Investing in Dow stocks is always a reasonable strategy for those who value the American economy. The Dow Jones is composed of 30 prominent publicly listed U.S. firms. Those firms are large and tend to be leaders in their respective industries. Thus, an investment is a vote of confidence in American industry and the economy at large.
It’s hard to argue that any of the 30 stocks in the Dow are outright terrible. It’s much easier to argue that a handful are particularly strong at any given time. That’s what we’ll be doing in this article.
The stocks and companies discussed below have had varying degrees of success in 2024. Some are up by double digits while others are down nearly as much. But there’s reason to believe that all will rise moving forward.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is a clear leader in artificial intelligence. The firm’s early and strong investment in AI has paid dividends, propelling the stock much higher. However, investors may wonder if the majority of gains have already been gotten and whether it makes sense to sit Microsoft out at this point.
That would be a poor decision as AI spending is sure to increase from here. That increased spending is likely to come from congress. A bipartisan group of senators is advocating for $32 billion in emergency spending on AI. Those senators are working to find greater consensus across the aisle. The worry is that if they don’t the U.S. will fall behind in relation to artificial intelligence.
Microsoft is likely to be a big beneficiary of any such spending. Otherwise, investors should simply consider Microsoft because it is fundamentally very strong. Top-line growth reached 17% in the most recent quarter. It’s difficult to find such a combination of size and growth elsewhere.
Amgen (AMGN)
Amgen (NASDAQ:AMGN) stock is a strong investment in the budding weight-loss drug category. Investors know that Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) are the early leaders in that industry. However, a number of upcoming firms aim to chip away at their early dominance. Amgen is one of those firms.
The market knows this and has already reacted sending Amgen’s stock higher in the first month of May. The best time to have been invested was prior to recent announcements but there is still reason to remain highly optimistic.
The reason to believe so lies in the advantages of Amgen’s injectable drug, Maritide. It requires fewer injections than competitor drugs from Eli Lilly and Novo Nordisk. Further, Maritide may produce greater weight loss than competitor drugs. Beyond that, Amgen may be better suited to produce large volumes of drugs. It’s no secret that Eli Lilly and Novo Nordisk have faced problems in that regard. However, Amgen is expected to do much better on that front.
Honeywell (HON)
Honeywell (NASDAQ:HON) stock represents an industrial conglomerate well positioned for the future economy. Honeywell is highly notable for its position relative to automation of building and industry. When it comes to things like AI robots and the internet of things, Honeywell is a strong choice.
So, when those segments slow investors would generally expect Honeywell to grow weaker. That isn’t actually the case based on recent results. While Honeywell’s industrial and building automation segments did slow down in the most recent quarter, the company’s aviation business more than made up for the slowing.$3.67 billion in sales from that unit helped the company beat guidance of $9.03 billion in sales that was expected.
The point here is simple: Honeywell is proving its resilience and strong balance overall. The company continues to be well positioned to take advantage of the automation trend but isn’t fully dependent on it. Honeywell is a strong Dow stock and a great industrial share to consider for investors.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) stock has performed poorly in 2024, falling by more than 7%. Company management has been well aware of an emerging issue with the company’s value platform, especially in light of rampant inflation.
The company proposed that franchisees bring back a $5 meal deal including four items earlier this year. The company again brought up the proposal this May as it has become more and more apparent that a consumer pullback is at hand. A few days later it was announced that the $5 meal deal will return for four weeks beginning in late June. The move should be a boon to the stock which has suffered due to stagnant results of late.
Costs associated with the promotion will be largely borne by franchisees. That’s why franchisees in high cost areas such as California had pushed back against the promotion earlier this year. It’s done now. McDonald’s has a chance to regain some of the market as a value option that it had lost. The stock has long been a strong performer and now’s a good time to invest.
American Express (AXP)
American Express (NYSE:AXP) stock continues to do well as the upper class strengthens and continues to do well itself. Retail spending has been very strong through the first of 4 months of 2024 which is reflected in American Express’s earnings.
Earnings jumped up by 39% during the first quarter reflecting the overall strength of American Express. The company caters to a more affluent customer base and for investors who believe that the rich will continue to get richer, American Express is a strong investment.
That notion certainly appears to be correct when it comes to credit card stocks. American Express has outperformed Visa (NYSE:V) and Mastercard (NYSE:MA) this year and in the longer term as well. Visa and MasterCard cater to a less affluent customer base. Thus, there’s a strong argument to be made in favor of American Express simply because of its customer base affluence. All three of the stocks are reasonable investments but I’d argue that American Express is the clear leader.
Cisco Systems (CSCO)
There are a lot of reasons to like Cisco Systems (NASDAQ:CSCO) stock at the moment. It’s relatively cheap at the moment and underappreciated. Cisco Systems also pays a very reliable dividend, yielding 3.2% currently. In addition, the company is transitioning to a more reliable sales base that should interest investors. That’s a good place to start.
Cisco Systems recently closed its acquisition of Splunk which will push its sales mix decidedly in favor of software. That’s important because software sales are recurring in nature. Thus, Cisco Systems will benefit from a more stable and predictable revenue mix. The company is already proven to be very stable although it relied on more one-off hardware networking sales historically.
Investors should also note that Cisco Systems is very attractive on the basis of its forward P/E ratio. That ratio is lower than its already attractive trailing P/E ratio — suggesting that earnings will rise.
Salesforce (CRM)
Salesforce (NYSE:CRM) is the dominant force in customer relationship management. The stock has long benefited from that position.It should continue to strengthen moving forward for multiple reasons, one of which is its artificial intelligence investment.
Salesforce is looking to acquire Informatica for roughly $11 billion. Salesforce is looking to buy the AI powered cloud data management vendor. The move should not be particularly surprising as Google (NASDAQ:GOOG,GOOGL) is set to buy Salesforce competitor, HubSpot (NYSE:HUB).
Analysts argue that sales forces move better positions it for the AI opportunity over the coming decade. More specifically, It should help Salesforce to better integrate with data warehouses via AI.
However, the deal will not come without substantial pushback from some Salesforce investors. the company faced a lot of pushback when it acquired Slack in 2021 for $28 billion. Nevertheless, Salesforce continues to dominate customer relationship management and is expected to grow rapidly this year and next.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
