Are you looking for quality stocks that are easy and rewarding to own for the long haul? Why not start — and maybe even finish — your hunt with the 30 names that make up the Dow Jones Industrial Average? They’re all established blue chips, after all, hand-picked largely because of their resilience.
To this end, here’s a closer look at three of the Dow’s best bets right now simply because they’re poised to rally during the remainder of this year and into the indefinite future.
1. Apple
For years Apple (NASDAQ: AAPL) was such a frequently suggested stock pick that it almost become cliché, albeit for good reason. The organization is not only the world’s biggest publicly traded company as measured by market cap, but it’s also regularly the world’s most profitable. Apple also earned all of that growth, leveraging the wild popularity of its iPhone.
The iPhone hasn’t been much of a growth engine lately, of course. Between market saturation, consumer inflation, and improving competition, revenue stemming from sales of the smartphone has been stagnant since 2021. Total iPhone deliveries have also been flat for nearly a decade now. The bulk of any top-line and bottom-line growth the company has achieved during this stretch has actually been from digital services like apps, music, and video entertainment.
Something happened just a few weeks ago, however, that could prove game-changing for Apple for a long, long time. In June, it introduced what it’s calling Apple Intelligence, which turns its newest and more powerful smartphones into full-blown mobile AI devices. More to the point, Apple devices powered by its in-house-designed M-series and A17 Pro processors (or better, presumably) will be able to handle heavy-duty generative artificial intelligence tasks directly from the device rather than punting that work to the cloud.
Investors and consumers alike are excited. After all, in many ways this is the AI tool the world’s been waiting on. Apple shares are up more than 30% from the April low largely due to this development.
The market may still underestimate just how big of a deal onboard artificial intelligence could be for Apple, though. Technology market research outfit IDC believes generative AI smart shipments will grow at an average annual pace of more than 78% through 2028, with more than 900 million of these devices likely to be purchased that year.
Given that Apple is already the premier name in the smartphone space, it’s apt to capture more than its fair share of this growth. Of course, more iPhones being in consumers’ hands means more services revenue as well. This is also much higher-margin revenue than device revenue could ever be.
2. PepsiCo
The Coca-Cola Company is a common go-to pick for income-minded investors, and understandably so. Everyone knows its brands, and the company has raised its dividend payment every year for the past 62 years.
If you’re looking for a dividend-paying Dow stock with room and reason to soar soon and for a while, however, consider taking on a stake in beverage rival PepsiCo (NASDAQ: PEP) instead. Whereas Coca-Cola shares are well into record-high territory thanks to years of mostly uninterrupted bullishness, PepsiCo shares are priced right around where they were in late 2021.
However, don’t you want to own an industry’s strongest-performing stock? Generally speaking, yes, you do. The reasons for that leading performance should be clear and reasonable, though. In this case, they aren’t.
Although Coca-Cola may be a leading name in several different categories of beverages, it’s not necessarily a better investment than PepsiCo is. PepsiCo’s dividend has been grown at a faster pace than Coke’s has for many years now, for instance. It’s also technically cheaper than Coke’s stock currently is, priced at only 21 times its projected per-share earnings versus Coca-Cola’s comparable multiple of 24. PepsiCo’s forward-looking dividend yield of 3.1% is also better than Coke’s 2.8%.
So, why are investors still filing into the more expensive and less rewarding ticker when they could own the cheaper, higher-yielding option instead? Habit, mostly. The Coca-Cola Company has been such a reliable winner for decades that investors often buy it without giving it any thought or without considering its valuation or yield. The market doesn’t quite have the same history-driven affinity for PepsiCo.
Give it time, though. Investors eventually figure things out. They’ll realize soon enough that PepsiCo shares are undervalued compared to the next-nearest alternative.
3. Nike
Finally, it’s been a tough past few years for athletic apparel brand Nike (NYSE: NKE). The company began turning up the heat on its own direct-to-consumer business just a few years back, alienating many of its third-party retailing partners. As it turns out, though, Nike can’t do quite as much on its own as it initially thought it could.
The pandemic also broke its supply chains, causing a costly swell in inventory levels. There’s also no denying that many of the company’s recent athletic sneaker designs just haven’t resonated all that well with consumers, who are increasingly looking for more practical — even if pricier — athletic shoes from brands like Hoka or On.
These are all reasons why Nike stock has been more than halved since its late-2021 peak. This steep sell-off, however, is more of an opportunity than a warning of what’s to come. In short, Nike CEO John Donahoe knows what needs to be done to fix the company — and he’s doing it.
One of these initiatives is a full restoration of its once-important wholesaling to retailers like Foot Locker. Last quarter’s 5% year-over-year improvement in wholesale revenue is solid progress, but the recent rehiring of former executive Tom Peddie specifically to grow this business speaks volumes about Nike’s longer-term ambitions.
Donahoe is also ramping up effective innovation. Although the company technically never stopped innovating, it did lose its touch on this front. In April of this year, however, it unveiled the Nike Pegasus Premium running shoe, adding that its debut “signaled a multiyear innovation cycle” that will utilize the “full power of digital capabilities and cutting-edge technology.”
It remains to be seen exactly what that means. However, it is clear that Nike realizes it needs to do more than it’s been doing. Better yet (and recent challenges aside), it’s doing this work with the advantage of being one of the world’s premier brand names in athletic apparel.
It’s tempting to wait and see if Nike stock can begin a clear long-term recovery. Waiting for such confirmation, however, could mean a major missed opportunity.
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James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Apple and Nike. The Motley Fool recommends Foot Locker and On Holding and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
These 3 Dow Stocks Are Set to Soar in 2024 and Beyond was originally published by The Motley Fool
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