The Dow stocks are synonymous with solid blue chips that can steer relatively clear of various market blow-ups and sector-based bubble bursts. Undoubtedly, the Dow Jones Industrial Average, comprising 30 high-quality large-cap stocks that meet various fundamental criteria, tends to be a bad index to watch.
The sample size of stocks isn’t large enough to represent the American stock market, and the folks who choose what to add and what to give the boot don’t have the best track record of timing. Indeed, what’s brought into the Dow may be a top performer destined for underperformance, while what goes out may be close to turning a corner.
While I don’t believe that any long-term investor will feel true regret from buying any one of the Dow stocks (even the Dow’s dogs are investable over a long-term horizon), I do see the following trio as having a tough road ahead of them.
Boeing (BA)
After countless missteps and fumbles, Boeing (NYSE:BA) remains a relatively messy and turbulent story. Despite the setbacks, bad news events and testimonies, the company’s duopolistic market positioning has likely saved BA stock from tanking below $100 per share, levels not seen since the worst of the 2020 stock market crash.
With current CEO David Calhoun to be replaced at the start of next year, there’s a great deal of uncertainty surrounding who will become the next leader and whether they will have what it takes to repair Boeing’s severely tarnished reputation. Over the past week, the rumor mill spun about who will take the job come the new year.
The Air Current mentioned Former Rockwell Collins CEO Kelly Otberg, a subsidiary of RTX (NYSE:RTX). Regardless of who takes the reins from Calhoun, lifting Boeing off the tarmac will probably be a tough task.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) is a construction machinery maker that has enjoyed a great run in recent years. As you may know, though, the business of heavy-duty machinery can be quite cyclical. Several bust years can follow the boom years. At this juncture, it looks like CAT stock could be vulnerable if another bust year is in the cards.
Shares of Caterpillar have already begun to come in, now off close to 9% from its high. Though not expensive at 15.9 times forward price-to-earnings (P/E), I can’t say the risk/reward looks great here, especially with hot U.S. construction spending (on pace for $2.1 trillion a year) likely already baked into the Dow stock.
Indeed, elevated infrastructure spending could stay elevated for longer. And as rates finally come down, Caterpillar may still have legs (no pun intended). With expectations slightly elevated, it may make sense to wait for a bigger pullback in the name, especially if the Fed shows a pause in its next big meeting.
Verizon (VZ)
Shares of telecom firm Verizon (NYSE:VZ) have been showing signs of life over the past year, now up close to 18%. While it’s refreshing and encouraging to see VZ stock in the green on its one-year chart for a change, the company needs to address numerous issues before the Dow stock can enjoy its next leg higher.
Indeed, the momentum enjoyed in the back half of last year has since tapered off. The company fell short of revenue expectations when it rolled into its second quarter. And with T-Mobile (NASDAQ:TMUS) continuing to dominate the mobile landscape, questions linger as to whether Verizon is the telecom name to own as smartphones move into the AI age.
Though seemingly cheap at 15.1 times trailing P/E, I’d argue there are better places to look for those tempted by the 6.65% dividend yield.
On the date of publication, Joey Frenette did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
