It used to be said, “As goes General Motors, so goes the nation.” It is pretty much the same thing with the Dow Jones Industrial Average. The venerable index has long been considered a barometer on the health of the stock market and the economy.
It’s been a bumpy ride for both this year. Although the Dow is hitting new all-time highs in 2024, the index also suffered some dramatic drops as it seemed the economy would plunge into recession. So far that hasn’t happened and despite indications a recession could be on the horizon, the DJIA is up 9% this year.
Over half of the 30 stocks that make up the index are doing better than the average and three of them are trouncing its performance. The following trio of companies are up an average of 42% this year and two of them have set new records of their own. So let’s see whether buying their stocks now is still worth it or if investors have missed the boat.
Key Points About This Article:
- The Dow Jones Industrial Average has been subject to volatility this year on concerns over the economy, but the venerable index continues to hit new highs.
- These three companies are all vastly outperforming the Dow by a 4-to-1 margin, but the question is, have they come too far too fast?
- For investors looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
American Express (AXP)
Financial services giant American Express (NYSE:AXP) is up 32% in 2024 and is an amazing 84% higher from the low point it hit last October. The credit card company is benefiting from higher payment volumes as travel and entertainment spending soared. Since the second quarter of 2021, net interest income (NII) has more than doubled from $1.8 billion to $3.7 billion this year.
Yet NII represents only 22% of American Express’s total revenue. More than three-quarters of its revenue comes from non-interest income, primarily from the fees it charges merchants when they process payments on an AmEx card. Travel and entertainment spending accounts for 28% of the credit card company’s billed business. That suggests American Express would be highly susceptible to an economic downturn as consumers would spend less money.
AmEx even acknowledges that even though NII grew 20% year-over-year in the second quarter, growth “has moderated over the last several quarters.”
Yet two factors argue against a significant reversal of fortune. First, AmEx users tend to be higher income individuals who tend to be impacted to a lesser extent by economic turmoil than lower income individuals. The credit card company also began pursuing a younger, though still affluent, demographic.
Second, bear markets tend to be measured in months while the resulting bull markets that inevitably follow go on for years. A recession should be seen as simply a pause for American Express with higher highs expected to come.
3M (MMM)
Industrial conglomerate 3M (NYSE:MMM) has awakened from a multi-year slumber that saw significant destruction of shareholder value. Over the last three years as the Dow offered total returns of 23%, 3M lost 5% for investors.
Weighed down by lackluster business growth, considerable debt, and mounting legal issues, 3M began settling its lawsuits, slashed its dividend in half to save money, and spun off its healthcare business Solventum (NYSE:SOLV). The change in its outlook has been breathtaking.
MMM stock is up 44% this year and is 83% higher from its October low. Its second-quarter earnings report beat Wall Street expectations on revenue, earnings, and full-year guidance. Despite revenue coming in a half-percent lower than the year-ago period, adjusted profits surged 39% to $1.39 per share and it produced $1.2 billion in adjusted free cash flow. And though the dividend cut was tough for investors after a 60-year streak of raising the payout, management maintains the dividend is still a priority for the company.
Now carrying a lighter load, 3M stock should see continued growth for the foreseeable future.
Walmart (WMT)
The best-performing stock on the Dow Jones Industrial Average is retail king Walmart (NYSE:WMT). Shares are up 44% year-to-date and have doubled over the past two years, handily beating the index’s performance by more than two-to-one.
Walmart is an all-weather stock to own, no matter if times are good or bad. Because people need to eat regardless of what is occurring in the economy, and the retailer maintains an everyday low pricing policy, it will enjoy continuous growth. Especially when we experienced the twin ravages of high inflation and interest rates, Walmart was an oasis for consumers. It explains the retailer’s stock performance.
The scale of its retail footprint is unrivaled, allowing it to leverage its presence to boost sales and profits. Yet it also has an extensive online presence that is second only to Amazon (NASDAQ:AMZN). Moreover, the same scale that supports its brick-and-mortar position also undergirds its e-commerce offerings, making Walmart one of the very few retailers that can meet consumer expectations for selection, price, and fulfillment.
There ought to be a place for WMT stock in every investor’s portfolio for long-term growth and capital appreciation.
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