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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4. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 154
Salesforce, Inc. (NYSE:CRM) is a California-based company that offers Customer Relationship Management (CRM) technology worldwide. Hedge fund sentiment was positive toward Salesforce, Inc. (NYSE:CRM) in Q1 as hedge funds with investments in the stock were 154 in the quarter, with positions worth $16.62 billion. This is compared to 131 funds with positions worth $14.98 billion in the preceding quarter. Fisher Asset Management is the biggest shareholder in the company as of March 31 and has a position worth $3.265 billion.
As of May 23, Salesforce, Inc. (NYSE:CRM) has a consensus Buy rating among 28 Wall Street analysts, and its average price target of $338.45 implies an upside of 21.78% from current levels.
Vulcan Value Partners commented on Salesforce, Inc. (NYSE:CRM) in its first quarter 2024 investor letter:
“Salesforce, Inc. (NYSE:CRM) is the world’s leading SaaS vendor for customer relationship management (CRM) and salesforce automation (SFA) software. Free cash flow for FY2024 came in significantly better than expected, and Salesforce guided free cash flow growth to again be very strong in FY2025. The company also pointed to several things with the potential to accelerate future growth including pricing, artificial intelligence, and a better buying environment.”
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3. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 166
Visa Inc. (NYSE:V) is one of the biggest payment technology companies in the world. On May 13, Piper Sandler initiated coverage of Visa Inc. (NYSE:V) with an Overweight rating and a $322 price target.
On May 15, Visa Inc. (NYSE:V) introduced new products and services at the annual Visa Payments Forum in San Francisco. The new offerings include the reinvention of the card product to move with ease between payment methods called Visa Flexible Credential, added features to the company’s tap-to-pay service known as Tap to Everything, new security features called Visa Payment Passkey Service and Visa Protect for A2A Payments, and lastly, its new technology of Pay by Bank for innovating account-to-account (A2A) payments experiences.
In the first quarter, 166 hedge funds held positions in Visa Inc. (NYSE:V) and their stakes amounted to $27.167 billion. As of Q1, TCI Fund Management is the most significant shareholder in the company and has a position worth $4.7 billion. The company is one of the best Dow stocks to buy according to hedge funds.
Wedgewood Partners stated the following regarding Visa Inc. (NYSE:V) in its first quarter 2024 investor letter:
“Visa Inc. (NYSE:V) stock posted a small negative drop during the quarter. In the first quarter, the Company grew earnings per share +11% as payment volume growth was up +8% and cross-border payment grew a solid +16%, adjusted for currency. Beyond their consistent growth and execution, recent regulatory trends have caught considerable investor attention. The Company’s networks and value-added services drive enough economic value to bank customers and retailers that the addressable market for payments should continue growing at a healthy rate for many more years, regardless of recent regulatory changes. Visa’s value-added services can be extended to less-sophisticated, emerging non-Visa networks to help grow the overall payment ecosystem that make up the vast global payment addressable market. For example, not long after debit interchange rates were regulated last decade, Visa began an aggressive push to allow non-bank 2inancial institutions access to Visa’s networks, which helped drive more interchange volume to banks and offset lower interchange rates. This was a key element that spawned the massive “Fintech” industry that exists today. We continue to expect Visa’s scale and breadth of service offerings will help them drive attractive growth at stellar margins along with the overall payments’ ecosystem.”
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2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 293
Microsoft Corporation (NASDAQ:MSFT) is a world-renowned developer and provider of software, services, devices, and solutions. Microsoft Corporation (NASDAQ:MSFT) was held by 293 hedge funds in the first quarter and the stakes amounted to $88.16 billion. Bill & Melinda Gates Foundation Trust is the top shareholder of the company and has a position worth $15.356 billion as of the first quarter, representing 33.48% of the portfolio.
On May 22, Microsoft Corporation (NASDAQ:MSFT) announced that, in collaboration with AI firm G42, it will build a data center in Kenya worth $1 billion. Under the partnership, the companies will work with local firms for the development and research of a local language AI model, construct an East Africa Innovation Lab, and work with the local government.
Vulcan Value Partners stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its first quarter 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software company with a broad range of offerings including Microsoft office, gaming, Azure cloud computing, LinkedIn, and more. It was a material contributor for the second consecutive quarter, and we discussed it at length in last quarter’s letter. The company continues to execute well.”
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1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) is a retailer of consumer products, advertising, and subscription services. The stock tops our list of the best Dow stocks to buy according to hedge funds. As of May 23, it is up by 57.46% over the last twelve months.
In September 2023, the company revealed its plans for a generative AI-powered version of Alexa. On May 22, CNBC reported that Amazon.com, Inc. (NASDAQ:AMZN) is set to unveil a conversational artificial intelligence-powered version of its Alexa in 2024. The update to the voice assistant comes at the heels of the company’s rivals’ chatbot success. While the corporation has not set the price of the new version, it has disclosed that it will charge a monthly subscription fee. In its annual shareholder letter published in April, the company stated:
“We’re building a substantial number of GenAI applications across every Amazon consumer business. These range from Rufus (our new, AI-powered shopping assistant), to an even more intelligent and capable Alexa, to advertising capabilities (making it simple with natural language prompts to generate, customize, and edit high-quality images, advertising copy, and videos), to customer and seller service productivity apps, to dozens of others.”
As reported by Bloomberg on May 22, Amazon.com, Inc. (NASDAQ:AMZN) is planning on expanding its cloud business in Europe through an investment of €15.7 billion ($17 billion) in Spain. According to the company, the new investment is an extension of its previously announced €2.5 billion investment plan in Spain unveiled in 2021.
In the first quarter, 302 hedge funds held positions in Amazon.com, Inc. (NASDAQ:AMZN) worth $60.37 billion. As of March 31, Fisher Asset Management is the most dominant shareholder in the company and has a position worth $7.678 billion.
Vulcan Value Partners stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its first quarter 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a dominant, world class company with powerful secular tailwinds in place including its ecommerce penetration, digital advertising growth, and the cloud transition. Amazon reported strong results during the quarter. Losses in the Core Retail business significantly narrowed. Amazon reduced its cost to serve on a per unit basis for the first time since 2018 as the company’s recent regionalization efforts continue to bear fruit.”
If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure. None.
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