Even though 2022 was the most difficult year for Wall Street in more than ten years, the timeless Dow Jones Industrial Average (DJI) shone the brightest. The Dow’s 9% decline was significantly less painful than the 19% drop for the broad-based S&P 500 and the 33% plunge by the tech-focused Nasdaq Composite, even though all three major U.S. stock indexes entered a bear market last year.
The composition of the Dow holds the not-so-subtle secret to this outperformance. It consists of 30 multinational corporations, most of which are established and pay dividends. They are the stocks investors should want to own in uncertain economic times.
The “House of Mouse,” Walt Disney (DIS 2.41%), is the first stock in the Dow Jones Industrial Average that is a must-buy in 2023. Disney offers clearly defined catalysts for the future, despite the COVID-19 pandemic wreaking havoc on its theme parks and significantly decreasing its movie revenue.
Businesses need to be more adept at connecting with customers across generational divides. Disney can aggressively raise theme park ticket prices and maintain a significant lead over the inflationary curve thanks to this superior engagement.
Johnson & Johnson
Johnson & Johnson, a healthcare conglomerate, is a second Dow Jones stock that will be a solid investment in 2023 (JNJ 0.87%).
Because demand for healthcare services is unrelated to the health of the American economy or stock market, healthcare stocks can be extremely wise investments during a bear market. In other words, people will always get sick and need prescription medications, healthcare equipment, and other services. Therefore, a huge company like J&J can anticipate fairly consistent yearly revenue growth and operating cash flow.
Pharma sales account for most of Johnson & Johnson’s sales growth and operating margin. The challenge with getting more than half of its income from brand-name medications is its limited window of sales exclusivity. J&J uses its superior medical device segment, pipeline products, and new drug development to combat patent cliffs. The need for medical devices should increase as people age.
Arguably the safest stock to purchase within the Dow is Johnson & Johnson. It is one of just two publicly traded companies to hold Standard & Poor’s highest credit rating (AAA), a division of S&P Global.
The semiconductor stock Intel (INTC 1.14%) is the third member of the Dow that is a no-brainer purchase for the new year. Even though the demand for chips has been weakening recently and is cyclical, this market leader has never been this cheap.
Fighting off its main rival, Advanced Micro Devices (AMD -1.16%), has been one of Intel’s biggest challenges. AMD has gained market share for central processing units (CPUs) in mobile, data center servers, and personal computers (PCs). Even with slight share losses over the past couple of years, Intel still reigns as the undisputed CPU king — and this is a crucial “however.”
Walgreens Boots Alliance
Walgreens Boots Alliance (WBA -0.46%), a chain of pharmacies, is the fourth Dow stock that will be begging to be purchased in 2023. In each of the previous 47 years, Walgreens’ base annual payout has increased, supporting a yield of 5.1%.
Walgreens Boots Alliance hopes to increase customer loyalty and generate meaningful organic growth by opening full-service health clinics adjacent to its stores. Together with VillageMD, which Walgreens has partnered with and invested in, the two companies hope to open up to 1,000 clinics with physician staff by the end of 2027 in more than 30 U.S. markets. These full-service clinics are a true differentiator since most pharmacy chain clinics can only administer vaccinations.
Payment processor Visa (V -0.18%) is the fifth and final Dow stock that will be a no-brainer purchase in 2023.
The rising possibility of a recession and historically high inflation have shaken most financial stock markets, but Visa has generally prospered. Visa has benefited from increased credit card use as the rate of personal savings in the United States has fallen, even though it is a cyclical business that a recession could negatively impact. The fact that consumers must spend more money on necessities has benefited the fee-based Visa.
The last aspect of Visa that makes it a fantastic investment is its avoidance of lending. Visa could become a very successful lender if it wanted to. However, doing so would put the business at risk of loan losses during inevitable recessions. The company avoids the pitfalls of lending and needs not to worry about diverting valuable cash to cover loan losses because it strictly sticks to payment processing. In other words, it is better positioned than most financial stocks to recover from economic downturns quickly.