While the Dow Jones (^DJI) represents industry leaders, not every stock in the index is a safe bet. Some are facing headwinds like declining demand, rising costs, or disruptive new competitors.
Just because a company is in the Dow Jones doesn’t mean it’s a great investment, and StockStory is here to help you separate winners from laggards. Keeping that in mind, here are two Dow Jones stocks that could be good additions to your portfolio and one best left off your watchlist.
One Stock to Sell:
Nike (NKE)
Market Cap: $67.29 billion
Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE: NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.
Why Should You Dump NKE?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Free cash flow margin is forecasted to grow by 1.6 percentage points in the coming year, potentially giving the company more chips to play with
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Nike is trading at $45.73 per share, or 27x forward P/E. To fully understand why you should be careful with NKE, check out our full research report (it’s free).
Two Stocks to Watch:
McDonald's (MCD)
Market Cap: $217.7 billion
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Could MCD Be a Winner?
- Rapidly increasing restaurant base reflects a desire to sell in new markets and scale quickly
- Asset-lite franchise model is reflected in its superior unit economics and a best-in-class gross margin of 57.1%
- Robust free cash flow margin of 26.2% gives it many options for capital deployment
At $306.25 per share, McDonald's trades at 23x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Amgen (AMGN)
Market Cap: $187.9 billion
Founded in 1980 during the early days of the biotechnology revolution, Amgen (NASDAQ: AMGN) is a biotechnology company that discovers, develops, and manufactures innovative medicines to treat serious illnesses like cancer, osteoporosis, and autoimmune diseases.
Why Does AMGN Stand Out?
- 14.2% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
- Revenue base of $36.75 billion gives it economies of scale and some negotiating power
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Amgen’s stock price of $347.92 implies a valuation ratio of 15.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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