Later this month, the iconic Dow Jones Industrial Average (^DJI 0.26%) will celebrate its 126th "birthday" since its inception. What began as a generally concentrated 12-stock index in 1896 has morphed into an index with 30 diverse, multinational, and highly profitable businesses that Wall Street and investors still look to as a barometer of stock market health.
But since the beginning of the year, the Dow has been rocked. Like all major U.S. stock indexes, it's entered correction territory by falling at least 10% below its all-time high. Although wild vacillations in the market can be scary, they're historically the ideal time to put your money to work.
As we push into May, three Dow stocks stand out for all the right reasons and can confidently be described as screaming buys.
Image source: Getty Images.
Salesforce
The first Dow stock that looks like an absolute bargain is the fastest-growing company in the index, Salesforce.com (CRM 3.24%).
Salesforce provides cloud-based customer relationship management (CRM) software solutions. In plain English, this means it provides consumer-facing businesses with real-time software solutions that can handle things like online marketing campaigns, predictive sales analyses, and product/service troubleshooting, to improve existing client relationships and increase sales. As you can imagine, this software is ideally designed for the service industry, but has been catching on with financial, industrial, and healthcare companies in recent years.
NYSE: CRM
Key Data Points
CRM software offers sustainable double-digit growth appeal, and Salesforce is at the center of this rapidly growing trend. According to a report put out last year by IDC, Salesforce accounted for 23.9% of global CRM spend during the first half of 2021. That's more than four times the market share of its next-closest competitor, which all but ensures it'll remain the CRM leader for a long time to come.
Another factor fueling Salesforce's continued outperformance is CEO Marc Benioff's desire to make bolt-on acquisitions that expand the company's ecosystem and provide cross-selling opportunities. Three of the most memorable buyouts include MuleSoft, Tableau Software, and Slack Technologies, the latter of which closed last year.
Whereas global CRM spending is growing by a low double-digit percentage, Salesforce's combination of organic growth, innovation, and acquisitions has the company increasing its top line by about 20% annually. By Benioff's own account, Salesforce can hit $50 billion in annual revenue by fiscal 2026 after bringing in $26.5 billion in fiscal 2022.
With shares of the company now valued at a reasonably low forward-year earnings multiple of 30, the time for opportunistic investors to strike has arrived.
Image source: Getty Images.
JPMorgan Chase
Another Dow Jones stock that checks all the appropriate boxes as a screaming buy in May is money-center bank JPMorgan Chase (JPM +0.17%).
Bank stocks have been clobbered across the board since the year began. Banks are cyclical, and the combination of historically high inflation and a hawkish Federal Reserve bodes poorly for economic growth. In fact, the U.S. Commerce Department reported a surprise decline in first-quarter gross domestic product (GDP) last week. When the U.S. economy enters a recession, it's common to see loan delinquencies rise for banks of all sizes.
NYSE: JPM
Key Data Points
On the flip side, the banking industry's cyclical nature is also a positive. Whereas recessions typically last for a few months or a couple of quarters, periods of economic expansion are measured in years. This allows patient investors to take advantage of the natural expansion of GDP over time.
Something else JPMorgan Chase investors will appreciate is the hawkish Fed. Even though higher interest rates have a tendency to slow economic growth, they also provide added net interest income on outstanding variable-rate loans. This extra net interest income should flow right to JPMorgan Chase's bottom line.
JPMorgan Chase has done an excellent job with its digitization efforts as well. The company ended the first quarter with 46.5 million active mobile customers, which was up 11% from the previous year. Digital transactions cost just a fraction of what in-person and phone-based interactions run.
Bargain-hunting investors can scoop up shares of JPMorgan Chase right now at a 39% premium to its book value (roughly a four-year low), and for less than 10 times Wall Street's forecast profit for 2023.
Image source: Getty Images.
Walgreens Boots Alliance
The third and final Dow stock that's a screaming buy in May is a company I've pounded the table on as a top-tier value stock recently: Walgreens Boots Alliance (WBA +0.00%).
Pardon the pun, but healthcare stocks are normally immune from recessions. Since we can't control when we get sick or what ailment(s) we develop, there's a steady/growing demand for prescription medicine, medical devices, and healthcare services in any economic environment.
NASDAQ: WBA
Key Data Points
However, Walgreens proved to be one of the few exceptions to this rule in 2020. That's because pharmacy chains are reliant on foot traffic to thrive. With the initial stages of the COVID-19 pandemic limiting foot traffic, Walgreens saw its front-end and clinic revenue decline. But following a significant share price retracement, now is the perfect time for investors to pounce.
Walgreens has implemented a number of strategies designed to expand its operating margins over time while also targeting organic growth opportunities. For example, the company slashed more than $2 billion from its annual operating expenses a full year ahead of schedule. Despite these cuts, Walgreens has been investing aggressively in a variety of digitization initiatives. Even though brick-and-mortar stores will continue to generate the lion's share of Walgreens' sales, promoting direct-to-consumer options is an easy way to boost the company's organic growth rate.
What's more, Walgreens has partnered with, and invested in, VillageMD. The duo has already opened more than 100 co-located, full-service clinics, with a goal of opening more than 600 in over 30 U.S. markets by the end of 2025. Since these are physician-staffed clinics, they're better geared to deal with a wider gamut of patients. It's also a smart way for the company to connect with consumers and patients at the grassroots level.
Even with its COVID-19 vaccination growth spurt set to wane, Walgreens Boots Alliance looks like a surefire bargain at a little over eight times Wall Street's forward-year earnings forecast, and sporting a 4.5% dividend yield.
