I’d argue that investing in the Dow in April is a particularly smart move. Dow Jones stocks represent 30 of the most prominent U.S. firms. Stocks listed in the Dow tend to be more defensive than the Nasdaq and other indices.
The reason that matters is that investors are currently seeking safety. Rate cut expectations are softening and treasury yields rising. That combination of factors is strongly suggestive of softness for more tech-oriented shares and other growth stocks. Conversely, it is a boon for more defensive stocks like those found on the Dow.
Dow stocks tend to be more defensive although they certainly have significant growth potential in some cases. Anyway, they look strong at the moment as the markets digest the latest news on rate cuts and Treasury yields.
While the index generally looks strong there are better positions therein. Let’s take a look at seven of those.
Dow Stocks: Amazon (AMZN)
Mention the name Amazon (NASDAQ:AMZN) and most investors immediately associate it with e-commerce first. That’s logical given that Amazon’s online shopping platform is the primary driver of the stock’s performance.
However, Amazon is so much more. That’s what I want to talk about: Amazon’s other efforts and why they should inspire investors to plow money into it.
The next most important business segment for Amazon is its cloud computing division, Amazon Web Services (AWS). Amazon is the leader in the cloud segment with a substantial lead over its main rival, Microsoft (NASDAQ:MSFT).
Cloud is particularly important at the moment as it is a primary investment area for artificial intelligence (AI). Amazon is making massive moves there. The company recently announced that it will invest $150 billion over the next 15 years in cloud AI. Thus, it’s clear that Amazon intends to dominate the cloud via its investment in the necessary muscle for increased AI compute workloads.
Meanwhile, Amazon continues to battle Walmart (NYSE:WMT) for retail dominance. Remember, Walmart is the largest grocer in the United States. Amazon is expanding its grocery store footprint through Amazon Fresh and Whole Foods. In short, there are multiple reasons to believe that Amazon continues to be among the best positioned Dow stocks in April and beyond.
Visa (V)
I can give readers at least two strong, logical reasons that Visa (NYSE:V) stock is an excellent investment.
The first is simply that credit card usage and credit card debt continue to soar to new historical highs. Current American credit card debt sits at a massive balance of $1.129 trillion. Balances have risen by $273 billion since the fourth quarter of 2021. To give a bit more context, total credit card debt was below $500 billion at the turn of the millennium. The point here is simple and powerful: credit card issuers like Visa are very well positioned to capitalize on surging credit usage.
Furthermore, Visa is the most widely accepted credit card globally. That’s particularly important as the world increasingly moves toward a more cashless global society. Speaking anecdotally, I was recently visiting Korea which is quickly becoming a cashless society. My Visa card was accepted everywhere. Fintech will continue to grow and Visa has a strong lead through the massive Network it has built over several decades.
Dow Stocks: Microsoft (MSFT)
Microsoft stock, along with many other tech shares, is currently being punished by the markets as the rate cut fears increase and treasury yields rise. Investors should take this brief opportunity to pick up Microsoft shares as it will not last.
Share prices have fallen from $427 to $403 as I write this. The S&P 500 continues to fall as the markets wonder whether there will be any rate cuts at all in 2024. Treasury yields are also rising causing investors to diversify away from the stock market and into perceived safety. The result is that Microsoft shares are currently cheap.
For those wondering if Microsoft is suddenly on the precipice of a long drawdown, don’t worry. Instead, look at its most recent earnings report. Remember how large Microsoft is. Then, consider that its revenues grew by 18% in the period.
After you digested that fact, then consider its cloud revenues grew by 24%. Those revenues represent more than half of all revenues. The point there is that Microsoft is incredibly well positioned as AI takes off. Yes, the company is seeing some softness in relation to demand for its AI CoPilot product. Bears that focus on that fact are missing the larger narrative which is that Microsoft is growing by leaps and bounds due to AI.
Chevron (CVX)
Chevron (NYSE:CVX) stock has fallen by $5 to $167 over the prior week. There’s good news and bad news there. I would suggest that investors pay attention to the good news and remain bullish because Chevron is one of the best positioned Dow stocks in April.
The bad news for Chevron is that there’s currently a bit of a fear and trepidation in the markets about the economy. If the economy tanks, the result is lower oil consumption as overall activity slows. Thus, oil prices fall and producers including Chevron fall in tandem.
The good news is that oil prices continue to be strong on turmoil in the Middle East. I believe that that will be the more important story for Chevron and other energy firms moving forward. Frankly, I don’t think the economy is in much trouble currently. I do think that there is a lot of geopolitical turmoil, however.
It’s evident in the fact that energy sector returns have essentially mirrored tech returns thus far in 2024. Chevron is the best Dow stock by which to capture those gains moving forward.
Dow Stocks: Coca-Cola (KO)
Coca-Cola (NYSE:KO) is always one of the first defensive stocks to consider when fear is on the rise.
Investors turn to Consumer Packaged Goods firms and other shares that tend to benefit from steady demand across a variety of macroeconomic environments in such times.
It seems that fear is rising as we head toward the end of April. That creates an opportunity for Coca-Cola stock and investors. Search the term ‘all weather stocks’ or something similar and Coca-Cola is almost certain to come up. I’m probably beating a dead horse here but it’s shares have a very long history of thriving in the best and worst of times. The point is that if current fear materializes into something more serious, Coca-Cola is well positioned.
The other positive regarding Coca-Cola is that Wall Street believes there’s roughly an additional $8 of upside beyond its current $58 price. Look to Dow stocks for defensive strength and to KO stock for strength within that strength.
Honeywell (HON)
Honeywell (NYSE:HON) is another defensive Dow stock that looks particularly well positioned at the moment. I say that because I think investors are likely to pivot into defensive positions, especially those that provide income.
Honeywell is an excellent choice in that regard. The company recentlyannounced its 14th dividend increase since 2010. During that time frame the income provided has increased from $1.21 to $4.32 at present.
Honeywell is an industrial company and that continues to beat earnings expectations in what many have characterized as a difficult economy. The company also tends to guide conservatively, thus having the potential to outperform.
Overall, it has a unique combination of steady industrial sector performance and income. It also has a strong connection to artificial intelligence. Honeywell builds robotics that have the potential to replace factory floor workers. The company is applying AI to those machines and has a real shot at creating highly valuable use cases for manufacturing oriented firms.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) management is positioning the company for a period of rapid growth. I believe that’s very important to MCD stock at the moment. Growth investors are looking to artificial intelligence to capture perceived growth in the near to midterm.
While I have no problem with that logic I also think that those same investors should look at McDonald’s. The company is entering its fastest period of growth in its history. However, that growth is not predicated on AI making it much less risky.
McDonald’s plans to open 50,000 restaurants by 2027. That equates to roughly a 23% increase over its current restaurant count. It’s clear that McDonald’s will grow rapidly over the coming few years.
Meanwhile, McDonald’s is also aiming to take market share from competitors including Starbucks (NASDAQ:SBUX) that sell high margin beverages. If McDonald’s can successfully scale its CosMc’s business growth will be turbocharged. There’s a lot to like about McDonald’s in April as defensiveness rises and even more to like in the midterm as its growth ramps up.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.