7 dormant Dow stocks to buy before Wall Street wakes up

Although investors want nothing less than the most exciting investment opportunities after last year’s wild ride, 2022 could be the time for dormant Dow stocks to buy. After all, companies listed on the Dow 30 didn’t get there in a whirlwind operation. While they don’t command the most thrilling scenarios, these blue chips have the potential to help keep your wallet afloat in times of stress.

Fundamentally, the Federal Reserve changed the broader monetary and economic paradigm. Rather than a dovish framework that in many ways actively encouraged speculation in the markets, the Fed is now looking to tighten monetary excesses. It’s deflationary, what the incentives value over mere growth.

In this environment, here are seven of the best dormant Dow stocks to buy that could outperform.

HD Home deposit $267.20
WBA Walgreens Boot Alliance $32.76
JPM JPMorgan Chase $107.21
M.K.R. Merck $86.40
IBM International Business Machines $122.42
PG Procter & Gamble $135.74
AXP American Express $137.96

Home Depot

Source: Helen89 / Shutterstock.com

Generally a steady hand among dormant stocks at home improvement retailer Dow Home deposit (NYSE:HD) has printed an unusual amount of red ink so far this year, down a staggering 34%. Basically, the company probably suffered from rising interest rates. Yes, higher rates after a long period of accommodative monetary policy will present a shock to any business. However, Home Depot was among the main beneficiaries of last year’s incredible housing boom.

To quickly recap, a combination of fiscal stimulus and accommodative monetary policy has enabled many people to buy real estate. Moreover, wealthy members of society have sought to combat the long-term erosion of purchasing power by turning to housing to protect their wealth.

Today, this macro environment has been reversed. Higher rates correspond to higher borrowing costs. In turn, housing prices fell. Thus, renovation budgets are expected to take a hit, especially as many return to the office.

Now for the 5,000 IQ game: if interest rates come back down in a recessionary environment, it could trigger a second housing boom, as previously off-price buyers may move in. It’s a risky narrative, but one that could make HD one of the dormant Dow stocks to buy.

Walgreens Boots Alliance (WBA)

Walgreens (WBA) store exterior and sign in Pompano Beach, Florida

Source: saaton / Shutterstock.com

One of the hardest hit dormant Dow Jones stocks, Walgreens Boot Alliance (NASDAQ:WBA) certainly presents a frightening profile, even for opposites. Year-to-date through the Sept. 23 session, WBA has lost more than 38% of its market value. This is significantly more than the benchmark stock indices.

At the same time, if we’re being honest, Walgreens probably deserves at least some of the red ink. Initially this year, many bought into the idea that WBA was one of the dormant Dow Jones stocks. For example, the company benefited from tailwinds from its coronavirus vaccine and testing-related revenue channels. Later in the year, however, management presented a less than stellar outlook, pointing to a number of challenges for the business.

At the same time, there is an argument that Walgreens has already fallen enough. Basically, the company is still enjoying tailwinds due to greater awareness of infectious disease protocol and management. Should another breakout occur, WBA stock offers a nice cyclical upside for those looking for downed dormant Dow stocks.

JPMorgan Chase (JPM)

A sign for JP Morgan Chase & Co (JPM).

Source: Bjorn Bakstad / Shutterstock.com

As strange as it may seem, the deflationary dynamics induced by the tightening of monetary policy could benefit JPMorgan Chase (NYSE:JPM). In theory, banks benefit from a rising interest rate environment because their net interest margins increase. In other words, bank lending products become much more profitable. That said, higher interest rates also mean slower business activity due to higher borrowing costs. And that’s one of the main reasons why JPM stock is down 32.5% year-to-date.

Now, the reason why deflation could be positive for JPMorgan comes down to the wealth management arm of the business. To be frank, a monkey throwing darts at a board can potentially be a solid financial advisor during an inflationary cycle. With inflation, the dollar loses purchasing power, which encourages active investment.

In a deflationary environment, the opposite is true. Investors have more options, with bonds and cash looking much more attractive. Thus, JPMorgan’s vast army of trained and experienced financial advisers could entice more cash into the markets, which would boost relative outperformance. This company’s wealth management division is the best of the best, making JPM one of the dormant Dow stocks to consider.

Merck (MRK)

Merck (MRK) logo outside the company building

Source: Atmosphere1 / Shutterstock.com

Let’s be honest. In the shadow of meme stocks and cryptocurrencies, Merck (NYSE:M.K.R.) turns out to be incredibly boring. At the same time, the pharmaceutical giant presents an incredibly relevant business profile. That’s why MRK stock is up 13% year-to-date as major stock indices have plunged. Perhaps more importantly, with the Covid-19 pandemic subsiding, Merck has a huge fundamental catalyst.

Go back a moment on Memory Lane. During the initial onslaught of Covid-19, many feared the outbreak. I think we all remember images of people dropping dead in the street, a scene from a horror movie. This dynamic has caused many people to avoid hospital visits due to infection concerns.

With the distribution of the Covid-19 vaccine and general cabin fever, the fear around the Covid-19 pandemic is fading. As a result, the company’s solutions for cancer or other long-term illnesses such as Keytruda may finally see the kind of adoption many have been waiting for.

International Business Machines (IBM)

Quantum computing stocks: IBM sign with Canada headquarters in the background in Markham, Ontario, Canada.  IBM is an American multinational technology company.

Source: JHVEPhoto / Shutterstock.com

Arguably, it doesn’t get much sleepier among dormant Dow stocks than International Business Machines (NYSE:IBM). A boring legacy technology company at the best of times, IBM is attracting positive investor attention mostly for its dividend. With a forward yield of 5.38%, this company’s passive income profile remains a compelling selling point. After all, with inflation taking a bite out of everything, every mitigating element is useful.

However, what I appreciate about IBM is that it presents an “old faithful” type of investment scenario. Unlike flashy tech names, this clear example of a dormant Dow stock doesn’t grab the spotlight. Today, this factor pays off (literally and figuratively). While IBM stock is down 10% for the year so far, this is a superior performance relative to the tech sector.

Also, I appreciate that management is pivoting from hardware to the cloud. Honestly, the transition is taking longer than investors would like. However, over time, I think this transition could pay off for patient investors looking for a place to hide.

Procter & Gamble (PG)

A Procter & Gamble (PG) distribution center in Vandalia.

Source: Jonathan Weiss/Shutterstock.com

A dormant stock that has a higher than average probability of survival and prosperity is Procter & Gamble (NYSE:PG). As a household equipment giant, the company presents a painfully boring profile. I can’t imagine anyone waking up in the morning, logging into the trading desk and bidding on PG stocks based on toilet paper fundamentals.

Yet the lessons of Covid-19 have brought consumers a rude awakening. During the initial onslaught of the pandemic, household items such as toilet paper and hand sanitizer were essentially bricks of gold. Just when you thought global supply chain disruptions couldn’t get any worse, they did with a more recent shortage of feminine hygiene products.

It’s also possible that with the ongoing conflict in Ukraine – one that shows no signs of abating – supply chain disruptions will worsen. After all, we are dealing with countries that export many raw materials that we took for granted before the new normal. As a result, the PG stock is the one currently on my watchlist.

American Express (AXP)

the American Express logo carved into the wood

Source: First Class Photography / Shutterstock.com

As a financial services company specializing in the issuance of credit cards, American Express (NYSE:AXP) doesn’t shout “dormant Dow stocks to buy” to many.

Why?

Well, this company’s business model may not benefit from this tighter monetary policy environment. As borrowing costs rise, consumers are naturally looking to save money, not spend it.

That said, American Express caters to a more affluent user base. Notably, the company’s premium tier Platinum cardholders have an average net worth of $4.3 million. In addition, this clientele produces an average income of $474,000. In other words, we’re talking about a user demographic that may not be as impacted by inflation, deflation, or anything else.

American Express is a company that always offers risk, make no mistake. Down nearly 17% for the year so far, the company itself is not immune to market pressures. Nonetheless, the company’s outperformance relative to benchmark stock indices can be a positive sign for long-term investors.

As of the date of publication, Josh Enomoto had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided critical and unique insights to investment markets, as well as various other industries including law, construction management and healthcare.

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