The Dow Jones Industrial Average (Dow) stocks may be worth looking at if you’re looking to check out of the expensive tech (and AI) trade for the time being. Indeed, being a member of the Dow doesn’t necessarily mean there’s undervaluation to be had.
However, a stable earnings history is one of the key attributes to entering the Dow Jones club. And as the AI tailwind begins to spread from the Nasdaq 100 to the more value- and dividend-focused Dow, perhaps the Dow 30 may begin to offer more bang for the buck as the highest flyers in tech begin to get fatigued.
Let’s examine some of Wall Street’s largest and most favored blue-chip stocks for investors looking to continue doing well for the year ahead.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) is a proven long-term performer that deserves its comfortable spot in the Dow Jones index. Until recently, UNH stock has been a steady appreciator. With the managed health providers under considerable pressure for more than a year over elevated medical expenses, UNH stock was sent straight to the penalty box, with shares now down more than 16% from their all-time highs.
There are no easy ways around industry headwinds brought on by the recent Medicare Advantage rate cut. Regardless, UnitedHealth has some of the best managers in the game and is more likely than not to find a route higher from what I view as a temporary setback.
Recently, HSBC upgraded UNH stock to a Hold, noting that “risk related to the current turbulent environment” is “captured” in the stock. Believe it or not, HSBC is also one of the least bullish on the company. At 18.85 times trailing price-to-earnings, I’d argue there’s a good chance UNH stock’s in the bargain bin right now as we await earnings next week.
Walt Disney (DIS)
Walt Disney (NYSE:DIS) stock has been a hot mover of late, even though activist investor Nelson Peltz didn’t get his way with the proxy battle. In any case, CEO Bob Iger has a chance to prove to the retail investors who stood by him that he can turn the tide and bring forth further gains in a continuation of the stock’s rebound.
At just shy of $118 per share, the former Dow dog is now one of its top runners, at least year to date, with 30% gains posted so far. Despite the sudden pop, shares are still down and out, with room to run if new highs (close to $200) are hit.
As Disney shifts from its proxy battle to driving fundamentals and embracing new technologies like spatial computing, I wouldn’t dare short DIS stock here. As a new Wall Street favorite, perhaps the stock has what it takes to become one of the Dow’s biggest gainers for 2024.
Microsoft (MSFT)
It’s hard to find anybody remotely bearish or even neutral on Microsoft (NASDAQ:MSFT) these days — not while the firm looks to gain further on the back of generative AI technologies.
Recently, the $3.17 trillion giant announced its intent to invest $2.9 billion in data centers in Japan. The aggressive move gives the American enterprise kingpin a massive footprint in a tech-savvy market sure to use a ton of cloud computing power.
In addition, Microsoft’s betting a similar amount ($3 billion) on data centers in the U.K. Undoubtedly, Microsoft’s cloud AI business looks unstoppable right now as it innovates in software and hardware. As Microsoft puts the finishing touches on its own line of AI accelerators (Maia 100 and Cobalt 100) for the cloud, the company could have what it takes to pull ahead of its Magnificent Seven rivals — if it hasn’t already.
Sure, MSFT stock is somewhat pricy at 38.3 times trailing price-to-earnings (P/E). But given its AI drivers, I’d argue Microsoft is a steal compared to Nvidia (NASDAQ:NVDA) stock, which currently trades for over 72 times trailing P/E.
On the date of publication, Joey Frenette owned shares of Disney and Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
