Three Dow Companies with Plenty of Upside Room: The Walt Disney Company (DIS), Caterpillar Inc. (CAT), International Business Machines Corp. (IBM)

Page 1 of 2

Everybody is talking about the fact that the Dow Jones has finally made new historical highs this week, and investors are wondering if the markets have enough fuel in the tank for further increases or if we are due for a pullback at this stage. This is an interesting issue to discuss, but trying to time the markets is in most cases a waste of time, it just can’t be done with enough precision.

On the other hand, looking at individual companies from a long-term investment perspective may be a much more productive idea, and these three Dow stocks have plenty of potential to keep rising.

Caterpillar Inc. (NYSE:CAT)A Magic Business

Mickey Mouse, Tinker Bell, Snow White, Winnie the Pooh, Tarzan, Pinocchio, Pocahontas Nemo, Hulk and Spider Man are just a few of the world famous names that make The Walt Disney Company (NYSE:DIS) a unique company with truly irreplaceable assets. In addition to the rights to profit from some very famous characters, the company owns brands like ABC, ESPN, and Pixar among others.

These may not be tangible assets, but they a very real economic value: Disney monetizes its intellectual property through different venues like movies, shows, amusement parks, cruises, and merchandising among others. The recent purchase of Lucasfilm in October of last year for $4.05 billion ads another fantastic franchise which will generate growing profits at the house of Mickey – and now Darth Vader– for years to come.

Entertainment spending tends to be quite sensitive to economic cycle, and the movie business is characterized by a high degree of uncertainty since it´s difficult to tell if a new launch will be a big success or a complete miss from a commercial and profitability point of view. But Disney owns an amazing library of content, and the company has proven that it can generate growing sales and earnings through the ups and downs of the economy.

Reporting record sales and earnings figures, while at the same time trading at a very reasonable forward P/E ratio of 14.5, The Walt Disney Company (NYSE:DIS) looks well positioned to continue delivering a lot of fun to children, grownups and investors of all ages over the next years.

A Rock Solid Tech Company

The tech industry is one of the most dynamic businesses around. Opportunities for growth can be very exciting, but the winner of today can easily be the loser of tomorrow; so adapting to the new trends is absolutely critical. That´s why having a high quality management team on board can be of utmost importance in terms of positioning the company to thrive in a permanently changing scenario.

Back in 1993, under the leadership of Louis V. Gerstner, International Business Machines (NYSE:IBM) started an amazing transformation process which not only improved execution and efficiency, it drove the company away from the commoditized hardware industry towards greener pastures in areas like software and services. This produced a spectacular increase in profitability over the years, and it made of IBM the undisputed industry leader it now is.

IBM owns the second most valuable brand in the world according to Interband; the company has been around for more than 100 years and counts each of the Fortune 2000 companies as clients. IBM provides a level of soundness and reliability which is quite unusual in the tech industry, while at the same time it´s an active innovator in areas like mainframe servers, proprietary microprocessors, and data storage systems to name a few. At a forward P/E ratio of 11.3, IBM is looking quite cheap for such a high quality business.

Building a Recovery

Caterpillar Inc. (NYSE:CAT) operates in a very cyclical industry, which means that investors have been getting concerned about the effects of a weak global economy on the company´s performance. The commodities and mining segment has been showing weakness over the last quarters, and Caterpillar´s management has admitted that the business is facing considerable uncertainties when it comes to global demand in the middle term.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!