The Dow Jones Industrial Average has been among the best performing of the major U.S. stock indices so far in 2021, up 13% year-to-date. As a result, the Dow is drawing attention from investors looking for stocks to buy.
That performance puts the Dow in a tie with the S&P 500 index, which is also up 13% since the start of the year, and ahead of the technology heavy Nasdaq exchange, which has gained 11% in the first four months of the year. Clearly, investors have begun to favor the 30 largest blue-chip American companies that comprise the Dow.
While technology growth stocks were all the rage last year, investor sentiment has shifted toward value stocks and the securities of companies that are likely to perform well as the global economy returns to normal.
In this article, we look at seven of the best Dow Jones stocks to buy right now. They are:
- American Express (NYSE:AXP)
- Apple (NASDAQ:APPL)
- Caterpillar (NYSE:CAT)
- Goldman Sachs (NYSE:GS)
- Coca-Cola (NYSE:KO)
- Microsoft (NASDAQ:MSFT)
- Honeywell (NYSE:HON)
Dow Jones Stocks to Buy: American Express (AXP)
AXP stock has spent most of the past year sitting on the sidelines. With business travel replaced by video conference calls and consumers sheltering-in-place at home, worries compounded that American Express’ heyday was behind it.
The company’s share price fell 45% when the World Health Organization declared a global pandemic last March and the stock has been slow to recover. By last December, the share price was still nearly 10% below its pre-pandemic level of $135.
But now, it looks like better days have arrived for AXP stock and its shareholders, putting on this list of stocks to buy. Year-to-date, the share price is up 27%, and, at its current level of $150 per share, the stock is now 11% higher than it was before any of us had heard of the novel coronavirus. The boost comes as optimism builds for travel to resume in this year’s second half and for people to begin using their credit cards to again book airline flights, hotel rooms and to dine out in restaurants.
American Express forecasts that business travel will be back to 70% of its pre-pandemic levels by the end of this year and will likely be fully recovered by 2023. In the meantime, the company is focusing its efforts on signing up new customers. It spent $1 billion on marketing in this year’s first quarter, a decision that helped the company enroll 2.1 million new customers.
After months of consolidating following a four-for-one stock split at the end of August 2020, APPL stock is again running higher. Euphoria around Apple and its stock reached a crescendo at the end of last summer right before the split, with the company’s market capitalization hitting $2.16 trillion and making it the most valuable publicly traded company in the U.S.
But after the stock split, Apple’s share price spent the fall and winter consolidating around $120. It has recovered in recent months and is now back up to around $134 a share, the same price it was at on Sept. 1 last year.
However, there is plenty of reason to believe that APPL stock will continue moving higher.
The company’s 5G-enabled iPhone 12 has kicked off a super cycle that should see global sales increase sharply. A host of new products have been announced that have consumers excited, including an iPad Pro tablet with 5G wireless internet capability, plus an iMac computers that run on Apple’s M1 microchip that is manufactured internally.
And, the company has announced that it will spend $1 billion to open a new campus in Raleigh, North Carolina that will employ 3,000 people.
Dow Jones Stocks to Buy: Caterpillar (CAT)
Machinery and heavy equipment company Caterpillar has two things going for it right now.
The first is the economic recovery that has many state and municipal building and repair projects back on schedule.
The second is President Joe Biden’s $2.3 trillion infrastructure plan that aims to improve everything from roads and bridges to broadband internet access. Polls show that a majority of American support the infrastructure legislation, which is great news for Caterpillar and the bulldozers, dump trucks and backhoes the company manufactures and sells.
Indeed, CAT stock has been a top performer among the Dow 30 index, up 28% since January at $230.88 a share. The company is scheduled to release its latest earnings on April 29 and analysts are expecting the company to report big growth.
Also, despite the challenges of the past year, Caterpillar has managed to complete its acquisition of The Weir Group’s oil and gas business for $405-million in cash, and its business has remained solvent enough that the company has been able to maintain its dividend without interruption. Not every company in the Dow Jones index can say the same.
Goldman Sachs (GS)
U.S. banks have come through the global pandemic strongly. None more so than Goldman Sachs.
The New York-based investment bank reported record earnings in this year’s first quarter as it expanded key parts of its business. Of note, its investment banking and trading units that did great business bringing special purpose acquisition companies (SPACs) t0 market.
Goldman Sachs posted per-share earnings of $18.60, well above the $10.22 expected by analysts, and up 498% from a year earlier. Revenue of $17.7 billion blew past analyst expectations of $12.6 billion.
The stellar performance has helped to keep GS stock aloft. Year-to-date, Goldman Sachs stock has increased 30% to $344.77 a share. In the past 12 months, the stock has risen 88%. Looking ahead, Goldman Sachs should continue to outperform.
While business on the investment banking side may slow as the SPAC craze cools off, the company should still benefit from the growth of its private wealth and consumer banking business under the “Marcus” brand. In the first quarter, the company saw its consumer banking revenue increase 32% to $371 million.
Dow Jones Stocks to Buy: Coca-Cola (KO)
The quintessential blue-chip stock, Coca-Cola is a solid investment in good times and bad. and is one of the Dow stocks to buy.
And now is a great time to buy shares of the venerable Atlanta-based company that has been a going concern since 1892. With restaurants reopening for in-person dining and live sports, concerts and other events set to return, sales of Coca-Cola are expected to improve this year.
Not that the company had bad sales in 2020. Even during the depths of the pandemic, Coca-Cola still managed to top earnings estimates even as its global revenue slumped 11% for all of 2020.
The company has used the global pandemic to streamline its operations, cutting legacy drinks such as Tab that haven’t had strong sales in years. The company recorded a $160 million impairment charge for the discontinued brands as it works to reduce its total number of beverage brands by 50% to about 200 total.
However, business for Coke has come roaring back. Coca-Cola’s sales in the first quarter of this March (2021) were the same as sales recorded in March 2019 before the pandemic. KO stock is up 10% year-to-date at $53.66 a share.
MSFT stock is another one that has been a clear winner among the Dow Jones index this year, up 23% since January at $261.55 a share.
Many on Wall Street are forecasting that 2021 will be the year when Microsoft joins Apple in the $2 trillion market cap club. Clearly the global pandemic has not slowed down this leading software and technology company. Despite the economic carnage wrought by Covid-19, Microsoft has managed to continue on a steady growth path.
Highlights of Microsoft’s current success include record sales of its enterprise cloud software, plus continued strength in its legacy Office and Windows suite of products. In addition, robust sales of a new Xbox console that debuted in the fourth quarter of last year. This is a company that continues to fire on all cylinders.
Dow Jones Stocks to Buy: Honeywell (HON)
Like the aforementioned Caterpillar, industrial conglomerate Honeywell is benefiting from the economic resurgence and Biden’s focus on infrastructure renewal and expansion.
Since Feb. 1, HON stock has risen 13% to around $222 a share. In the past year, the stock has recovered 81%. And much of the company’s share appreciation this year came after it handily beat earnings expectations for the first quarter and provided stronger than expected forward guidance for the remainder of this year.
Honeywell now sees revenues of between $34 billion and $34.8 billion in 2021, along with organic sales growth of 5% and adjusted earnings of $7.75 to $8 per share. This would be a 15 cents per share increase from its previous full-year guidance. The strong results and outlook have been driven by sales of Honeywell’s “safety and productivity solutions,” which jumped nearly 50% to $2.1 billion in the first quarter.
The company has seen brisk sales of the company’s warehouse automation technology that counts companies such as Amazon (NASDAQ:AMZN) among its roster of clients.
On the date of publication, Joel Baglole held long positions in APPL and MSFT.