On May 17, the Dow Jones Industrial Average (^DJI) closed out at record highs, crossing the 40,000 milestone for the first time ever. However, this was a little shortlived as the index is down nearly 2.35% since that day, as of May 23. While the index seems to be underperforming the S&P 500 and NASDAQ, it doesn’t fully cover the market conditions like the latter two. Nevertheless, the S&P 500 and NASDAQ’s performance is mostly dominated by mega-cap tech stocks, especially NVIDIA Corporation (NASDAQ:NVDA), which isn’t a part of the Dow Jones index.
Dow Bucks Trend, Falls Despite NVIDIA’s Upbeat News
NVIDIA Corporation (NASDAQ:NVDA) reported its first-quarter 2025 earnings on May 22. Despite record numbers, the market failed to rally along with the company. This includes the Dow Jones index as all 30 of its components ended the day in red on May 23, including some of the best Dow stocks that are direct AI beneficiaries such as Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT).
In its Q1 2025, NVIDIA Corporation (NASDAQ:NVDA) generated a revenue of $26.04 billion, which was up over 262% year-over-year and surprised the consensus estimates by $1.45 billion. The company reported earnings per share (EPS) of $6.12, an over 460% increase year-over-year. Moreover, NVIDIA Corporation (NASDAQ:NVDA) announced a 10 for 1 split, which will take effect on June 7. For the second quarter, NVIDIA Corporation (NASDAQ:NVDA) expects a revenue of $28.0 billion. The company predicts that the automotive sector will emerge as the leading enterprise vertical within its Data Center division in the current year. At its Q1 2025 earnings call, the company’s CFO, Colette Kress said:
“Leading LLM companies such as OpenAI, Adept, Anthropic, Character.AI, Cohere, Databricks, DeepMind, Meta, Mistral, xAI, and many others are building on NVIDIA AI in the cloud. Enterprises drove strong sequential growth in Data Center this quarter. We supported Tesla’s expansion of their training AI cluster to 35,000 H100 GPUs. Their use of NVIDIA AI infrastructure paved the way for the breakthrough performance of FSD Version 12, their latest autonomous driving software based on Vision. Video Transformers, while consuming significantly more computing, are enabling dramatically better autonomous driving capabilities and propelling significant growth for NVIDIA AI infrastructure across the automotive industry. We expect automotive to be our largest enterprise vertical within Data Center this year, driving a multibillion revenue opportunity across on-prem and cloud consumption.”
After reporting stellar earnings, NVIDIA Corporation’s (NASDAQ:NVDA) share price crossed the $1000 mark for the first time. Nevertheless, the company failed to rally the market with it as the S&P 500 was down almost 0.75% during the same period, the NASDAQ-composite recorded a decline of 0.4% and the Dow Jones index experienced its worst day in almost 14 months declining by over 1.5%.
Jim Cramer: Celebrating the 40K Milestone
Even though the Dow Jones index is underperforming other indices in 2024, CNBC’s Mad Money host, Jim Cramer still believes in celebrating its 40,000 points milestone. On May 20, he urged the investors to appreciate the market’s progress despite past downturns. Cramer emphasized that while the Dow does not fully represent the market like the S&P 500, it reflects a team effort across various sectors, which should have been demolished by the challenges they faced, such as the Federal Reserve’s rate hikes, inflation, and supply chain issues during the Covid-19 pandemic, yet they thrived. He acknowledged the potential for market declines but stressed the importance of recognizing the achievements of these stocks and companies over the years.
Cramer mentioned that he started as a summer associate in 1983 at Goldman Sachs when the Dow was just over 1000 points, the market was full of bears in multiple sectors but the stock market “left them behind.” He added that the index going from 1000 to 40,000 shows the strength of these companies and that they “will make you money.”
In light of these comments, some of the best Dow stocks to buy now according to hedge funds include Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Visa Inc. (NYSE:V). You can also take a look at the 15 Best S&P 500 Dividend Stocks To Buy Now.
8 Best Dow Stocks To Buy According to Hedge Funds
Our Methodology
For this article, out of the 30 components of the Dow Jones index, we narrowed down our list to 8 stocks that were most widely held by institutional investors as of the first quarter of 2024. The hedge fund data was taken from Insider Monkey’s database of 919 elite hedge funds. 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.
8 Best Dow Stocks To Buy According to Hedge Funds
8. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 95
Merck & Co., Inc. (NYSE:MRK) is a New Jersey-based healthcare company that operates through Pharmaceutical and Animal Health segments. In Q1, 95 hedge funds had investments in Merck & Co., Inc. (NYSE:MRK), with positions worth $8.11 billion. With 13.87 million shares worth $1.83 billion, Fisher Asset Management is the most dominant shareholder in the company, as of March 31.
On April 25, Merck & Co., Inc. (NYSE:MRK) reported Q1 earnings. The non-GAAP EPS was $2.07, which topped the estimates by $0.15. The revenue grew 9% year-over-year to $15.8 billion and beat the estimates by $600 million. For its full-year 2024 financial outlook, the company raised and narrowed its expected sales range to $63.1 billion and $64.3 billion, compared to the previous $62.7 to $64.2 billion range. Additionally, it expects full-year non-GAAP EPS to be between $8.53 and $8.65, compared to the prior $8.44 to $8.59 guidance.
Baron Health Care Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its first quarter 2024 investor letter:
“Global pharmaceutical company Merck & Co., Inc. (NYSE:MRK), Inc. contributed on the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”
7. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 104
UnitedHealth Group Incorporated (NYSE:UNH) is a diversified healthcare company that provides various services and products, including but not limited to, Medicaid plans, consumer-oriented health benefit plans and services, care delivery, software and information products, and pharmacy care services and programs.
On May 15, Bank of America Securities analyst Kevin Fischbeck reiterated a Buy rating on UnitedHealth Group Incorporated (NYSE:UNH) with a price target of $675.00. He cited several reasons for the rating, including the company’s effort to grow its long-term EPS to 13-16%, strong value-based care model, and adaptable business strategy. The company’s effective cost management and ability to maintain target margins were highlighted. The analyst expects the company’s continued growth with stable margins due to its disciplined pricing and sustainable benefit design.
In the first quarter, 104 hedge funds had stakes in UnitedHealth Group Incorporated (NYSE:UNH), with total positions worth $8.66 billion. As of March 31, Fisher Asset Management is the most prominent shareholder in the company with a stake worth $1.47 billion.
Baron Funds stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its first quarter 2024 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading health insurance company that operates across four segments: United Healthcare, Optum Health, OptumInsight, and OptumRX. Shares fell alongside other managed care organizations (MCOs) due to patient utilization of Medicare Advantage (MA) that was higher than consensus forecasts, raising concerns that MCOs had mispriced 2024 bids and could suffer margin compression as a result. In addition, the industry is facing headwinds from MA reimbursement cuts and Star Rating changes. While management said higher cost trends are mostly transitory and reflected in its bidding, and 2024 guidance was roughly in line with consensus, investors took a more cautious wait-and-see approach. We believe UnitedHealth should remain a core portfolio holding, as it is a way to play positive demographic, population health, and value-based reimbursement trends. Despite its size, we think the company should be able to grow earnings consistent with its 13% to 16% long-term EPS annual target, the fastest among major MCOs.”
6. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 112
JPMorgan Chase & Co. (NYSE:JPM) is a financial services company. It runs through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. JPMorgan Chase & Co. (NYSE:JPM) was part of 112 hedge funds’ portfolios in the first quarter with a total stake value of $8.4 billion. Fisher Asset Management is the largest shareholder in the company and has a position worth $2.45 billion as of the first quarter. The firm has held shares of the company since the fourth quarter of 2010, with the exception of the second quarter of 2012 and the third quarter of 2017.
On May 20, JPMorgan Chase & Co. (NYSE:JPM) announced a quarterly dividend of $1.15, payable by July 31 to the shareholders of record on July 5. As of May 23, the stock has a dividend yield of 2.34%.
Carillon Tower Advisers stated the following regarding JPMorgan Chase & Co. (NYSE:JPM) in its fourth quarter 2023 investor letter:
“PNC Financial and JPMorgan Chase & Co. (NYSE:JPM) performed well due to more benign inflation data, which the market likely interpreted as a sign that a recession is now less likely to occur. Recall that historically speaking, banks are hyper-cyclical stocks and typically will trade lower if investors foresee a recession, because recessions tend to trigger loan losses.”
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 150
Apple Inc. (NASDAQ:AAPL) is a known developer and manufacturer of smartphones, personal computers, tablets, wearables, and accessories.
On May 2, Apple Inc. (NASDAQ:AAPL) announced second-quarter earnings. The GAAP EPS was $1.53, which beat the market consensus by $0.03. The revenue topped the estimates by $190 million at $90.8 billion. Furthermore, the company announced an additional $110 billion program to repurchase its common stock.
At a stake value of $161.38 billion, 150 hedge funds held positions in Apple Inc. (NASDAQ:AAPL) in the first quarter. Warren Buffett’s Berkshire Hathaway is the top investor in the company and has a position worth $135.361 billion as of Q1.
The London Company stated the following regarding Apple Inc. (NASDAQ:AAPL) in its first quarter 2024 investor letter:
“Reduced: Apple Inc. (NASDAQ:AAPL) – Reduction reflects strong performance in 2023 and resulting elevated valuation. We believe the outlook for AAPL remains strong with slow growth in iPhone (now #1 global market share) and faster growth in the higher margin services business. R&D will continue to drive new products and AAPL now has over 2 billion installed devices around the world. While near term earnings expectations appear reasonable, we felt it was prudent to reduce the position size based on risks to valuation.”
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