7 Dow Stocks to Buy as Recession Fears Roll Back
With the Dow Jones soaring on fading recession fears, its holdings are also becoming far more attractive, too. In fact, here are seven of the top Dow stocks to buy immediately.
Dow Stocks to Buy: Merck (MRK)
From a pure potential perspective, Merck (NYSE:MRK) stock offers a lot to investors. Past returns might not be an absolute indicator of future performance. However, they tend to be a reasonable indicator given that strong firms usually tend to continue to do well. Merck is particularly attractive for that reason. Over the past 10 years, its stock has returned 13.02% annually. That’s roughly 149% better than the average stock during the same period.
Further, Merck continues to offer upside currently. Wall Street analysts believe there’s about 20% upside in MRK hares beyond their current price. Not convinced yet? Well, it also includes a dividend that hasn’t been reduced since 1985 that adds an additional 2.75% return to its shares.
Revenues have slowed slightly of late at the firm. However, Merck has grown faster than every other large-cap pharmaceutical firm in the U.S. over the past 3 years with the exception of Pfizer (NYSE:PFE). Strip out Pfizer’s extraordinary Covid-19 windfall and Marck may have been the outright leader.
Dow Stocks to Buy: Apple (AAPL)
Apple (NASDAQ:AAPL) has contributed heavily to the 2023 turnaround in markets. Better, investors expect Apple shares to hold value due to the ubiquity of its products and an expectation it will continue to thrive.
That notion is primarily related to the continued strength of iPhone sales. Apple sold $51.33 billion worth of iPhones during the most recent quarter. That was a record for the company and is part of the reason Apple shares continue to surge even as overall revenues continue to sag. The explanation is simple: Investors understand that Apple has figured out how to create and market products that have such mass appeal that quarterly fluctuations are hardly a concern.
The company can find revenues elsewhere in the short term as it is doing with services. However, the real reason to buy in now is that Apple is on the cusp of its first new product release in a decade with Apple Vision Pro and new markets for legacy products, particularly India.
Dow Stocks to Buy: JPMorgan (JPM)
JPMorgan (NYSE:JPM) stock continues to look better and better in the aftermath of the banking crisis. It is now old news that JPMorgan took over First Republic, acting as an anchor to the U.S. banking system.
However, that notion is worth examining again because it means JPMorgan has extended its dominant position in the U.S. banking sector. And when big firms get bigger that’s generally a reasonable time to consider investing. JPMorgan is certainly bigger now than it was a year ago so it is the tie to invest. Revenues increased by 34%, reaching $41.3 billion. The bank was able to derive $14.47 billion in net income from that which represented a 67% increase year-over-year.
The company gained First Republic’s wealth banking business from the takeover. That will allow the company to cater better to wealthy coastal clientele. Meanwhile, JPMorgan is currently also benefiting from surging interest income as it lends more through credit cards to cash-strapped Americans unwilling or unable to cut back on spending.
Honeywell (HON)
Honeywell (NYSE:HON) is perhaps not the most exciting stock on this list but it does offer investors a reasonable amount of upside potential over the next few years. The firm serves a wide swath of the economy and firms through industrial software.
There’s a lot of potential in that area for the company especially given that Honeywell is deeply connected to the building technologies sector. The opportunity to drive revenues from the emerging IoT opportunity gives Honeywell strong future prospects and growth paths.
However, Honeywell hasn’t been growing much lately. Its 3-year 1.1% revenue growth rate of 1.1% is worse than average for its sector. Honeywell is expected to grow faster than that this year and next. That should correlate to increasing share prices as markets will appreciate the growth and Honeywell’s IoT potential. Investors can also expect rising earnings as top-line results improve in 2023 and through 2024. It is a solid stock worth owning over that period.
Nike (NKE)
The bull case for investing in Nike (NYSE:NKE) stock is fairly straightforward right now. For those who believe that the brand’s power matters, there’s a lot of upside in initiating a position at this moment.
Nike is the largest sports brand by market capitalization. It is far ahead of the next closest competitor and even farther ahead of Adidas, the nearest shoe seller. That ranking does not look to be changing any time soon and that suggests that as Nike works through its current problems it will emerge more valuable on the other side due to its position.
Nike products continue to sell well with sales increasing by 8% during the most recent quarter. However, the firm has been impacted by a combination of higher costs and markdowns that sent net income falling by 28% during the same timeframe.
It should be as simple as that for investors: If you believe Nike is capable of working through the kinks and ironing out its operations it’s a great time to buy given that sales continue to grow.
Microsoft (MSFT)
The outlook for an already strong Microsoft (NASDAQ:MSFT) stock is getting stronger. Microsoft has done extraordinarily well in 2023 due primarily to AI. The company invested heavily in to ChatGPT and emerged as the clear leader when generative AI exploded earlier this year.
At that time, Microsoft’s outlook improved because the integration of AI into its products expanded its overall market. That wasn’t the end, though. More recently, Microsoft announced aggressive pricing for some of its AI products. The announcement leads to the possibility of even higher revenues than previously expected making MSFT shares even more attractive.
It’s difficult to ignore Microsft, frankly. It has Microsft 365 office products, Azure cloud, a large stake in OpenAI, and a track record of winning for such a long time that it almost gets ignored when it continues to win. On top of that, Microsoft gets to merge with Activision Blizzard (NASDAQ:ATVI) improving its gaming industry standing and carving a deeper path for dominance in that burgeoning sector.
Cisco (CSCO)
I believe Cisco (NASDAQ:CSCO) stock should appeal to a certain type of tech investor currently. The company focuses on networking and things like internet protocol products and services. It is a leader in its sector but isn’t considered among the tech giants by any means. That’s where I want to start regarding Cisco as an opportunity.
At some point, tech investors will diversify away from the magnificent 7 and into less volatile tech. With a beta of 0.99, Cisco is among the least volatile tech stocks available. It’s a safer bet on tech growth and one that investors worried about ongoing concentration in the tech sector might consider. If you want to diversify out of those mega names, Cisco is a reasonable choice.
It will likely grow by 10% this year. That’s not bad at all. It isn’t Nvidia (NASDAQ:NVDA) style explosive growth but the flipside is that Cisco offers a dividend yielding 3.04% currently. That’s quite high within the tech sector and serves to make Cisco’s returns significantly higher overall.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
