To The Moon

• Investor sentiment around these stocks is low because of the risks ahead, but their long-term growth stories are solid.

• Verizon (VZ) has been plagued by its expensive 5G upgrade, but the group looks well placed to make the most of it moving forward. 

• Disney (DIS) lost momentum when its streaming service stumbled, but it’s wider business model is strong enough to weather the storm. 

• Intel (INTC) is in a position to leapfrog the competition in the semiconductor space, making it a good choice for value investors. 

dow stocks - 3 Most Undervalued Dow Stocks to Buy Now: August 2023

Investors sometimes overlook dow stocks thanks to the quirky composition that comes with the terriroty. However, there are some bargains to be had if you look carefully. The Dow Jones Industrial Index was created as somewhat of a bellwether for the United States economy. It’s meant to reflect economic conditions in the U.S., and is made up of mostly blue-chip stocks with relatively stable earnings. However, some investors are critical of the Dow as a touchpoint for the U.S. economy given it’s missing some of the biggest players.

Companies like Amazon and Google and are notably absent from this list of dow stocks. That’s because the index is price-weighted, which means the higher the price, the more impact that stock has on the Dow’s direction of travel. Both Amazon and Google trade well beyond the rest of the index in terms of dollar value, so including them would significantly skew it. 

Still, there are some heavy hitters among the Dow stocks, and its a good place to go looking for blue-chip names to add to your portfolio. Given the current economic climate, many of those stocks are facing a bumpy road ahead. From rising interest costs to a cash-strapped consumer, the uncertainty that lingers ahead is threatening to derail many of the Dow’s most popular members. However for investors looking to zoom out a bit further, there’s plenty of long-term growth on offer for bargain basement prices. 

Verizon (VZ) $Verizon(VZ)$

Verizon Wireless sign and trademark logo.

Verizon (NYSE:VZ) stock has been struggling since recent news that it may need to replace many of its old, lead-wrapped cables thanks to concerns about their impact on the environment. This is an unwelcome development given the company just shelled out billions upgrading to 5G. The costs have created a sizeable debt pile at Verizon, and given the increasingly volatile interest rate environment, it could become problematic if the group can’t chip away at it. 

Luckily, as one of the world’s largest telecommunications groups, Verizon’s revenue is relatively stable. That’s because even in times of economic strife, people are not going to go without internet. The business is cash-generative, and that means the group’s got enough to continue paying down debt without putting the dividend at risk.

There are certainly some risks ahead as the lead-cable ordeal is unpacked. For now, there’s no clear evidence of the financial or environmental impact. However, this isn’t a Verizon-specific issu as all telecoms are dealing with the same cloud of uncertainty.

Disney (DIS) $Walt Disney(DIS)$

Disney logo on a store front. DIS stock.

There’s no doubt that Disney (NYSE:DIS) is going through a time of uncertainty. However, for investors with some patience, it’s a good choice among Dow stocks. The group’s streaming business has taken a bite out of investor sentiment as it continues to operate in the red. Furthermore, Disney+ subscriber numbers have been on the decline. The group lost out on some important streaming rights, and that saw interest in the service plummet. 

The good news for Disney is that its business model is strong and time is on its side. People have less to spend right now, so competition for their discretionary income is fierce. However, Disney’s enviable catalogue of popular TV shows and movie franchises puts it in a strong spot to continue building out the service.

Furthermore there’s Disney’s other powerhouse businesses: parks, merchandise and movies. These make it a worthwhile long-term pick among dow stocks. Theme parks have been the hero recently, keeping the bottom line in good shape. This should be a relatively resilient part of the business throughout the long term as well, adding to the case that Disney is a long-term buy.

Intel (INTC) $Intel(INTC)$

Close up of Intel sign at their San Jose campus in Silicon Valley

Intel (NASDAQ:INTC) is often overlooked as the dinosaur among semiconductor stocks, but the group’s a great pick as far as undervalued dow stocks for those with a long-term view. The company has set itself up to be in a prime position as the semiconductor space develops. 

As geopolitical tension simmers, the risk of increased regulation is growing. However, Intel is inserting itself as a solution to support the U.S. semiconductor industry as a manufacturer capable of taking on rivals’ manufacturing contracts. The company is currently building America’s biggest semiconductor manufacturing facility where it intends to build competitor chips for a fee. This means Intel is in a great position as the industry expands even if it doesn’t become a market leader in the technology itself. 

Source: MarketWatch