Dow Jones at 17,000: These Companies Offer More Upside Potential

The Dow Jones may be at record highs, but companies such as Disney, Home Depot, and Procter & Gamble still have room for gains.

Jul 7, 2014 at 6:00PM

With the Dow Jones Index trading at record highs above 17,000, investors may get the idea that there's not much more money to be made by investing in companies included in the Dow Jones at this stage. However, make no mistake: Companies such as Disney (NYSE:DIS), Home Depot (NYSE:HD), and Procter & Gamble (NYSE:PG) still have a lot of room to run.

The fun is not over with Disney
Like the Dow Jones, Disney is trading at all-time highs, near $86.80 per share. But that doesn't mean the ride is over for investors in Disney. Far from that. The company offers extraordinary quality and fundamental strengths, and it's a great business to hold in your portfolio for years to come.

Dis Frozen Image

Source: Disney.

Disney is a unique business in several ways. The company benefits from its tremendously valuable intellectual property, which sets it apart from the competition. Disney owns brands like ABC, ESPN, and Pixar, among others, and it has the rights to profit from an amazing portfolio of fictional characters from Mickey Mouse to Darth Vader, going through many of the most popular and recognizable names in the entertainment industry.

Disney is reporting blockbuster financial performance; sales during the first quarter of 2014 grew by 10% to $11.6 billion, versus $10.6 billion in the same period of 2013. All of the company's business segments reported solid growth, but the studio division was the big star of the show, with revenues jumping by an impressive 35% versus the prior year, to $1.8 billion.

The explosive success of Frozen has been a major growth driver for Disney in the studio division lately. Perhaps more important, it shows that the magic factory keeps running at full capacity. As long as the company is delivering high-quality successful content and making big profits from it, investors in Disney should simply relax and enjoy the show.

Home Depot is on firm ground
With more than 2,200 retail stores in the U.S., Canada, and Mexico, Home Depot is the largest home improvement retailer in the world. Scale advantages, geographical presence, and brand recognition differentiate this heavyweight champion from its competitors in the industry.


Source: Home Depot.

Home Depot benefits from superior negotiating power with suppliers, and the company gets to spread its fixed costs over huge sales volumes, which reduces fixed costs per unit. Price competitiveness is a central factor in the industry. Besides, Home Depot has built a solid relationship with contractors over the years, a key clientele in the home improvement business.

Home Depot has been an unequivocal beneficiary from the real estate recovery, and management has implemented a series of strategies to increase efficiency and streamline operations. The combination of growing sales and improving profit margin has been notoriously profitable for Home Depot and its shareholders during the last several years, and the business continues performing strongly judging by recent financial reports.

Even though Home Depot was affected by the unusually cold weather during the quarter ended on May 4, the company still delivered healthy performance during the period. Comparable sales in the U.S. increased 3.3%, and diluted earnings per share grew 20.5% versus the same quarter in the prior year. In an optimistic sign, Home Depot also increased earnings guidance for the full year, and management expects earnings per share to grow by a big 17.6% during fiscal 2014.

Procter & Gamble is solid as a rock
Procter & Gamble is a market leader in several consumer staples categories around the world. The company owns 25 brands generating more than $1 billion each in sales, in addition to 15 other growing brands generating between $0.5 billion and $1 billion each in global revenues.

Pg Image Brands

Source: Procter & Gamble.

The company is actively focusing on innovation and restructuring its operations in order to reinvigorate growth. Recent product innovations in categories such as laundry, baby care, and grooming are generating promising results, and management is quite optimistic regarding opportunities for growth via innovation and emerging markets expansion in the years ahead.

Procter & Gamble is increasingly paying more attention to where not to play, which can be as relevant as deciding in which markets to participate. During the last several years, the company has exited businesses representing more than $6 billion in sales, including coffee, snacks, pharmaceuticals, water purification, and bleach, among others.

Procter & Gamble's financial soundness is unquestionable, and a rock-solid trajectory of dividend payments provides further evidence. The company has paid uninterrupted dividends since its incorporation in 1890, which means 124 consecutive years of consistent dividend payments. In addition, Procter & Gamble has increased distributions during the past 58 years in a row, including a 7% increase announced in April.

The company is paying a dividend yield of 3.2%, which sounds like an attractive yield coming from a rock-solid dividend juggernaut, especially at a time when opportunities for income are quite scarce due to historically low interest rates.

Foolish takeaway
The Dow Jones may be at record highs, but investing is about future, not past, performance. Don't let the headlines confuse you; high-quality Dow Jones companies like Disney, Home Depot, and Procter & Gamble still have plenty of gas left in the tank.

This coming consumer device has huge upside potential, too
Imagine the multibillion-dollar sales potential behind a product that can revolutionize the way the world shops and interacts with its favorite brands every day. Now picture one small, under-the radar company at the epicenter of this revolution that makes this all possible. And its stock price has nearly an unlimited runway ahead for early, in-the-know investors. To be one of them and hop aboard this stock before it takes off, just click here.

Andres Cardenal owns shares of Walt Disney. The Motley Fool recommends Home Depot, Procter & Gamble, and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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