In May, Barron’s published an article titled Week’s Best: Dow 50,000 or Bust? At the time, the Dow Jones Industrial Average hit 40,000, a record for 30 of America’s oldest companies. That got me thinking about Dow stocks to buy.
Of the three major indexes, the Dow is the worst performer in 2024, up less than 3% on the year, compared to 12.8% for the S&P 500 and 14.8% for the Nasdaq 100. However, it got closer over the past year but widened again over the past five years.
This suggests that you’ll need to be very selective about which of the 30 Dow stocks you buy, given their failure to deliver in the near and long term.
Looking at Finviz.com’s performance data for the Dow 30, just nine stocks are in positive territory for all periods: five days, one month, the latest quarter, six months, 52 weeks, and year-to-date (YTD).
Here are the three best to buy now.
Dow Stocks to Buy: Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) stock is up nearly 19% YTD and 44% over the past year.
It’s hard to believe I would choose an investment bank as one of my three Dow stocks. However, the company’s Q1 2024 results demonstrate the overall business performance.
In the first quarter, its revenues were 16% higher to $14.21 billion, with Global Banking & Markets growing by 15% to $9.73 billion, or 68% of its overall revenue. Its investment banking fees accounted for 21% of the segment’s quarterly revenue. The segment’s net earnings were $3.53 billion, 18% higher year-over-year (YOY).
An example of the kinds of businesses that Goldman Sachs is involved in is Apex, the company’s family office subsidiary, which is part of its Asset & Wealth Management segment. Thanks to the success of Wrexham AFC, the Welsh soccer club actors Ryan Reynolds and Rob McElhenney bought for $2.5 million in 2020, family offices are all over sports investments.
The discussion around the broader sports ecosystem is continuing to be a big area of focus for family offices,” Fortune quoted Anushka Gupta, the head of Apex.
GS continues to have its fingers in many pies. Eighteen of the 26 analysts who cover GS stock rate it a Buy.
Walmart (WMT)
Walmart (NYSE:WMT) stock is up more than 26% YTD and 34% over the past year. Finviz.com says it is the seventh-best Dow stock over the past year.
You know business must be good at Walmart when it ratchets up the perks and payouts to employees. On June 5, Walmart U.S. CEO John Furner and Chief Talent Officer Lo Stomski announced new investments in its employees, the discount retailer’s most important asset.
“For Walmart to be the best place to shop, we also need it to be the best place to work. That idea is the North Star of our journey to build a better company for our associates,” stated Walmart’s press release.
Somebody from Walmart management must have spied on a Costco (NASDAQ:COST) management meeting. Costco has been treating its employees well since the beginning, which is why Charlie Munger loved it so much.
The reality is that Walmart’s already upped its investment in its employees — since 2019, it’s raised its average U.S. hourly wage to nearly $18, a 30% increase over the past five years — but the four latest moves take it up a notch.
However, the most shocking is the introduction of bonuses for its hourly full-time and part-time staff, the first ever from Walmart. Depending on tenure, the annual bonus could reach $1,000 annually.
That might not seem like much to big whigs on Wall Street, but it will make a difference to front-line employees.
Perhaps after many years of failing to do so, Walmart is finally trying to live up to Sam Walton’s vision for the company.
That’s a good thing if you own WMT stock.
3M (MMM)
Last on the list of Dow stocks to buy is 3M (NYSE:MMM). Its stock is up nearly 8% YTD and 21% over the past year.
The industrial conglomerate is most certainly the contrarian play of the three. However, considering how much its business has changed in the past few years, it becomes less contrarian than you might think.
3M is traditionally known for consumer products such as Scotch tape and Post-it Notes. However, some of its other businesses, such as industrial adhesives and reflective tape, have delivered poor margins and revenue growth.
In 2024, the company has made significant changes to reenergize the overall business and return to growth by focusing on fewer, more profitable businesses.
On April 1, it completed the spinoff of Solventum (NYSE:SOLV), its healthcare business. 3M shareholders got one SOLV share for every four 3M shares. It continues to own nearly 20% of Solventum, which it will sell over the next five years. On May 1, Bill Brown took over as CEO from Mike Roman, who became executive chairman. Brown most recently was CEO of L3Harris Technologies (NYSE:LHX).
A reduced annual dividend payment of $2.80 yields a reasonable 2.8%. The company intends to devote about 40% of its annual free cash flow to dividends, with the rest for share repurchases, debt repayment, acquisitions, and investing in its existing businesses.
Its price-to-sales ratio of 1.67 is cheaper is cheaper than in the past decade.
On the date of publication, Will Ashworth 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.
