The Dow Jones Industrial Average is on a hot streak, rising each of the first nine days of May. According to Barron’s, only three of the index’s 30 components — Intel (NASDAQ:INTC), Disney (NYSE:DIS) and McDonald’s (NYSE:MCD) — dropped in that time. Meanwhile, Amgen (NYSE:AMGN), Caterpillar (NYSE:CAT) and Amazon (NASDAQ:AMZN) have all been on hot streaks in May. Conversely, 80% of the S&P 500 rose during the same time frame. Some of its key components, including CVS (NYSE:CVS) and Starbucks (NASDAQ:SBUX), have tumbled more than 10% in May. It appears that investors are starting to grow less thrilled with technology and AI for the time being. That trend is beneficial for the Dow, which is much less tech-oriented than the S&P 500. Specifically, 30% of the S&P 500’s components are in the tech sector versus only 19% of Dow stocks. For investors wanting to exploit the Dow’s new-found strength, here are the three best Dow stocks to buy in May.
American Express (AXP)
American Express (NYSE:AXP) is clearly continuing to benefit significantly from the strength of the upper-middle class and wealthy consumers. Adobe Analytics recently reported that online retail spending in America jumped 7% in the first four months of the year.
So it’s unsurprising that in the first quarter, American Express’ EPS soared 27% YOY to $3.33. Meanwhile, its top line advanced 12% YOY to $15.8 billion. Given the large increase of the company’s bottom line, its forward price-earnings ratio of 18.6 times is quite attractive.
All of these factors make American Express one of the best Dow stocks to buy in May.
Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) is getting a big lift from the improvements of the stock, credit and IPO markets, along with increased M&A activity. The firm will likely get a boost from the Fed’s determination to cut interest rates, as this will benefit nearly all of its operating markets.
As of last month, GS stock has been identified as one of the top American equities by Bank of America. Additionally, Argus raised its rating on the shares to “Buy,” citing the rejuvenation of the firm’s investment banking business. Argus expects Goldman’s investment banking unit to continue to deliver strong returns going forward. The huge investment bank’s underwriting business expanded last quarter, while M&A activity jumped nearly 20% last quarter industrywide YOY.
Indicating that the Street is warming up to GS stock, the shares have climbed almost 17% in the last month.
Amgen (AMGN)
Amgen CEO Robert Bradway recently reported that he was encouraged by the interim results of a Phase 2 trial of the company’s weight-loss drug, MariTide. Bradway noted that he was confident that the treatment would help patients. The firm did not release any Phase 2 data on the drug, but it’s expected to do so later this year. Some evidence indicates that MariTide helps patients keep weight off even after discontinuing the drug. That would be an important, key differentiator for MariTide compared to competing treatments. Additionally, MariTide is administered monthly, while the leading, currently available weight-loss drugs have to be taken weekly.
Investment bank William Blair upgraded Amgen to “Outperform” in the wake of the news. The bank thinks the drug can be a multi-blockbuster and believes that it can reduce patients’ weight by 20% or more.
On the date of publication, Larry Ramer held GS bonds and long positions in INTC and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
