The Dow Jones Industrial Average has risen 3.64% over the past month. Technical indicators suggest the index could continue climbing higher in 2024.
Last year’s repeat performance of the “Majestic Seven” leading stocks propelling the broader market indices could happen again this year. This could lead to a volatile, yet bullish ride for stocks.
Despite lofty valuations, tech stocks are poised to deliver robust growth in 2024. Also, this year’s rally may include a more diverse mix of stocks compared to 2023. Lower P/E ratios and declining bond yields in response to predicted interest rate cuts could lift some undervalued Dow components.
1. Microsoft (MSFT)
Microsoft is one Dow stock from 2023’s Majestic Seven with ample growth potential remaining. The tech giant’s investment in OpenAI positions it as a leader in generative AI.
Generative AI progressed rapidly in 2023, from GPT-3’s release to GPT-4 and GPT-4 Turbo. Some analysts anticipate GPT-5 could arrive by mid to late 2024. While still far from human reasoning abilities, GPT-5 is expected to show sizable improvements in reasoning and longer context windows.
As OpenAI’s closest partner, Microsoft seems poised to benefit foremost from public AI breakthroughs. This AI edge could continue boosting Microsoft’s share price over peers in 2024 and beyond.
2. Coca-Cola (KO)
Along with tech, defensive sectors like consumer staples and healthcare appear attractive in 2024. Coca-Cola is one reliable consumer staples stalwart for long-term investors.
Owning Coca-Cola provides a hedge if indices rally while taking on more risk elsewhere. The stock’s reasonable valuation at 24 P/E also appeals to income investors amid falling rates.
Coca-Cola’s 3.08% dividend yield is solid. Its 3.36% 3-year dividend growth offers rising income potential for buy-and-hold shareholders. The worldwide brand’s defensive nature makes it a core portfolio holding.
3. Johnson & Johnson (JNJ)
Johnson & Johnson is another defensive play whose growth prospects are underestimated amid pending talc litigations. However, JNJ has already allocated $9 billion for expected legal costs.
Johnson & Johnson’s pharmaceutical and medical device segments provide growth despite its defensive label. The stock appears undervalued relative to long-term EPS trends and growth forecasts.
In summary, Microsoft, Coca-Cola and Johnson & Johnson represent top Dow stocks to watch in 2024 based on growth prospects, reasonable valuations and defensive profiles. Their upside potential makes them attractive buys for the year ahead.
