In the contemporary age, the concept of top Dow stocks to buy seems rather anachronistic. After all, the underlying Dow Jones Industrial Average only covers 30 companies. Contrast that with other indexes that consider hundreds if not thousands of publicly traded securities.
However, the limited coverage of Dow stocks shouldn’t be conflated with a lack of relevance for individual enterprises. Indeed, a few companies stand out, either for their business vision or their undervalued or underappreciated profile. As the title of this article suggests, you might regret not considering the below ideas soon.
Yeah, I get it. Other indexes certainly carry a sexiness effect thanks to burgeoning innovations like artificial intelligence. Still, this old dog has a few new tricks up its sleeve. Below are top Dow stocks to put on your radar.
McDonald’s (MCD)
What it is: Frankly, if you don’t know what McDonald’s (NYSE:MCD), you might be in the wrong business. In all seriousness, MCD has been a staple among top Dow stocks since 1985, per The Washington Post. It’s a global fast-food giant but it also serves as an icon of American capitalism.
Relevance: To be sure, McDonald’s suffered some fading relevance as millennials and Generation Z gravitated toward healthier food and beverages. Still, with Gen Z, in particular, appreciating custom beverages and snacks – something that rival Starbucks (NASDAQ:SBUX) is known for – the Golden Arches responded with a new business initiative called CosMc’s. From early reports, the new drive-thru-only brand seems to be a hit.
Pros: McDonald’s isn’t the sexiest idea among Dow stocks. However, it gets the job done through solid revenue growth and consistent profitability. Analysts also rate shares a consensus strong buy with a $313.70 average price target.
Cons: MCD has demonstrated sizable choppiness over the past 52 weeks so caution is warranted.
Chevron (CVX)
What it is: A giant within the hydrocarbon energy industry, Chevron (NYSE:CVX) distinguishes itself as the only oil and gas component among Dow stocks. That’s not necessarily a good thing. After all, the political and ideological winds favor alternative energy sources. However, the world currently runs on oil, irrespective of the electrification of mobility. That trend could last for longer than many expect.
Relevance: When it comes to the relevance of Chevron as one of the top Dow stocks to buy, the focus centers on the science. Yes, renewable energy sources and other alternatives have come to the forefront thanks to technology and economies of scale. Still, fossil fuels command extraordinary energy density. Because of this reality, don’t be shocked if CVX continues to attract investor dollars.
Pros: Overall, Chevron benefits from solid long-term revenue growth and reasonably consistent profitability. Analysts peg shares a consensus moderate buy with a $179.59 average price target.
Cons: Economic concerns (demand erosion) and geopolitical factors combined to weaken the oil market recently.
Disney (DIS)
What it is: An icon in the broader entertainment industry, Disney (NYSE:DIS) helps shape popular culture. While that’s an enviable position to be in as one of the top Dow stocks, it also generates controversy. I don’t want to step onto the political minefield. However, it would be disingenuous not to acknowledge the heated discourse between the Magic Kingdom and ideologically conservative voices.
Relevance: At the moment, Disney isn’t exactly doing so well in the equities space. That might seem a victory for the anti-woke advocates. However, we can’t ignore that the company commands a massive entertainment and theme park portfolio. Like it or not, people gravitate toward the brand, which is why Gurufocus labels DIS significantly undervalued based in part on future projected business.
Pros: While questions surround Disney, it does print solid revenue growth and consistent profitability metrics. That has convinced analysts to rate DIS a strong buy with a $108.45 price target, implying 16% upside.
Cons: To be clear, DIS is not undervalued against traditional metrics. For example, it trades at a staggeringly high 73X trailing-year earnings.
On the date of publication, Josh Enomoto 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.
