The Dow Jones Industrial Average is a price-weighted index of 30 significant stocks traded on mostly the New York Stock Exchange (NYSE) and, in a few cases, the NASDAQ. The Dow 30 frequently serves as a barometer of investor sentiment. These are blue-chip stocks; when these components move sharply in one direction or another, they can move markets.
For example, Apple, Inc. (NASDAQ: AAPL) is a Dow component. It's also one of the most widely held stocks among retail and institutional investors. When Apple lost $200 billion of market capitalization the week of September 4, 2023, it dragged down the entire index and weighed heavily on the broader market.
But the opposite is also true; when these stocks rally, a rising tide can lift all boats. And several Dow stocks look like solid buys after the market sell-off in August.
An Undervalued Winner in the Energy Sector
Investors were elated that the rate of inflation appeared to continue to soften in August. But that's likely to change when the CPI and PPI come out the week of September 11, 2023. That's when the first effects of rising oil prices will be felt. But it won't be the last. Crude prices are now over $85 a barrel, and it's not hard to see oil going over $90 or even $100 a share by early 2024.
That means if you're not in oil stocks, now is the time. And Chevron Corporation (NYSE: CVX) still looks undervalued relative to the sector. CVX stock is trading at $168.74 as of this writing. That's up about 5.7% in the last month. And as the stock price has gone up, so has the company's valuation. But it still trades at around 12x forward earnings, pays a safe, growing dividend, and has started investing in the renewable energy sector.
An Attractive Combination of Health Insurance and AI
Most investors will benefit from some exposure to healthcare stocks in their portfolios. And UnitedHealth Group Incorporated (NYSE: UNH) is not only one of the largest insurers but also one of the best-performing stocks in the sector.
The company's primary business is health insurance, where it generates most of its revenue. However, investing in UNH stock also gives you some AI exposure. The company's Optum division uses AI to help deliver better outcomes for patients and providers.
Trading at over $470 per share, UNH stock is not inexpensive. But that shouldn't scare retail investors away. Instead, they should look at the stock's value, reflected in 19x forward earnings.
This Company Will Continue to Be an Infrastructure Winner
Caterpillar, Inc. (NYSE: CAT) has been a big winner as infrastructure money from the Inflation Reduction Act begins to flow into the economy. With the stock up over 52% in the last month, some wonder if a sell-off is in order. The Caterpillar analyst ratings on MarketBeat give the stock a consensus Hold rating with a price target that shows a 5% decline in CAT stock.
However, the company is heading into the two quarters which have historically produced the strongest revenue and earnings. And the country is heading into an election year. That leads me to believe that politicians from sea to shining sea will want to ensure infrastructure dollars continue flowing.
This Bank is Looking to Play "Let's Make a Deal?"
Like most companies in the financial sector, 2023 is a year investors in the Goldman Sachs Group, Inc. (NYSE: GS) would like to forget. GS stock is down 5.5% year-to-date and over 6% in the last month.
Some of the decline is due to a lack of M&A and IPO activity in 2022. That's expected to change in 2023 and 2024, and Goldman Sachs will likely benefit from that increased activity.
GS stock trades at an attractive valuation of just 12x forward earnings. The Goldman Sachs analyst ratings on MarketBeat give GS stock a Moderate Buy rating with a 22% upside in the stock propelled by a forecast for 33% earnings growth in the next year.
This Retailer is Bucking the Inventory Trend
Home Depot (NYSE: HD) is one part of the duopoly in home improvement stocks with Lowe's Companies, Inc. NYSE: LOW). But so far, the two sides are heading in markedly different directions. And Home Depot has been on the bearish side of that trade.
HD stock is up 4% in 2023, which isn't terrible. But it pales in comparison to LOW stock, which is up 16% for the year. But that means some investors may view Home Depot as an undervalued addition.
One metric supporting that idea is how the company manages its inventory. Specifically, in its last quarter, the company reported an 11% decline in inventory while keeping its gross margin intact. That bodes well for the company's revenue and earnings in the second half of the year and could result in a comeback of sorts for HD stock.