15 Best Dow Stocks To Buy Now

Published on December 29, 2023 at 8:36 am by Usman Kabir in Hedge Funds, News

In this article, we discuss the 15 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.

The Dow Jones Industrial Average, also known as Dow Jones or Dow, is one of the oldest and most followed equity indexes of the United States stock market. It was founded more than a century ago in 1896 by Charles Dow, the editor of the Wall Street Journal at the time. Originally, the Dow comprised just twelve companies that were commodity-focused. In 1928, the index was expanded to 30 stocks. It is a price-weighted index, unlike other market indexes which weigh businesses on their market capitalizations of businesses.

In a stock market filled with uncertainty, investments in the Dow are great for stability and defense. However, in a bull market, the Dow cannot always compete with the growth of other indexes that are more tech heavy. For example, so far this year, the market has responded positively to steady interest rates and slowing inflation. The benchmark S&P 500 has returned more than 24% to investors year-to-date. The NASDAQ Composite has outplaced even the S&P 500, returning over 44% to investors. The Dow has returned around 13%.

However, these numbers do not tell the whole story. The Dow has actually shined for value investors over the long term, unlike the S&P 500 and the NASDAQ Composite. For example, despite stellar returns in 2023, the S&P 500 is still slightly off the peak it achieved in early 2022. The NASDAQ is actually down by 5%. The Dow sits handsomely above both these indexes with returns of around 3% during this time span. Stocks on the Dow often lag behind the overall market during bull periods but are resilient against sell-offs during recessions.

Some of the top Dow stocks to buy now include Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and UnitedHealth Group Incorporated (NYSE:UNH). These firms have established product lines and steady revenues, a quality that all Dow stocks are famous for. Andrew Witty, the CEO of UnitedHealth Group Incorporated (NYSE:UNH), recently highlighted during the third quarter earnings call that the firm was focused on delivering well-balanced and durable growth for investors.

“As a direct result of mission-driven focus, this year, we’ll serve even more people more comprehensively than anticipated in the outlook we offered at the end of 2022. By the close of this year, we will serve nearly 900,000 additional patients under value-based care arrangements at Optum Health, almost 1 million new consumers across UnitedHealthcare’s Medicare Advantage offerings, and a total more than 1.5 billion scripts to the people who rely on Optum Rx. Based on this performance, we’re strengthening our 2023 adjusted earnings outlook to a range of $24.85 to $25 per share. The confidence we have in our sustained long-term growth outlook is exemplified by the 14% third-quarter revenue increase we reported this morning, more than $11 billion above last year.

The sources of this growth will drive many more years of strong performance. Value-based care is the centerpiece of our long-term strategy, precisely because it delivers on the promise of high-quality clinical outcomes and experiences at lower cost than traditional models. This year, we expect Optum Health will serve more than 4 million people in fully accountable relationships, almost twice as many people as we served just two years ago. Many of these patients have serious health challenges, few economic resources and until now, often had limited access to care or the type of care they truly need.”

Our Methodology

These were picked from the Dow Jones Industrial Average and ranked by hedge fund sentiment towards each stock. The analyst ratings 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 the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each company. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

A close-up of a stock market ticker displaying the company’s stocks.

Best Dow Stocks To Buy Now

15. The Coca-Cola Company (NYSE:KO)

Number of Hedge Fund Holders: 57

The Coca-Cola Company (NYSE:KO) is a beverage company that manufactures, markets, and sells various non-alcoholic beverages worldwide. On December 13, investment advisory Citi maintained a Buy rating on The Coca-Cola Company (NYSE:KO) stock and raised the price target to $67 from $65.

Among the hedge funds being tracked by Insider Monkey, Omaha, Nebraska-based firm Berkshire Hathaway is a leading shareholder in The Coca-Cola Company (NYSE:KO) with 400 million shares worth more than $22 billion.

Just like Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and UnitedHealth Group Incorporated (NYSE:UNH), The Coca-Cola Company (NYSE:KO) is one of the best Dow stocks to buy now.

In its Q3 2023 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and The Coca-Cola Company (NYSE:KO) was one of them. Here is what the fund said:

“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, The Coca-Cola Company (NYSE:KO) trades at ~30x P/E despite having the same earnings as 10 years ago.

Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.

I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Coca-Cola is facing disruption risk from consumers shifting to new, heathier beverage brands.

But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.”

Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”

14. Honeywell International Inc. (NASDAQ:HON)

Number of Hedge Fund Holders: 60

Honeywell International Inc. (NASDAQ:HON) operates as a diversified technology and manufacturing company worldwide. On December 11, investment advisory Bank of America maintained a Buy rating on Honeywell International Inc. (NASDAQ:HON) stock and lowered the price target to $250 from $265.

At the end of the third quarter of 2023, 60 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Honeywell International Inc. (NASDAQ:HON), compared to 61 in the previous quarter worth $2.5 billion.

13. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 61

Verizon Communications Inc. (NYSE:VZ) is a New York-based multinational telecommunication firm. On December 13, investment advisory Citi maintained a Buy rating on Verizon Communications Inc. (NYSE:VZ) stock and raised the price target to $42 from $40.

Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in Verizon Communications Inc. (NYSE:VZ) with 6.7 million shares worth more than $217 million.

12. NIKE, Inc. (NYSE:NKE)

Number of Hedge Fund Holders: 69

NIKE, Inc. (NYSE:NKE) markets athletic footwear and apparel. On November 16, Truist analyst Joseph Civello initiated coverage of NIKE, Inc. (NYSE:NKE) stock with a Hold rating and a price target of $108.

Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in NIKE, Inc. (NYSE:NKE) with 6.7 million shares worth more than $640 million.

In its Q2 2023 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:

“Athletic footwear and apparel company NIKE, Inc. (NYSE:NKE), also a beneficiary of pandemic pull-forward demand, lagged primarily around fears about consumer resilience and potential pressure on Nike’s business in a macroeconomic slowdown.”

11. The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 75

The Procter & Gamble Company (NYSE:PG) provides branded consumer packaged goods worldwide. On November 13, investment advisory Jefferies initiated coverage of The Procter & Gamble Company (NYSE:PG) stock with a Buy rating and a price target of $177.

At the end of the third quarter of 2023, 75 hedge funds in the database of Insider Monkey held stakes worth $5.7 billion in The Procter & Gamble Company (NYSE:PG), compared to 74 in the preceding quarter worth $5.3 billion.

In its Q3 2023 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and The Procter & Gamble Company (NYSE:PG) was one of them. Here is what the fund said:

“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, Coca-Cola trades at ~30x P/E despite having the same earnings as 10 years ago. The Procter & Gamble Company (NYSE:PG) is likewise at ~27x P/E, with earnings only ~12% higher than a decade ago (or a ~1% annual growth rate). This equates to a mere 3.3% – 3.7% earnings yield.

Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.

I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Proctor & Gamble is facing disruption from direct-to-consumer brands that offer their products for a fraction of the price.

But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.

Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”

10. The Home Depot, Inc. (NYSE:HD)

Number of Hedge Fund Holders: 76

The Home Depot, Inc. (NYSE:HD) is a home improvement retailer. On December 8, Truist analyst Scot Ciccarelli maintained a Buy rating on The Home Depot, Inc. (NYSE:HD) stock and raised the price target to $356 from $340.

Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm Citadel Investment Group is a leading shareholder in The Home Depot, Inc. (NYSE:HD) with 1.9 million shares worth more than $591 million.

In its Q3 2023 investor letter, Madison Investments, an asset management firm, highlighted a few stocks and The Home Depot, Inc. (NYSE:HD) was one of them. Here is what the fund said:

“We updated the sustainable scorecard for The Home Depot, Inc. (NYSE:HD) and maintained our Above Average Rating. Home Depot’s corporate responsibilities focus on three pillars: focusing on its people, operating sustainably, and strengthening its communities. Home Depot continues to focus on its people by investing billions of dollars in wages, training, and benefit enhancement. The company’s environmental targets include the reduction of direct (Scope 1) and indirect (Scope 2) emissions by 42% by 2030, as well as a 25% decrease in emissions related to the “use of products sold” (Scope 3 emissions). Both targets are from a 2020 base year.

Separately, The Home Depot Foundation announced that it will invest $6 million in skilled trades training to address the 400,000 job openings across the construction industry. This grant launches a new program that will provide free, skilled trades training and scholarships for veterans and military families.”

9. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 80

Walmart Inc. (NYSE:WMT) operates as a retail firm. On November 14, investment advisory Jefferies maintained a Buy rating on Walmart Inc. (NYSE:WMT) stock and raised the price target to $195 from $190.

Among the hedge funds being tracked by Insider Monkey, Texas-based investment firm Fisher Asset Management is a leading shareholder in Walmart Inc. (NYSE:WMT) with 9.1 million shares worth more than $1.4 billion.

8. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 84

Johnson & Johnson (NYSE:JNJ) makes and sells healthcare products. On December 12, investment advisory Morgan Stanley maintained an Equal Weight rating on Johnson & Johnson (NYSE:JNJ) stock and lowered the price target to $171 from $170.

At the end of the third quarter of 2023, 84 hedge funds in the database of Insider Monkey held stakes worth $4.1 billion in Johnson & Johnson (NYSE:JNJ), compared to 88 in the previous quarter worth $4 billion.

7. Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 85

Merck & Co., Inc. (NYSE:MRK) operates as a healthcare company worldwide. On December 12, investment advisory Morgan Stanley maintained an Equal Weight rating on Merck & Co., Inc. (NYSE:MRK) stock and lowered the price target to $116 from $118.

At the end of the third quarter of 2023, 85 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Merck & Co., Inc. (NYSE:MRK), compared to 78 in the previous quarter worth $2.6 billion.

6. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holders: 89

The Walt Disney Company (NYSE:DIS) operates as an entertainment company worldwide. On December 12, investment advisory Morgan Stanley maintained an Overweight rating on The Walt Disney Company (NYSE:DIS) stock and raised the price target to $110 from $105.

Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in The Walt Disney Company (NYSE:DIS) with 11 million shares worth more than $929 million.

Along with Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and UnitedHealth Group Incorporated (NYSE:UNH), The Walt Disney Company (NYSE:DIS) is one of the best Dow stocks to buy now.

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