Although the best Dow stocks to buy now won’t titillate investors, they offer a dependable canvas for jittery folks to park their money. Given the wild ride that the equities sector has suffered — the worst first-half performance since 1970 to be precise — many folks already have had enough excitement. Instead, they’re seeking solid return potential to finish out the rest of the year.
For that, the best Dow stocks to buy present an intriguing upside pathway. Unlike the S&P 500, the Dow Jones Industrial Average doesn’t have concrete rules for inclusion. Per its methodology, a security is added “only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors.” Despite this ambiguity, you have to be special to be part of the Dow 30.
Obviously, the best Dow stocks to buy are titans of industry. Taken as a whole, the index features a market capitalization of nearly $10 trillion. For context, if the Dow 30 was its own country, it would rank as the world’s third-largest economy. Therefore, putting your money to work here will help provide at least some peace of mind.
American Express (AXP)
As far as credit card issuers are concerned, American Express (NYSE:AXP) is adding unwanted PR to the broader challenges it faces as households and businesses struggle against soaring inflation. Having been accused of going “woke” among conservative social critics, the issue came to a head when a former (celebrated) employee accused the financial institution of reverse discrimination.
Admittedly, it’s a messy issue because the underlying political discourse has turned vitriolic. With both Republicans and Democrats gearing up for a bruising battle in the upcoming midterm elections, this matter is not something American Express wanted to deal with.
Nevertheless, the company makes a case for one of the best Dow stocks to buy in July due to its generally affluent cardholder base. For instance, holders of Amex Platinum cards command an average net worth of $4.3 million and have a household income of $474,000.
Put another way, AXP stock may enjoy economic insulation should things turn sour.
If you’ve been paying modest attention to the business news cycle, you’ll know that a growing number of experts are sounding the alarm about a possible global recession. Along with Russia’s invasion of Ukraine and its subsequent energy supply chain disruptions, the coronavirus pandemic likely did a number on China’s economy. Therefore, we’re entering into uncharted territory.
Usually, you wouldn’t consider a consumer technology firm as one of the best Dow stocks to buy under this circumstance. However, Apple (NASDAQ:AAPL) is a different animal from its peers. Leveraging one of the world’s most powerful brands, Apple products continue to ring the cash register. Indeed, merely discussing rumors about its upcoming device launches has become a full-time job for many writers.
Therefore, AAPL may also enjoy economic insulation should we encounter a downturn. Another factor to point out is that Apple’s ecosystem has become ingrained into the mainstream consciousness, thus driving sales even under difficult circumstances.
The world’s leading manufacturer of construction and mining equipment, Caterpillar (NYSE:CAT) might come off as a strange idea for best Dow stocks to buy this month. With many analysts predicting that economic activity will slow due in part to a crippling inflation rate, Caterpillar appears like a liability. Indeed, CAT stock is down almost 14% on a year-to-date basis, providing little encouragement.
However, if you’re willing to absorb some near-term volatility, CAT could be one of the surprising ideas to emerge among the best Dow stocks to buy. That’s because the war in Ukraine has forced western powers and U.S. allies to rethink their energy dependencies. Russia is no longer a credible and dependable partner, so it’s important to plan out alternative energy flows.
Well, hydrocarbons are still incredibly relevant due to their high energy density. Further, the U.S. has vast riches of natural resources and key commodities. Despite the environmental concerns, it’s possible that the existential threat from Russia will be enough to overcome objections. Therefore, keep close tabs on CAT stock.
Speaking of hydrocarbons, Chevron (NYSE:CVX) is the only oil and natural gas company left among the best Dow stocks to buy. Following a devastating year for the entire sector, Chevron’s main rival Exxon Mobil (NYSE:XOM) got the boot from the Dow 30 in August 2020. Still, because of sudden spikes in relevancy, CVX is doing very well as the lone hydrocarbon representative in the index.
Up around 20% YTD, Chevron is basically the polar opposite of the major equity indices. With the pivot to electric vehicles still many years away — largely due to financial reasons as a new EV will set back households $60,000 — the fossil fuel industry should enjoy a significant upside pathway. Further, supply chain issues are also impacting EVs, meaning that combustion cars are still chugging along.
To be fair, CVX did lose 17% over the trailing month since the July 1 session. A combination of higher interest rates and increased supply from the Strategic Petroleum Reserve didn’t help. However, these are small issues compared to the broader narrative.
Ahead of potential economic turmoil, Coca-Cola (NYSE:KO) offers a generally reliable narrative among the best Dow stocks to buy. Historically, analysts have pegged KO stock as recession proof. While no investment is completely immune to fundamental headwinds, during the Great Recession, market experts focused on the beverage maker for its strong earnings and cash position.
While its balance sheet could enjoy some improvement, it’s still solid given the circumstances. However, Coca-Cola lives up to its billing as a recession-resistant idea, featuring some of the strongest profitability metrics in the business. For instance, its net margin of nearly 26% is well above the industry median of 5%.
For me, Coca-Cola really benefits from the cheap thrills thesis. Not surprisingly, economic downturns represent huge problems for stress, which can lead to mental health concerns. While absolutely not healthy, a little pick-me-up from a (cheap) can of Coke can help detract workers from their troubles.
Home Depot (HD)
Admittedly, Home Depot (NYSE:HD) is a tricky narrative when it comes to the best Dow stocks to buy. Mainly, shares are incredibly volatile. Since the opening round of 2022, HD stock has tanked around 30% and I must say it’s not too surprising. Although the home sale boom provided robust downwind benefits for Home Depot, rising interest rates are starting to impact homebuyer sentiment.
On the other hand, the reason why interest rates are rising — to address the inflation rate — can also help HD stock. With purchasing power declining, the inflationary environment is taking a bite out of real household earnings. Therefore, the concept of do-it-yourself (DIY) isn’t just a nice thing to learn during quarantine: Arguably, it’s now a financial necessity.
Therefore, it’s possible that down the line, revenue for Home Depot will increase as more people learn to take care of their own business rather than hiring tradespeople to perform relatively basic repairs. Still, it’s a tricky narrative like I said, so exercise some caution here.
Verizon Communications (VZ)
In some ways, you can consider Verizon (NYSE:VZ) as a core utility firm. True, the company doesn’t provide absolutely essential services such as water and power. However, in the connected economic ecosystem that we all live in, it’s going to be extraordinarily difficult to survive without telecommunications firms like Verizon. Therefore, out of sheer necessity, VZ is one of the best Dow stocks to buy.
On average, Americans spend nearly three hours on their phones each day. By the time the calendar turns the page on 2022, the average person in this country will spend nearly a month and a half on their mobile device. For members of Generation Z, this age cohort spends on average four hours and 15 minutes daily on their smartphones.
The point is that we have become a society completely addicted to our digital devices, which cynically serves the interest of wireless carriers like Verizon. Plus, that 5% dividend yield is awfully enticing.
On the date of publication, Josh Enomoto 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.