- Some of the Dow Jones constituents possess lucrative buying opportunities as they exhibit quality in abundance. I’ve identified a few household names that could bolster your portfolio.
- Boeing (BA) – Investors have yet to grasp this reopening game.
- Apple (AAPL) – Robust growth and economies of scale could limit its exposure to global supply chain issues.
- Coca Cola (KO) – Organic sales and consumer base tailwinds make KO stock a great belief play.
- Microsoft (MSFT) – An undervalued market stronghold and a healthy balance sheet could lead to a rally in MSFT shares.
- UnitedHealth (A H) – This remains a great option for investors looking for a risk-free asset with consistent returns.
It looks like the market is moving back into pre-pandemic territory. For example, according to Bloomberg Newsa Morgan Stanley report estimates that most meme investors lost all of their 2020/21 gains as the market retreated from growth stocks. Additionally, the restrictive economic environment has given rise to dividend-paying and quality stocks, which have outperformed other investment styles over the past year.
I could easily see this trend continuing with retail investors allocating funds to safer stocks for fear of further losses. Classic risk aversion is the most likely outcome after a stock market sell-off, as investors tend to put their money in safe havens during bear markets. I could see the current narrative of risk aversion persisting until an environment conducive to growth and small-cap stocks emerges.
Some of the highest quality stocks have been overlooked, and I believe now is the time for them to shine; Here are five high-quality Dow stocks worth buying.
|BA||The Boeing Company||$127.20|
|KO||The Coca-Cola Company||$65.72|
|A H||UnitedHealth Group Incorporated||$485.40|
Boeing (NYSE:BA) is a top re-opening game that still hasn’t been recognized by the market. I’m not a fan of industrials at the moment. However, airline manufacturers are an exception, with their business operations lagging behind the sector due to the stagnation in the transportation industry. The stock is trading at relative one-year strength of 22.59presenting a fantastic “buy the dip” opportunity.
In addition, one of Boeing’s largest customers, AerCap (NYSE:ARE), thinks Boeing will bounce back soon. According to Company CEO Aengus Kelly: “Clearly Boeing has its own issues, but Boeing is a wonderful company that has helped build the world for the past 100 years and I would never dismiss them, they always build great planes.”
Finally, BA stock is undervalued on a normalized basis, with its price-to-sales ratio trading at a discount of 42.06%suggesting that the stock’s earning capacity is underestimated.
Apple (NASDAQ:AAPL) the stock is down nearly 15% since the start of the year, which is amazing. It is a company with a strong market position and operating profit growth of 34.28% year-over-year. Additionally, Apple’s product differentiation strategy and economies of scale (gross margin of 43.32%) allowed it to achieve indefinite profitability. Still, the market is bearish on the stock due to global supply chain concerns.
However, market players need to realize that sourcing and third-party sourcing is one of Apple’s strengths, helping it reduce supply chain issues. Additionally, Apple’s restructuring of its services unit to accommodate enhanced streaming and advertising solutions could add significant value to its long-term prospects.
APPL stock is undervalued at a PEG ratio of 0.66x, indicating that the stock’s earnings per share growth exceeds its price by 1.52x.
An old favorite of Warren Buffett, Coca Cola (NYSE:KO) is again making significant progress. Elon Musk even joked that he would buy the company after his Twitter (NYSE:TWTR) acquisition, albeit for special reasons.
Coca-Cola has recently dazzled with its sales of organic products. The company recently exceeded its first-quarter earnings estimate of 6 cents per share after his organic sales increased by 18%with a 39% increase in Latin America.
Chris Carey from Wells Fargo believes the consumer staples sector will continue to outperform the broader market as investors weather macroeconomic headwinds. I agree with Carey; it is irrelevant that the current economic environment is conducive to consumer staples stocks, as these are generally defensive stocks.
The KO stock has a strong return on equity of 45.61% and offers a lucrative dividend at a forward yield of 2.75%. This stock is in wonderful condition!
Microsoft (NASDAQ:MSFT) fell below a 2 trillion dollars market capitalization with a down nearly 20% since the beginning of the year. I just can’t imagine MSFT’s stock continuing to drop. Microsoft’s diverse array of hardware and software offerings has led to an immaculate 26.27% 5-year compound annual growth rate of business operating income.
In addition, Microsoft’s balance sheet is strong, with a Altman Z-score of 8.62, allowing it to provide residual profit to its shareholders. So, I’m bullish on Microsoft stock because I think it has the qualities to outperform in a dodgy stock market.
United Health (UNH)
UnitedHealth (NYSE:A H) stock is probably the ultimate defensive play. I say this because of its exposure to the healthcare sector and its contracts awarded by the government. Of course, the insurance industry has faced its challenges during the pandemic. However, UnitedHealth has a stronghold in its field, which is reflected in its 11.36% return on invested capital ratio.
The company beat its first-quarter earnings estimate with a beating of 14 cents per share. Behind its success, there was a medical care ratio of 82%, a medical reserve development of $290 million and a number of days of compensation payable of 49.1.
UnitedHealth stock is undervalued relative to its peers. First, its price-to-sales ratio is trading at a 64.31% discount, and second, UNH shares are trading at an enterprise value-to-sales ratio of just 1.62x. I think the stock is far from its cyclical peak and could be a good buy in the current market climate.
As of the date of publication, Steve Booyens held indirect long positions in MS, BA, APPL, KO, MSFT, WFC and UNH. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.
Steve co-founded Pearl Gray Equity and Research in 2020 and has since been responsible for institutional equity research and public relations. Prior to founding the company, Steve spent time in various finance roles in London and South Africa. He holds a Masters in Investment Banking from Queen Mary – University of London and is preparing his Ph.D. in finance, in which he tries to challenge the famous Fama-French 5-factor pricing model by integrating ESG factors. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance and Benzinga. Steve’s articles on InvestorPlace form an interesting juxtaposition between mainstream opinion and objective theory. Readers can expect coverage on frequently traded stocks, cryptocurrencies, crowdfunding, and ETFs.