Originally launched with 12 stocks in 1896, the price-weighted Dow Jones Industrial Average (DJIA) has since expanded to 30 blue chip pillars. These companies represent the US economy in all sectors except transportation and utility, as a 1% slice of the total stock market.
Ranging from Apple and Boeing to MasterCard, Walmart, JPMorgan Chase, and Chevron, this makes DJIA one of the most-watched and traded (via futures contracts) market indices. Year-to-date, DJI has underperformed the S&P 500 (SPX) at 2.83% vs 14%.
Over the last month, however, DJI has been ahead of SPX at 2.30% vs 1.96% respectively. Amid the recent stock market correction, investors should take note of stocks with strong relative strength.
This concept showcases the market leaders as stocks that have outperformed their market indices and are first to move higher in uptrends while last to move lower in downtrends.
Considering their strong relative strength, which Dow Jones stocks fit the bill?
Visa (NYSE: $V)
As the world’s largest payment processor, Visa is well-positioned to catch e-commerce growth. Out of total retail, e-commerce share is expected to grow to 23% by 2027, projected to reach a $57.22 trillion market size by 2032 from $14.14 trillion in 2022.
The post-lockdown period was particularly fruitful for Visa, as its payment volume increased by 31.8% from 2020 to 2022. For Q3 2023, Visa reported 12% YoY net revenue growth to $8.1 billion. This was boosted by a 17% YoY cross-border volume increase and a 10% increase in processed transactions.
In the last three months of market correction, Visa (V) outperformed DJI at 3% vs. -3%, respectively. Based on 30 analysts pulled by Nasdaq, V shares are a “strong buy.” The average V price target is $276.95 vs the current $244.05. The high estimate is $295, while the low estimate is $243 per share.
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Intel Corporation (NASDAQ: $INTC)
Intel has been the leading chipmaker in the semiconductor sector, reaping 9.7% revenue of the global semiconductor market as of 2022. Although facing stiff opposition from AMD, Intel still dominates the PC market thanks to its CPU lineup, holding 68.4% of the x86 processor market vs AMD’s 31.6% share.
Nonetheless, AMD outpaced Intel regarding market cap, as it also offers GPUs. Intel only recently entered the discrete GPU market in 2022 with Arc series GPUs. However, in that short time, by Q3 2022, Intel’s graphics card market share doubled to 4%. This speaks highly of Intel’s capacity to leverage its branding, holding 68% of PC GPU vendor market share (including integrated graphics) as of Q2 ‘23.
Moving forward, Intel is heavily investing in cloud computing, AI, 5G, and the Internet of Things (IoT) to fuel its growth further. In Q3 2023, the chipmaker reported an 8% YoY revenue decrease to $14.2 billion. However, this downturn beat both the $13.53 billion revenue estimate and earnings-per-share (EPS) at 41 cents vs 22 cents consensus.
Most importantly, Intel is becoming more cost-effective, decreasing its operating expenses by 13% YoY. Over the last three months, INTC stock outperformed DJI significantly, at nearly +12% vs -3%. With that said, beating estimates hasn’t alleviated Intel’s manufacturing delays.
Case in point, Intel has delayed its server processor Sapphire Rapids launch four times already. Alongside increased competition from AMD, Intel stock is in “hold” recommendation from 33 analysts pulled by Nasdaq.
The average INTC price target is $37.22 vs current $38.20. The high estimate is $56 vs the low estimate of $17 per share. The hold is likely short-term, indicating neither underperformance nor overperformance.
Microsoft (NASDAQ: $MSFT)
Over the last three months, MSFT stock outperformed DJI at +7.70% vs -3%. Much like Apple, Microsoft spread into all tech pies, covering everything from software and cloud computing to peripherals, hardware, and AI. Although heavily censored, Microsoft’s recent DALL-E integration into Bing, Image Creator, showcases AI commercialization.
From a click away, Microsoft users can generate professional-grade art, such as logos and postcards, and onboard the results to Microsoft Designer. This indicates that Microsoft is further ahead in commercializing AI hype while at the same time having the capacity and reach to mainstream it.
In practice, Microsoft 365 Copilot AI is making investors extra bullish, indicating a first-mover advantage. In FY23 Q4, Microsoft increased its revenue by 8% YoY to $56.2 billion, with the boost coming from the Intelligent Cloud segment (17%) and Productivity and Business Processes (10%).
Indicative of future AI growth, Office 365 Commercial grew 15% YoY. These tailwinds offset the drop in revenue from Windows, devices, and Xbox at -10%, although Xbox content and services revenue experienced a minor 3% boost.
Having beaten EPS estimates four quarters in a row, MSFT shares are a “strong buy.” Based on 40 analyst inputs pulled by Nasdaq, the average MSFT price target is $408.83 vs the current $353.85. The high estimate is $450 vs the low estimate of $375 per share.
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The post These Three Dow Jones Stocks Are Worth Watching in November appeared first on Tokenist.
