The Dow Averages had facelifts recently; here's an overview of the latest Dow components, notes Chuck Carlson, dividend reinvestment specialist and editor of DRIP Investor.
The Dow Jones Industrial Average recently added Amazon (AMZN) while booting Walgreens Boots (WBA). And the Dow Jones Transportation Average made changes — entering the Transports is Uber (UBER). Leaving the Dow Transports is JetBlue Airways (JBLU).
Amazon’s entry into the Dow Industrials was widely expected. The addition brings important segments to the index, not the least of which is Amazon’s massive cloud computing services. Amazon also brings to the Dow another important player in the artificial intelligence (AI) field.
I expect Amazon to put up nice numbers in 2024, paced by continued growth in its cloud services, a fast-growing advertising business, and consistent results in its online retailing business.
Profits should get a lift from a continued focus on cost controls. Perhaps the biggest headwind for the company is the regulatory environment, although I think the stock discounts a lot of the negative news on the regulatory front.
While Amazon has been a solid performer over the last 12 months, rising 82% in that time, the stock is still down from levels it reached in July 2021. With its entry in the Dow, Amazon represents one of my favorite Dow stocks for gains over the next 12 months, and its long-term growth potential is excellent.
Amazon offers a direct-purchase plan. Minimum initial investment is $250. The plan administrator is Computershare. For enrollment information call (866) 258-7741 or visit www. computershare.com/directstock.
Uber’s addition brings a modern touch to the Dow Transports. Uber’s presence gives the Transports exposure to such segments as ride-sharing and delivery services. Earnings estimates have been rising for the company over the last 60 days.
Per-share profits should grow at least 54% in 2024 and more than 60% in 2025. To be sure, to capture that fast growth investors will have to pay up to own Uber. The stock currently trades at 65 times 2024 earnings estimates. That valuation leaves little room for disappointment.
Still, Uber is a “bull-market” stock — one in which investors don’t care too much about valuation as long as the primary trend is bullish. Thus, I could see these shares pushing higher this year, although I also expect periodic downdrafts to occur.
As a long-term play in interesting growth markets, Uber has appeal. But I would try to use pullbacks to build positions. Uber offers a direct-purchase plan via Computershare’s online-only DirectStock plan. Minimum initial investment is $25.
