The Dow Jones (^DJI) is home to corporate giants, but size alone doesn’t guarantee success. A few of these companies are struggling with weak fundamentals, paradigm shifts, or poor execution.
Finding the best companies in the Dow Jones isn’t always straightforward, and that’s why we started StockStory. Keeping that in mind, here are two Dow Jones stocks that could be good additions to your portfolio and one that may struggle.
One Stock to Sell:
Honeywell (HON)
Market Cap: $149.6 billion
Originally founded in 1906 as a thermostat company, Honeywell (NASDAQ: HON) is a multinational conglomerate known for its aerospace systems, building technologies, performance materials, and safety and productivity solutions.
Why Are We Wary of HON?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Efficiency has decreased over the last five years as its operating margin fell by 3.1 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Honeywell is trading at $235.45 per share, or 22.7x forward P/E. Read our free research report to see why you should think twice about including HON in your portfolio.
Two Stocks to Watch:
Coca-Cola (KO)
Market Cap: $331.3 billion
A pioneer and behemoth in carbonated soft drinks, Coca-Cola (NYSE: KO) is a storied beverage company best known for its flagship soda.
Why Is KO on Our Radar?
- Customer loyalty and massive revenue base of $48.06 billion makes it a household name that influences purchasing decisions
- Differentiated product offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 61.3%
- Healthy operating margin of 25% shows it’s a well-run company with efficient processes, and its rise over the last year was fueled by some leverage on its fixed costs
At $77.03 per share, Coca-Cola trades at 23.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Merck (MRK)
Market Cap: $286.3 billion
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Is MRK a Good Business?
- Dominant market position is represented by its $65.01 billion in revenue, which creates significant barriers to entry in this highly regulated industry
- Adjusted operating profits increased over the last two years as the company gained some leverage on its fixed costs and became more efficient
- MRK is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Merck’s stock price of $115.58 implies a valuation ratio of 22.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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