On May 26, Icon Dow Jones Industrial Average (DJI: ^DJI) It celebrated its 128th birthday. Since its introduction in 1896, it has undergone more than fourteen changes and gone from a 12-stock index filled with industrial companies to one now represented by 30 time-tested, diversified multinational companies.
In mid-May, Dow Jones It made history by closing above 40,000 for the first time in its history. Although some investors may be apprehensive about investing their money on Wall Street with a perpetual index like the Dow Jones that is currently near an all-time high, value can always be found for investors with a long-term mindset.
Here are three Dow Jones stocks that stand out as easy buys as we head into June.
Intel Corporation
The first Dow Jones component to trigger a buzzy buy right now is none other than the semiconductor giant Intel Corporation (NASDAQ: INTC).
I'd be lying if I told you that Intel hasn't faced a significant number of headwinds in recent years. It has lost CPU share to itself Advanced micro devices, has seen demand for personal computers (PC) decline significantly in the wake of the coronavirus (COVID-19) pandemic, and its bottom line is affected by losses associated with its foundry services segment, which it is building from the ground up. But despite these challenges, the risk-reward scenario is definitely tilted in favor of patient optimists.
The first thing to note about Intel is that Their core CPU sectors remain cash cows. Even as AMD shrinks its CPU share, Intel remains the undisputed market share leader in traditional PCs and data centers. The expected operating cash flow Intel generates from its customer computing and data center segments will allow the company to redirect this capital toward higher growth initiatives.
One of Intel's most exciting projects is the large-scale launch of the Gaudi 3 chip during the third quarter. Gaudi 3 is an artificial intelligence (AI) accelerator chip designed to fit the toe of the foot NvidiaThe dominant H100 graphics processing unit (GPU) in high-compute data centers. As demand for GPUs grows, new entrants like the Gaudi 3 should enjoy exceptionally strong demand.
Looking further, Intel charted a path to becoming the world's second-largest foundry services provider by the turn of the decade. Intel is building two chip manufacturing plants in Ohio, and is supposed to open another in Germany later this decade, which is partly supported by the German government.
The final piece of the puzzle for Intel is that its valuation is incredibly attractive. Although a price-to-earnings-per-share (P/E) ratio of 16 may not seem all that special, the Wall Street consensus is calling for Intel to actually triple its earnings per share (EPS) to $3 by 2027.
Johnson & Johnson
The second component of the Dow Jones 30 that made a blind buy in June is the health care conglomerate Johnson & Johnson (NYSE: GING)which is known as “J&J.”
J&J has lagged badly in the current bull market, and pending lawsuits are likely to blame for its poor performance. There are nearly 100,000 pending lawsuits alleging that Johnson & Johnson's baby powder, which has now been discontinued, causes cancer. Johnson & Johnson's two previous attempts to settle these lawsuits have been in court. Wall Street doesn't like unpredictability – and there's no telling when this lawsuit will be resolved.
On the other hand, Johnson & Johnson is one of only two publicly traded companies (Microsoft Being Other) has been given the highest credit rating (AAA) by Standard & Poor's (S&P). S&P has every confidence that Johnson & Johnson's cash-rich balance sheet and abundant operating cash flow can help it easily service its debt, as well as deal with any pending litigation.
What has made Johnson & Johnson a steady grower over the past decade is its renewed focus on pharmaceuticals. Although brand-name treatments have only a limited period of sales exclusivity, new drugs offer significant margins and exceptional pricing power. Allocating capital to drug development, internal collaboration, and continuous modernization of production lines have helped Johnson & Johnson's pharmaceutical business avoid the risk of patent expiration.
In addition, Johnson & Johnson benefits from continuity in key leadership positions. For example, you'd only need two fingers to count the number of CEOs J&J has had since its founding in 1886. Low employee turnover at the top leads to important end-to-end growth initiatives.
To round things off, Johnson & Johnson shares are at their lowest valuation, relative to forward earnings, in at least a decade. Long-term investors can now pick up shares for roughly 13 times forward earnings per share, representing a 16% discount to its multiple average forward earnings over the past five years.
Sales force
The third Dow Jones Industrial Average stock to buy blindly in June is a provider of cloud-based customer relationship management (CRM) software. Sales force (NYSE: CRM). CRM software helps consumer-facing businesses strengthen existing customer relationships and boost sales.
May was an eventful month for Salesforce, and not in a good way. CRM software provider's sales guidance misses the mark, based on Wall Street consensus, for first time 18 years! The company's chief operating officer, Brian Milham, attributed this rare revenue shortfall to longer deal cycles last quarter.
While Wall Street's disappointment when the stock market is historically expensive is never a good thing, there are several reasons to believe this near-term discount represents a good deal for patient investors.
To start with the obvious, demand for customer relationship management (CRM) software solutions is expected to grow by double digits. Fortune Business Insights estimates a 12% compound annual growth rate through the end of the decade, with the global CRM market reaching $157.5 billion in annual sales. Salesforce has been the undisputed leader in global CRM market share for the past 11 years. Based on a report by IDC, Salesforce's 21.7% share in 2023 was three times larger than the second company, Microsoft (5.9% share).
Salesforce also has a knack for making add-on acquisitions. Some of the best deals that co-founder and CEO Marc Benioff has helped engineer are the purchases of MuleSoft, Tableau Software, and Slack Technologies. Aside from adding new sales channels, these additional acquisitions expand the company's services ecosystem and provide lucrative cross-selling opportunities.
Don't overlook the company's capital return program either. In late February, Salesforce increased its stock buyback program by $10 billion and declared its first-ever dividend of $0.40 per quarter. For companies with stable or growing net income, buybacks can be particularly helpful in raising earnings per share.
After May's swoon, Salesforce shares now trade at 21 times expected forward-year earnings. This results in a 47% discount on average forward year earnings over the past five years. Even with modest sales growth, Salesforce shares look like a bargain for opportunistic investors.
Should you invest $1,000 in Intel now?
Before you buy Intel stock, consider the following:
the Motley Fool stock advisor The analyst team has just defined what they think it is Top 10 stocks Investors are buying it now… and Intel wasn't one of them. The 10 stocks that were discounted could deliver huge returns in the coming years.
Think when Nvidia I prepared this list on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $750,197!*
Stock advisor It provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. the Stock advisor The service has More than four times The return of the S&P 500 since 2002*.
*Stock Advisor returns as of June 3, 2024
Sean Williams He has positions at Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, Nvidia, and Salesforce. The Motley Fool recommends Intel and Johnson & Johnson and recommends the following options: long $45 January 2025 calls on Intel, long $395 January 2026 calls on Microsoft, short $35 August 2024 calls on Intel, and short $405 for January 2026 at Microsoft. The Motley Fool has Disclosure policy.
3 Dow Jones Stocks That You Need to Buy in June Originally published by The Motley Fool