The Dow Jones Industrial Average is widely expected to continue to perform well in 2024. The index represents 30 of the most prominent U.S. firms that are considered to be the most important Equities within the New York Stock Exchange and the nasdaq.
The Dow is widely considered to be a representative barometer of the U.S. economy and stock market overall. The Federal Reserve is anticipated to cut rates multiple times which will serve to propel the index higher. So, it’s reasonable to broadly invest in the Dow Jones Industrial index and expect returns. That said, there are better Dow stocks amongst the 30 in which to invest.
American Express (AXP)
With approximately a week left until American Express (NYSE:AXP) releases 4th quarter earnings investors should consider purchasing the stock. The company has done very well over the last year as Americans rack up record credit card debt.
That debt also comes with high interest rates due to high Fed funds rates intended to tamp down inflation. American Express provided strong fundamentals when it released its third quarter results months ago. However, investors should also anticipate that the fourth quarter will be strong.
Holiday spending ended up being strong after expectations wavered. That implies that credit card spending will have been strong as well which bolsters the investment case for American Express.
The net result is that American Express will have created a new set of assets in the form of accounts payable during the last year or so. Again, consumers are leveraging credit at record rates and the interest charges are currently very high. Those consumers will be repaying American Express for some time to come which will result in stronger top and bottom line results overall for some time to come.
It’s easy to see why investors might be tempted to avoid Apple (NASDAQ:AAPL) stock early in 2024. The year hasn’t started out very well at all. iPhone sales in China continue to slump. Meanwhile, in the U.S., sales of its Apple watch continue to be blocked. Those blows have prompted prominent analyst houses to downgrade the stock in recent weeks.
That raises an important question for investors: will Apple stand by idly as Microsoft passes it as the most valuable firm globally? The answer of course is no.
But it won’t be easy. The Chinese government will continue to prefer Huawei phones for its officials over Apple products. That isn’t going to change. That’s part and parcel of a broader conversation around Apple, China, and the US. Apple is going to continue to reassure part of its supply chain and customer base to appealing markets, particularly India.
There’s potential for Apple to derive wins from that situation. Whether that occurs or not it remains to be seen, of course. At the same time, the company is going to release its Vision Pro headset on Feb. 2 Which is one more reason to find optimism around Apple overall.
If 2024 is like 2023 then Salesforce (NASDAQ:CRM) will be among the best Dow stocks for investors to hold. In fact, Salesforce shares roughly doubled in 2023. Then, to start 2024, its shares emerged as the strongest performer through the first 10 days of 2024.
One factor to consider in that regard is the high institutional ownership of Salesforce equity. Institutional ownership accounts for 81% of all holdings of CRM shares. Institutional owners have a lot of collective power and as a result can shift share prices very quickly. If they see something they don’t like and offload their holdings — which tend to be substantial — share prices drop rapidly.
There are important macroeconomic cyclical reasons to believe that will not be the case. Primarily, the notion that multiple rate cuts are on the horizon. It is currently expected that the Federal Reserve will cut rates three times in 2024, likely beginning in March. That will result in cheaper borrowing which should prompt institutions to invest heavily in customer relationship management overall. That should be a boon to Salesforce which dominates the space.
Microsoft (NASDAQ:MSFT) was a massive winner in 2023 due to the emergence of AI, in particular generative AI. The company’s investment in OpenAI and ChatGPT served to propel its stock price substantially higher throughout the year.
That said, Microsoft’s connection to the artificial intelligence boom didn’t result in greater revenues. In truth, Nvidia (NASDAQ:NVDA) remains the clearest case of a company that actually saw top-line results due to the AI boom; it managed to sell many many more chips leading to greater revenues
Microsoft, on the other hand, has largely benefited due to the hype surrounding AI to this point. The reason that Microsoft is expected to be strong in 2024 relates to its pursuit of AI-related revenues.
Wall Street analysts expect Microsoft’s AI Investments to begin to lift revenues in a substantial manner in 2024. The company has invested heavily in adding AI functionality to its Office suite, referred to as CoPilot. further, Wall Street expects the company’s Cloud Revenue to be boosted substantially by AI in 2024. That potential makes Microsoft one of the best choices on the Dow for 2024.
IBM (NYSE:IBM) Will continue to represent a compelling mix of income and growth potential in 2024. That makes its stock a strong choice throughout 2024.
On the income side, investors should consider that IBM pays a dividend yielding approximately 4.1% at present. It’s a very safe form of income having last been reduced in 1994. In short, IBM shares are going to continue to appeal to income investors.
That said, IBM isn’t without compelling growth narratives. Specifically, cloud and quantum computing. Both of those sectors continue to Garner a lot of attention from investors seeking growth opportunities. Cloud computing is expected to continue to strengthen especially due to the introduction of artificial intelligence. At the same time, IBM is a leading firm in the realm of quantum computing. Quantum computing promises to speed the development of artificial intelligence Beyond the capabilities of classic computers.
Consequently, IBM is going to continue to garner a lot of attention for its potent mix of income and growth potential throughout 2024.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) Isn’t a particularly flashy company. The company deals primarily in Internet protocol (IP) networking. Again, not flashy and so it’s arguable that Cisco Systems might not ‘shine’ in 2024 because it is somewhat ho-hum.
Yet Cisco Systems continues to grow. particularly in relation to revenues. Over the last 12 months revenue has grown at a rate of 12.6%. That rate exceeds the 6.2% revenue growth experienced over the last three years which itself exceeds the revenue growth over the past five years of 5.2%. That alone is a compelling case for the hypothesis that Cisco Systems is heating up.
Broadly speaking, Cloud firms and other enterprises are going to continue to invest in strengthening their respective communications ability. The artificial intelligence opportunity makes that a near certainty.
That suggests that Cisco Systems growth rate has continued room for growth. Falling interest rates will serve to drive greater investment as lending costs fall which is yet another reason to consider Cisco systems. None of this even considers Cisco Systems’ dividend which currently yields more than 3%.
Arguments that favor investment in Visa (NYSE:V) and its stock are largely the same as those that apply to American Express, above.
Visa has benefited from many of the same factors that have propelled American Express and other credit card firms higher. I won’t waste my time reiterating those factors. Everyone is well aware that credit card spending is at historical levels.
That truth is reflected in the strong growth rates for Visa during the last 5 years. Somewhat surprisingly, Visa’s revenue growth rate over the last 3 years is actually higher than it was over the last 12 months: 16.8% versus 14.1%.
Perhaps the explanation lies in pandemic stimulus to some degree. Whatever the case, Visa continues to be strong overall with top-line growth well into the double digit rates no matter how you slice it. There continues to be a strong case for investing in credit card companies which have all the potential to outperform average Dow stocks in 2024.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.