In this article, we discuss 10 best Dow stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to 5 Best Dow Stocks To Buy Now.
Any doubts that growth investors had over high inflation numbers and an expected rise in interest rates have been laid to rest in the past few weeks as US central bank chief Jerome Powell vowed to wage a “sustained battle” against inflation. In this environment, interest in stocks that offer reliable profits has climbed as money flows out of companies with elevated valuations. The Dow Jones Industrial Average, a price-weighted index that tracks the performance of 30 large-cap firms trading on US markets, has gained prominence as well.
The Dow, created by Wall Street Journal editor Charles Dow, is a reliable indicator of the health of the overall US stock market since it mostly comprises firms with solid fundamentals. Some of the top Dow stocks to buy now include Johnson & Johnson (NYSE:JNJ), Merck & Co., Inc. (NYSE:MRK), and Walmart Inc. (NYSE:WMT), among others discussed in detail below. At the time it was launched in 1896, the Dow only consisted of 12 large firms and was commodity-focused. It expanded to 30 stocks in 1928.
The Dow is different from other market indexes because it is calculated using the sum of the price of a single share of companies on the index weighted against an adjusted factor based on stock splits and stock dividends. Investors eager to invest in the Dow can do so through many exchange-traded funds. The composition of companies on the index changes constantly to reflect the underlying changes in the US economy. However, critics claim the Dow is not a reliable measure of the market performance since it tracks the performance of just 30 stocks.
Our Methodology
These were picked from the Dow Jones Industrial Average. The analyst ratings and business fundamentals of each stock are also discussed to provide readers with some additional context for their investment choices.
Data from around 900 elite hedge funds tracked by Insider Monkey in Q3 2021 was used to identify the number of hedge funds that hold stakes in each company.
Best Dow Stocks To Buy Now
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 41
International Business Machines Corporation (NYSE:IBM) provides tech-related solutions and services. It is one of the most stable companies in the tech sector. International Business Machines Corporation (NYSE:IBM) has paid a dividend to shareholders for 32 consecutive years. These payouts have grown for the past 22 years. On February 1, the firm declared a quarterly dividend of $1.64 per share, in line with previous. The forward yield was 4.93%.
Elite hedge funds hold large stakes in International Business Machines Corporation (NYSE:IBM). Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in International Business Machines Corporation (NYSE:IBM), with 2.8 million shares worth more than $398 million.
Just like Johnson & Johnson (NYSE:JNJ), Merck & Co., Inc. (NYSE:MRK), and Walmart Inc. (NYSE:WMT), International Business Machines Corporation (NYSE:IBM) is one of the stocks that value investors are buying.
In its Q4 2021 investor letter, St. James Investment Company, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:
“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
9. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 46
Caterpillar Inc. (NYSE:CAT) markets construction and mining equipment. Major hedge funds have bullish positions on the stock. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Bill & Melinda Gates Foundation Trust is a leading shareholder in Caterpillar Inc. (NYSE:CAT), with 9.6 million shares worth more than $1.8 billion.
Caterpillar Inc. (NYSE:CAT) recently posted earnings for the fourth quarter of 2021, reporting earnings per share of $2.69, beating estimates by $0.43. The revenue over the period was $13.8 billion, up more than 23% year-on-year.
In its Q2 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Caterpillar Inc. (NYSE:CAT) was one of them. Here is what the fund said:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
8. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 46
3M Company (NYSE:MMM) is a diversified industrial tech firm. It has one of the most impressive dividend histories on Wall Street, having grown payouts to shareholders for 63 consecutive years. On February 8, 3M Company (NYSE:MMM) declared a quarterly dividend of $1.49, an increase of 1% from the previous dividend of $1.48. The forward yield was 3.67%.
Hedge funds appreciate the solidity that 3M Company (NYSE:MMM) stock offers in a volatile market. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company (NYSE:MMM), with 5.6 million shares worth more than $983 million.
7. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Chevron Corporation (NYSE:CVX) is an integrated oil and gas firm. Hedge funds have been piling into the stock in recent weeks as energy prices climb. At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation (NYSE:CVX), up from 50 in the preceding quarter worth $4.2 billion.
On January 31, Cowen analyst Jason Gabelman maintained an Outperform rating on Chevron Corporation (NYSE:CVX) stock and raised the price target to $133 from $122, highlighting that the rising oil prices were one of the primary reasons behind the target raise.
In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names, (including) Chevron. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
6. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Verizon Communications Inc. (NYSE:VZ) is a New York-based communications and technology firm. The stock has climbed in recent weeks after the company reached an agreement with regulators in the US about activating more 5G towers without hindering airport operations. The firm also recently beat market expectations on earnings for the fourth quarter of 2021.
Verizon Communications Inc. (NYSE: VZ) is one of the favorite communications stocks on Wall Street. At the end of the third quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $10.3 billion in Verizon Communications Inc. (NYSE: VZ), compared to 63 in the preceding quarter worth $10.9 billion.
Along with Johnson & Johnson (NYSE:JNJ), Merck & Co., Inc. (NYSE:MRK), and Walmart Inc. (NYSE:WMT), Verizon Communications Inc. (NYSE: VZ) is one of the stocks on the radar of institutional investors.
In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE:VZ) was one of them. Here is what the fund said:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
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Disclosure. None. 10 Best Dow Stocks To Buy Now is originally published on Insider Monkey.
