As we head into the second quarter of 2024, the Dow Jones Industrial Average (DJIA) is solidly up nearly 6% for the year, with 20 of its 30 stocks in positive territory. This provides investors with plenty of strong buy Dow stocks.
This return follows a great performance in 2023, up 12.1%. Through the first quarter of 2023, the index returned less than 1%, suggesting 2024 could be one of its best performances since the financial crisis in 2008.
All eyes remain focused on inflation, which has subsided from a year ago but remains higher than the Federal Reserve would like to see. This would postpone any interest rate cuts the markets have been waiting for.
The Fed’s preferred inflation metric is the Personal Consumption Expenditures (PCE) Index. It increased in January and again in February. This is bad for stocks because it will likely push back interest rate cuts.
If one or more of the Fed’s three projected interest rate cuts in 2024 did not come to fruition, that could set in motion a recession, which wouldn’t be good for some of the Dow 30, but not all.
Here are three Dow stocks to buy now.
American Express (NYSE:AXP)
American Express is having an excellent year in the markets. AXP stock is up more than 20% through the first quarter.
If you’re familiar with the financial services company, you know that Amex is one of Warren Buffett’s longest-held stocks.
“Berkshire’s purchases of Amex were essentially completed in 1995 and, coincidentally, also cost $1.3 billion. Annual dividends received from this investment have grown from $41 million to $302 million. Those checks, too, seem highly likely to increase,” Buffett wrote in Berkshire Hathaway’s 2022 shareholder letter.
Buffett pointed out in his 2023 shareholder letter that Amex accounts for just 4%-5% of Berkshire’s GAAP net worth. In 2024, he wrote, it would increase its dividend by 16%. It was closer to 17%, raising its annual payout to $2.80 from $2.40.
While American Express is not a Dividend Aristocrat — a company in the S&P 500 (SPX) that has increased its annual dividend for at least 25 consecutive years or more — it has almost doubled its payout over the past five years.
The great thing about American Express is that it is a well-run company liked by one of the world’s savviest investors. Buffett spent $1.3 billion on Amex. Berkshire now owns nearly 21% of its stock, valued at more than $34 billion.
If he’s not selling, you should be buying!
Amazon (NASDAQ:AMZN)
From its low of $84 at the end of 2022, Amazon stock has rebounded nicely over the past 15 months, up 115%. Boy, have things changed.
Amazon leaned into the demand for e-commerce and home delivery in 2020 and 2021, which meant it hired tremendous numbers of people to get all its shipments out of the warehouse and to the doors of millions of customers. It’s not a bad problem, but it was forced to reduce its headcount to right-size that part of its business.
While investors might have lost their nerve heading into 2023, analysts remained quite upbeat about the company’s chances.
“For those investors who utilize 2-3 year time horizons and are looking to take advantage of the recent dislocation in high quality ‘Net stocks, we highly recommend AMZN,” CNBC reported comments from Evercore ISI analyst Mark Mahaney on Dec. 29, 2022.
Today, of the 41 analysts covering its stock, all 41 rate it a Strong Buy, making it a rarity in the Dow 30.
AI is high on its list of initiatives in 2024. On March 27, it made a second investment in AI startup Anthropic, bringing its total outlay to date to $4 billion. Anthropic’s Claude chatbot competes with ChatGPT and many others.
It’s just another reason to be bullish about AMZN stock.
Walmart (NYSE:WMT)
While Walmart stock isn’t performing as well as American Express and Amazon in 2024, it’s still up nearly 11%, more than double the Dow. More importantly, good times are ahead.
Deutsche Bank analyst Krisztina Katai likes the company’s competitive advantage over other retailers, which it gained in part because of its size and the investments it made to remain the world’s largest retailer.
“‘Walmart’s in a double tailwind position to gain both low- and high-end consumers over the coming years,’ with 60% of the Walmart US sales coming from grocery alone,” Katai told Yahoo Finance.
It used to be that Costco captured the lion’s share of higher-income consumer spending in the discounter and warehouse space. Still, Walmart is coming on as customers look for value from both non-discretionary (grocery) and discretionary purchases.
The company’s been very active with its rollback promotions because it has so much pricing power with suppliers.
“The number of rollbacks have increased about 50% year over year in the back half of last year,” Katai told Yahoo Finance.
Over the next two years, Walmart will spend approximately $9 billion renovating and modernizing 1,400 U.S. stores. It’s a much easier proposition when you expect to generate $15.1 billion in free cash flow in 2024. If there’s a weakness in its business, I can’t see it.
