For many years, the Dow Jones industrial average ruled the investing world, before the advent of electronic and computer-driven trading. Created in 1896 by Charles Dow, the index originally consisted of 12 companies, each considered a giant in its sector. The Dow was introduced early in The Wall Street Journal as the first index of stock market activity. While the companies in the venerable index have changed many times since 1912, it is still considered one of the elite indexes in the world of investing.
The Dow has been overshadowed this year by the spectacular rise in the Nasdaq, which is up 27% as of the close Monday due to the artificial intelligence explosion and the rise of the Magnificent 7. The Dow has risen a paltry 1.1% in that time. Note that Microsoft is a Dow stock and is one of the Magnificent 7.
One reason for the severe underperformance is that many of the top companies among the 30 members of the Dow have had dreadful years for a variety of reasons. We decided to screen these casualties while looking for value. In addition, we looked for companies that have paid dividends for years and will likely continue to do so.
Five industry leaders made the cut. While not all are at 52-week lows, they all have underperformed and are offering patient investors some big-time upside potential, and they will pay some dependable, and in some cases quite large, dividends while investors wait for a rebound. While all five are rated Buy at top Wall Street firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Goldman Sachs
This industry leader is a premier stock in its sector, for those looking to add financials at a very reasonable price and multiple. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra-high net worth clientele, and top investment banking and capital markets expertise, and it continues to be a dominant force around the world in the world of finance.
Its Investment Banking segment provides financial advisory services, including strategic advisory assignments related to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs. It offers middle-market lending, relationship lending and acquisition financing, as well as transaction banking services.
This segment also offers underwriting services, such as equity underwriting for common and preferred stock and convertible and exchangeable securities, as well as debt underwriting for various types of debt instruments, including investment-grade and high-yield debt, bank and bridge loans and emerging- and growth-market debt.
The Global Markets segment is involved in client execution activities for cash and derivative instruments, credit products, mortgages, currencies, commodities, and equities, as well as provision of equity intermediation and equity financing services. It also offers clearing, settlement and custody services.
Shareholders receive a solid 3.40% dividend. Oppenheimer has a $450 target price on Goldman Sachs stock. The consensus target is just $361.65, and the stock closed on Monday at $318.50 a share.
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