Bull Market Buys: 3 Dow Stocks to Own for the Long Run

view original post

Figuring out the underlying industry’s longevity is half the battle.

It’s fun to score a big gain in a short period of time. But let’s be honest. That’s not the way investing is supposed to work. Wise investors understand this is a long game, won by people able to find and then willing to hold onto quality stocks for years on end. Slow and steady wins the race.

With that as the backdrop, here’s a rundown of three great blue-chip stocks that not only boast strong performances during bull markets but should continue performing well in the years aheada. They’re all part of the Dow Jones Industrial Average, in fact, meaning they’ve already been vetted for the long haul.

JPMorgan Chase

JPMorgan Chase (JPM -0.60%) isn’t just a big bank. It’s the nation’s biggest, with $3.5 trillion worth of assets on its books. While size theoretically shouldn’t matter, in reality it does. JPMorgan along with its retail/consumer-facing Chase brand enjoy enough size to keep the company in front of would-be customers while at the same time keeping its competitors in check.

Still, it’s a tough name to get excited about stepping into these days. Although last quarter’s top and bottom lines were both up year over year, cracks linked to economic lethargy are starting to show. Its credit card charge-offs nearly doubled in the first quarter, for instance, while 90-day delinquency rates jumped.

Allowances for loan losses are also rising, ultimately eating into the efficiency of its operation. The rate of return on its common equity slipped from 18% in 2023’s Q1 to 17% this time around. Net-interest income fell during the three-month stretch ending in March as well, while net interest-income guidance for the remainder of the year was also disappointing.

Shares fell as a result. In the banking business, it’s these seemingly little things that can often end up being rather big deals.

Largely lost in all the noise, however, is that none of what this bank or its peers are facing at this time is unusual or permanent. Rising interest rates, the ensuing economic weakness, and the subsequent loan losses are all part of a highly predictable cycle that takes the same toll on banks over and over again. The best ones never fail to snap out of that funk.

This time around isn’t likely to be any different, which is why — despite the post-earnings stumble — JPMorgan Chase shares are still within sight of their record high made earlier this month.

Microsoft

You know Microsoft (MSFT 0.04%). Indeed, there’s a very good chance you’re using its software right now.

There’s a similarly good chance you’re a regular user of one of its productivity programs like Word or Excel. There’s also a strong likelihood you’re a fan of its Xbox video game console or a user of its AI-powered Copilot assistant. Then there’s the Microsoft you don’t see. Synergy Research Group suggests Microsoft controls roughly one-fourth of the world’s cloud-computing market, for instance.

These are, of course, all good reasons to own Microsoft stock, made better by the fact that there are just so many of them. Perhaps the top reason to take a swing on Microsoft shares despite their record high just this week, however, is the way the company’s business model is evolving.

The software giant no longer merely sells updated versions of its software in a box. Much of its software is now rented. That is to say, consumers and corporations alike can pay a nominal monthly fee for cloud-based access to tools like the aforementioned Word or Excel.

Although the company itself is a little tight-lipped about exactly how much subscription-based business it’s doing these days, Microsoft did report it’s got $235 billion worth of “commercial remaining performance obligations” on its books as of the end of last quarter, up 20% from a year earlier. These are goods and services that have already been contracted for future delivery but have yet to be delivered.

As such, it’s an idea of the scope of the subscription-based business the company’s doing now. More to the point, it’s a glimpse at how much business is already lined up, setting the stage for reliable revenue growth as these performance obligations are booked as revenue. For perspective, Microsoft did $212 billion worth of business during the fiscal year ending in June of last year.

Microsoft still enjoys revenue from one-off purchases like an Xbox or video game, of course, or even via the sale of software to customers that don’t want or need subscription-based access. However it’s produced though, the need for software, operating systems, and cloud-computing technology isn’t going away anytime soon — if ever.

Visa

Last but not least, add Visa (V -1.28%) to your list of Dow stocks to own for the long run. Visa is the planet’s biggest credit card middleman. There are more than 4 billion Visa cards in cardholders hands, who use them at more than 130 million locations to make 276 billion purchases of goods and services — roughly $15 trillion worth — every year.

It’s not exactly a high-growth stock. Last quarter’s revenue growth of 10% is in line with its past and projected growth rates. Given the payment market’s existing saturation with plenty of alternatives, there’s not a great deal of business for Visa to steal from its rivals that will accelerate this growth.

There’s still plenty of opportunity for Visa to continue growing well into the distant future though.

One aspect of this opportunity is the ongoing shift away from cash and toward more convenient forms of payment. The U.S. Federal Reserve reports the use of cash within the United States has fallen from 31% of transactions in 2016 to only 18% in 2022. That leaves another 18% that could be handled with a card-based payment though, plus another 13% of payments that are presently handled with an automated clearing house (ACH) transfer (directly from a bank account).

As cash continues to become less convenient and even less necessary, look for this trend to continue. The same shift is evident overseas. This evolution works in Visa’s favor, since the company scrapes off a small percentage of every transaction it facilitates for itself.

In this vein, the Merchants Payments Coalition reports total swipe fees collected by credit card middlemen grew from $160 billion in 2022 to a record-breaking $172 billion last year, reflecting the impact of this shift. Again, however, there’s plenty more room for this trend to continue.

The other tailwind working in Visa’s favor is the planet’s ever-growing population in addition to the growing number of businesses that accept card-based payments. The latter is just the result of technology’s proliferation.

All of this makes Visa stock a strong bull-market performer — and the underlying dynamic will apply as long as commerce exists.