In this article, we will take a look at 11 Best Dow Stocks to Buy Now. If you want to see some more of the best Dow stocks to buy, go directly to 5 Best Dow Stocks To Buy Now.
Dow stocks are stocks listed on the prestigious Dow Jones Industrial Average, which is a stock market index that includes 30 prominent companies.
The Dow Jones Industrial Average was created by Charles Dow and Edward Jones in 1896 as a price weighted index to track 30 large companies listed either on the NYSE or NASDAQ. It’s considered as a benchmark for blue chips listed in the United States.
Due to the Federal Reserve having raised interest rates 5 times this year and expectations that the central bank could increase rates even further, the Dow has dropped almost 20% and there could be more downside in the future if economic data fails to meet expectations. Given that it is comprised mainly of blue chips, the Dow has fallen less year to date than the S&P 500 or the NASDAQ indexes, which have fallen around 25% and 34% respectively.
Given the uncertainty, it could be a good idea for long term investors to have a well diversified portfolio across many different stocks across many different sectors. Among the blue chip stocks, here are 11 of the best we think long term investors could potentially consider adding to their portfolios.
Francisco Amaral Leitao / shutterstock.com
Methodology
For our list of 11 Best Dow Stocks To Buy Now, we took 11 Dow Jones stocks that we think have the right combination of financial strength, and growth potential for long term investors. We then ranked those 11 Dow Jones stocks using the number of hedge funds in our database that held shares in those same stocks at the end of Q2 2022.
11 Best Dow Stocks To Buy Now
11. Honeywell International Inc. (NYSE:HON)
Number of Hedge Fund Holders: 42
Honeywell International Inc. (NYSE:HON) is a diversified technology and manufacturing company that makes auxiliary power units, propulsion engines, integrated avionics, and much more. Despite the S&P 500 falling around 25% year to date and the Dow falling almost 20%, Honeywell International Inc. shares have only fallen around 16% year to date due to the company’s strong businesses. As of October 12, the company trades at a forward P/E ratio of 18.12 and has an average target price of $204.04 per share. On 10/12/22 Joshua Pokrzywinski of Morgan Stanely cut his price target to $187 from $192 and kept an ‘equal rating’ on Honeywell International Inc..
Alongside The Walt Disney Company (NYSE:DIS), salesforce.com, inc. (NYSE:CRM), and Apple Inc. (NASDAQ:AAPL), Honeywell International Inc. is one of the best Dow stocks to buy now.
10. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 51
The Boeing Company (NYSE:BA) is a leading commercial jetliner and military aircraft manufacturer. The company also produces satellites, missile defense, human space flight and launch systems and other products. On 10/12/22, Charles Minnervino of Susquehanna noted that The Boeing Company’s delivery data for September showed improvement in 737 MAX deliveries. The analyst reiterated his positive rating and $192 price target.
Meridian Funds also said the following about The Boeing Company in its second quarter investor letter,
We similarly remained invested in largely out-of-favor The Boeing Company, a global leader in developing and producing commercial jet aircraft. Due to some self-inflicted wounds and a bit of bad luck, as well as dramatic declines in air travel early in the pandemic, investor sentiment for this company has simply been awful. As part of our contrarian thinking, however, we view the business as critical to global transportation needs and see multiple catalysts to improve sentiment. In addition to the current surge in air travel worldwide, ramped up production of the 737 MAX aircraft and the pending restart of 787 Dreamliner deliveries should help turn broader sentiment. Additionally, we anticipate a meaningful inflection in cash flow as Boeing starts delivering aircraft currently in storage as well as the eventual expansion of its production in both core platforms.
9. Amgen, Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 55
Amgen, Inc. (NASDAQ:AMGN) discovers, develops, manufactures, and delivers human therapeutics worldwide. Despite the Dow falling almost 20% year to date, Amgen, Inc. has rallied 9.1% in 2022 thanks to stronger sentiment.
On 10/11/22 Matthew Harrison of Morgan Stanley upgraded the stock to ‘Overweight’ from ‘Equal Weight’ and upped his price target to $279 from $257. Harrison is also bullish on Amgen, Inc.’s AMG133’s potential.
8. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 67
American Express Company (NYSE:AXP) is a leading financial services company that provides charge and credit payment card products and travel related services worldwide. On 10/12 Kunaal Malde of Atlantic Equities lowered his price target on American Express Company to $165 from $175 and kept a ‘Neutral’ rating citing increasing likelihood of a recession for the United States and global economies.
ClearBridge Investments mentioned American Express Company in a second quarter investor letter,
“In financials, recession fears outweighed the benefits of rising interest rates; in the Strategy, Bank of America (BAC) and American Express Company felt these concerns most acutely, although we remain comfortable with these businesses and their strong fundamental positions over the medium-to-long term.”
7. Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 69
Goldman Sachs Group, Inc. (NYSE:GS) is a leading bank on Wall Street that provides financial services for corporations, financial institutions, governments and individuals worldwide. Although Goldman Sachs Group, Inc. shares are down 22% year to date, the company has strong long term growth potential given its strong brand name. Due to the market decline, Goldman Sachs Group, Inc. trades at a forward P/E ratio of 7.79.
6. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 80
The Home Depot, Inc. (NYSE:HD) is a leading home improvement retailer. As of December 31, 2021, the company had 2,317 stores across the United States. Although shares of The Home Depot, Inc. have fallen 32% year to date, some analysts are optimistic. On 10/3/22 Jonathan Matuszewski of Jefferies upped his price target on Home Depot to $394 from $392 and kept a ‘Buy’ rating citing the company’s home maintenance and emergency repair business could still be attractive if discretionary home improvement outlays weaken.
Diamond Hill Capital said the following about The Home Depot, Inc. in its Q2 2022 letter,
“The Home Depot, Inc. is a high-quality operator in the home improvement industry. Macroeconomic concerns, particularly the rise in mortgage rates, caused the share price to pull back and trade at a greater discount to our estimate of intrinsic value. We believe Home Depot is well positioned to continue gaining share due to its premium real estate locations, strong operations and recent investments in its supply chain. We like Home Depot’s exposure to the professional customer and believe in its ability to take market share in this segment as we believe home improvement spending has the potential to remain resilient in upcoming years.”
Like The Home Depot, Inc., The Walt Disney Company, salesforce.com, inc. (NYSE:CRM), and Apple Inc. are all on our list of Best Dow Stocks to Buy Now.
5. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson develops, manufacturers and sells various products in the healthcare field globally. Given the company’s businesses, Johnson & Johnson shares have only fallen around 5% year to date and the company trades at around a 15.37 forward P/E ratio. On 10/5 Joanne Wuensch of Citi cut her price target on Johnson & Johnson to $198 from $201 but kept a ‘Buy’ rating on shares citing macroeconomic headwinds.
In the long term, Johnson & Johnson still has growth potential and the stock also has a current attractive dividend yield of 2.78% as of 10/12.
4. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 104
JPMorgan Chase & Co. is one of the largest banks in the United States. Given the decline in the market, JPMorgan Chase & Co. shares have fallen 34.6% year to date. In terms of the U.S. economy, JPMorgan CEO’s Jamie Dimon isn’t particularly optimistic as he says that although the U.S. economy is actually “still doing well”, he thinks there are headwinds such as the impact of inflation, rising interest rates, and Russia’s war in Ukraine. As a result, there could be a recession in the United States and also the world in six to nine months from now.
If that happens, JPMorgan Chase & Co. write offs could increase and its earnings could decrease. Given JPMorgan Chase & Co.’s forward P/E ratio of 8.26 and its business strength, however, the stock could be attractive long term.
3. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 109
The Walt Disney Company is one of the world’s leading entertainment companies with both content production and distribution and also theme parks. Due to the market weakness, shares of The Walt Disney Company are down almost 40% year to date and now trade at a forward P/E ratio of 17.3. On 10/11/22, Kannan Venkateshwar of Barclays lowered his price target to $105 from $120 on the stock but kept an ‘Equal Weight’ rating. Despite the potential recession in the future and the poor performance, The Walt Disney Company remains attractive in the long term given its earnings power.
2. Salesforce.com, inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce.com, inc. (NYSE:CRM) is a leading CRM cloud company. Given the weak market, shares of salesforce.com, inc. (NYSE:CRM) are down 44% year to date and trade at a forward P/E ratio of 25.05.
On September 22, Keith Bachman of BMO Capital cut his price target on salesforce.com, inc. (NYSE:CRM) to $190 from $207 but kept an ‘Outperform’ rating. Bachman thinks the company’s $50 billion FY26 revenue target is reachable though not easy given the macro and foreign exchange headwinds. By comparison, salesforce.com, inc. (NYSE:CRM) had sales of just over $21.2 billion in 2021.
If salesforce.com, inc. (NYSE:CRM) has higher revenue, the company’s earnings per share could potentially increase.
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. is a computer giant that designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories. The company also sells many software services. Due to the market weakness, Apple Inc. is down 22% year to date and trades at a forward P/E ratio of 21.4. On 10/11/22, Tim Long of Barclays cut his price target to $155 from $169 and kept an ‘Equal Weight’ rating on Apple Inc. citing incremental currency headwinds and potential Services weakness.
Distillate Capital commented on Apple Inc. in its Q2 2022 investor letter,
“Apple was largest new purchase in the quarter, at a 2% weight. Apple underperformed the overall market last quarter,and given very minimal debt, this price weakness translated into a commensurate fall in its enterprise value. For stocks with higher debt levels, it takes a disproportionately bigger market cap drop to achieve the same valuation improvementand this is a key reason we avoid highly leveraged names where significant price weakness can be experienced during a revaluation process. Alongside this decline in EV for Apple, its estimated free cash flows have risen steadily throughout the year. This contrast between a falling enterprise value and rising free cash flow, which is highlighted in Figure 12, made the stock sufficiently better valued such that it entered the portfolio. While Apple’s valuation is now attractive enough to warrant inclusion in the portfolio, it still ranks in the bottom quartile of the portfolio’s holdings and so the stock’s initiating weight is capped at a 2%. This contrasts significantly with Apple’s near-7% position in the S&P 500 benchmark,and reflects both our preference to avoid too much concentration risk as well our goal of ensuring that the overall portfolio valuation is as attractive as possible while balancing characteristics of stability and low indebtedness.”
You can also take a look at 10 Biggest Industries In the US and 25 Most Famous People in the World.
Follow Insider Monkey on Twitter
Suggested articles:
- 15 Most Valuable British Companies
- Most Valuable Companies in History
- Top 10 High Dividend Stocks To Buy Now
This article is originally published at Insider Monkey.
