You can't beat Dow Jones stocks for stability and defense in a down market. By the same token, the blue chip average won't always keep up in a rising market.
Case in point: the broader S&P 500 and tech-heavy Nasdaq Composite were both up about 23% on a price basis for the year to date through late October. The Dow Jones Industrial Average, by comparison, very much lagged the pack. The elite bastion of 30 mostly more mature industry leaders delivered comparatively poky price upside of 14%.
You can blame the Magnificent 7 stocks for much of the Dow's underperformance. Of the mega-cap tech stocks driving the majority of the bull market's returns this year, only Microsoft (MSFT), Apple (AAPL) and Amazon.com (AMZN) can be found in the blue-chip average. It also wouldn't hurt if the Dow included, say, Nvidia (NVDA) rather than Intel (INTC). The fact that the Dow is weighted by price rather than market cap is another reason it's lagging the other main benchmarks.
The current state of concentrated returns notwithstanding, it's important to know the Dow's recent underperformance isn't all that abnormal. More than half of the average's components are low-beta stocks. That means they tend to lag in up markets, but hold up better when everything is selling off. This low-beta skew can actually be quite advantageous to long-term investors.
After all, as bright a time as it's been for equity investors, downside risks very much remain. Economists generally expect growth to slow, and some surveys put the odds of recession hitting in the next year at 33%. Meanwhile, The New York Fed's yield-curve model assigns a 57% probability to the U.S. entering a recession over the next 12 months.
Should such a change in market fortunes come to pass ... well, that's where Dow Jones stocks come in.
Dow Jones stocks ranked
This collection of industry-leading companies and dividend growth stalwarts with their fortress-like balance sheets can offer relative stability in tempestuous market times. From the best Dow dividend stocks to the most widely held blue chip stocks, components of the industrial average occupy top spots in the portfolios of hedge funds and billionaire investors. Warren Buffett's Berkshire Hathaway (BRK.B), in particular, is a huge fan of select Dow stocks.
To get a sense of which Dow Jones stocks Wall Street recommends at an increasingly uncertain time for equities, we screened the DJIA by analysts' consensus recommendations, from worst to first, using data from S&P Global Market Intelligence.
Here's how the ratings system works: S&P surveys analysts' stock calls and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Scores between 3.5 and 2.5 translate into Hold recommendations. Scores higher than 3.5 equate to Sell ratings, while scores equal to or below 2.5 mean that analysts, on average, rate shares at Buy. The closer a score gets to 1.0, the higher conviction the Buy recommendation.
In other words, lower scores are better than higher scores.
Note that Amazon.com (AMZN) was added to the Dow in late February, replacing Walgreens Boots Alliance (WBA).
See the table below for analysts' consensus recommendations on all 30 Dow Jones stocks, per S&P Global Market Intelligence, as of October 21, 2024.
