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.