With the Dow Jones Industrial Average down 2% so far over the week of May 20, all of the Dow 30 stocks have taken a dip. For the average layman, this means the broader stock market contracted this week, but most professional investors would defer to the S&P 500 which is down an average of 0.74% in the same timeframe. In either case, the bubble-like growth of the last few weeks has cooled, as retail and institutional investors alike gauge their comfort with current stock prices. This could mean that there are some Dow stocks to buy on the dip before another potential rally in June, before major Q2 earnings reports.
While some outlets are stating the market is strong and bearish concerns are unfounded, other analysts assert that the market is objectively overvalued due to hype trains like artificial intelligence (AI). From my perspective, a generous correction is due, simply because the U.S. economy runs on consumption, yet its average consumers are running out of fiat currency to consume with. Furthermore, there’s a good chance all of the stocks in the Dow 30 have a long way to go down in the event of a crash, so time your investments wisely.
There’s only so much money to go around.
Dow Stocks to Buy on the Dip: Cisco Systems (CSCO)
So far, the AI bubble has slowed in growth, with many investors recognizing that not every business has an application for AI. In the case of Cisco Systems (NASDAQ:CSCO) the company had some well-founded claims for its AI-driven rallies in Fall 2023 but has been on the downtrend ever since. Its earning reports have been in the red lately, further exacerbating fears of a further dip.
However, it’s important to recognize the reality of Cisco’s business model and strengths. At its core, Cisco is a network provider, and the company cannot grow unless global development allows it to. In other words, Cisco goes through periods of waiting for new customers to become available.
That’s because not every country’s economy or business is strong enough to justify working with Cisco. Not everyone needs elite cybersecurity or cloud services, at least not yet. Once the opportunities open back up, Cisco will likely be on the up and up again.
Intel (INTC)
I recently recommended that investors avoid Intel (NASDAQ:INTC) back at the end of April. Since then, the stock has dipped another generous 13%, confirming that sell rating. From the lens of which Dow stocks to buy on the dip, however, such a low-priced Intel is starting to look more interesting.
A big issue for Intel has been the recent shift in architectural standards for computer chips. Ever since Apple (NASDAQ:AAPL) went its own way for building central processors using ARM architecture, designed by ARM Holdings (NASDAQ:ARM), Intel’s x86 architecture offerings have struggled to keep up in computing speeds versus heat and power efficiency.
However, Intel’s ARM-based chip offerings are still in the works and could spell a long-term win for the company once software support for ARM architectures broadens, and most developers still code operating systems and applications for x86 chips.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) has shown extensively lackluster performance over the last five years, growing only 7.81% since May 2019. Moreover, due to controversies around the safety and efficacy of its COVID-19 vaccine, investors missed out on the surge in value its competitor saw. Yet, that may have been for the best in terms of long-term returns, as it avoided a volatile price gouge and sell-off post-pandemic.
However, the market dynamics and overall business model of JNJ have changed significantly since its $40 billion split-off of Kenvue (NYSE:KVUE). Today, the company is refocused as a pure-play in pharmaceuticals and biotechnology, meaning it will take some time for its price to recover.
Thus, the current dip represents the early trading price of a newly specialized company, despite JNJ’s long-running blue-chip and Dow status. However, JNJ is likely to be disproportionately affected by a large market crash, so should one occur soon, beware of the risk.
On the date of publication, Viktor Zarev 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.
