The Dow stocks have finally had a chance to out-flex the outperforming, tech-heavy Nasdaq 100 for a change. With value plays, mid-caps, and “boring” blue chips starting to gain steam over their high-flying tech counterparts, the market rally’s breadth stands to improve. For new investors concentrated in the high-tech AI plays, such a so-called rotation that played out may have been a bit painful.
Fortunately, it’s never too late to start thinking about diversifying your portfolio. A continuation to mid-cap stocks and value may or may not pan out as we head into the late-summer months. But if you felt rattled over the past few weeks, I’d argue that it makes sense to consider some of the boring names (think the Dow stocks, which are a good place to start) for a change.
Sure, they’re not AI-driven momentum plays with red-hot growth narratives. However, they can steady the sails if hurricane season is coming for big tech.
Coca-Cola (KO)
There’s a reason smart investors like Warren Buffett are fans of junk food (or should I say junk beverage) plays like Coca-Cola (NYSE:KO): They’re just so resilient in the face of economic chaos.
Sure, KO stock isn’t going to pop like an AI stock would on some shocking news event. But, at the very least, Coke is less likely to crash in sympathy with the rest of the sector on any given day.
That kind of peace of mind makes Coke shares worth considering at a time like this, when there’s a great deal of uncertainty regarding mega-cap tech’s AI playbook while valuations remain somewhat on the higher side. With KO stock recently breaking out in parabolic fashion, perhaps it’s time to reach for the Dow Jones staple while it’s still yielding a generous 2.87%.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) has been really feeling the pinch over the past year, as inflation (Big Mac sticker shock) scared diners away from the Golden Arches. The good news is that the fast-food king has taken a hit to the chin so that its diners can get a better deal. The $5 meal deal has been quite popular, and McDonald’s is extending it through the summer.
With MCD stock popping 3.7% after missing second-quarter earnings expectations, perhaps the bar was set way too low heading into the number. It’s never encouraging to hear sales fell for the first time in three years.
That said, management is fully aware that past price hikes have gone too far, and they’ve already taken steps to win back customers. With the firm taking a “forensic approach” to past price hikes, perhaps broader price cuts across the board will be on the menu once the $5 meal deal is finally over. Despite the rough quarter, investors seemed enthused by what management had to say.
3M (MMM)
3M (NYSE:MMM) is another Dow stock that’s been off to the races following its latest quarterly earnings report. Indeed, MMM stock just came off its best day ever, soaring 23% in a day on the back of a wonderful Q2 beat and full-year guidance raise. Such double-digit single-day moves do not come often for the Dow stocks, but when they do, they’re sure to get the attention of Wall Street.
Even after the post-quarter pop, I view 3M stock as still incredibly cheap. At 17.3 times forward price-to-earnings, 3M now looks to be at the intersection of momentum and value. For investors seeking gains beyond big tech, perhaps 3M is worth stashing on the radar now that it’s accelerating its remarkable turnaround under the leadership of its new CEO, Bill Brown.
Looking ahead, Brown aims to streamline the firm’s “complex” structure while continuing to prioritize “sustained organic revenue growth” and “increasing operating performance,” among other efforts I believe could help take 3M stock to another level.
Brown has made a rapid impact at 3M, but there’s still work to do and room to run.
On the date of publication, Joey Frenette held a long position in shares of McDonald’s. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.