Although you probably don't need the reminder, Wall Street endured a challenging year in 2022, with all three major stock indexes plummeting into a bear market. But amid this turmoil, the iconic Dow Jones Industrial Average (^DJI 0.69%) outperformed the other major indexes by year's end.
Whereas the Nasdaq Composite shed 33% of its value last year, the Dow Jones walked back only 9%. This probably has to do with the Dow's being composed of 30 generally profitable, time-tested, and mostly dividend-paying companies. Although mature businesses aren't typically fast-growing, they do offer a solid foundation that investors of all walks seem to appreciate during a bear market.
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With stock valuations depressed, now is as good a time as any for long-term investors to go shopping for incredible deals. Not surprisingly, the 126-year-old Dow Jones Industrial Average is housing quite a few plain-as-day bargains.
What follows are three Dow stocks you can confidently buy now and never have to worry about selling.
Johnson & Johnson
The first surefire Dow Jones Industrial Average stock patient investors can buy and hold forever is healthcare conglomerate Johnson & Johnson (JNJ 0.29%).
One of the best aspects of healthcare stocks is that they're very defensive. No matter how poorly the stock market and/or U.S. economy perform, people will still become ill and require prescription medicines, medical devices, and various healthcare services. We don't stop getting sick just because it's inconvenient to do so. This helps J&J and the entire healthcare sector generate consistent revenue year in and year out.
On a company-specific basis, there are a couple of things that make Johnson & Johnson special. For starters, the company's revenue mix is moving the needle in the right direction. For more than a decade, J&J has been shifting more of its total sales to high-margin, brand-name pharmaceuticals.
If there's a downside to this strategy, it's that brand-name drugs have a finite period of sales exclusivity. However, Johnson & Johnson is prepared for the loss of exclusivity on its therapies over time. That's why it continues to aggressively reinvest in internal drug development, forge collaborations, and make the occasional acquisition. It also has its industry-leading medical technologies segment to fall back on. As the domestic and global population ages, demand for medical devices is expected to grow.
Aside from its revenue mix, J&J benefits from vision continuity. In Johnson & Johnson's 137-year history, the company has had just eight CEOs. Minimal turnover at the top ensures that strategic visions are being implemented and closely monitored.
Investors would also struggle to find a more financially sound public company than Johnson & Johnson. Out of the thousands of publicly listed stocks, only two carry the highest credit rating (AAA) bestowed by Standard & Poor's (S&P), a division of S&P Global. J&J is one of those two companies, implying S&P has the utmost confidence it can service and repay its outstanding debt.
If you need one more solid reason to add Johnson & Johnson to your portfolio, consider that it's raised its base annual dividend for 60 consecutive years. Only a small handful of publicly traded companies have a longer existing streak.
Microsoft
A second Dow Jones stock you can buy with confidence and hold forever is technology powerhouse Microsoft (MSFT 1.65%). Even though tech stocks are cyclical, and therefore prone to bouts of weakness during economic contractions, Microsoft has an abundance of competitive advantages that make it a no-brainer buy.
The best way to think about Microsoft is as a fusion of the past and the future. It's a company that still dominates certain aspects of legacy software, which allows it to generate copious amounts of cash that it can then invest in a variety of high-growth initiatives.
For example, the company's Windows operating system (OS) held a little over 76% of worldwide desktop OS share, as of June 2022. While this is down from a 91% share in January 2013, it's still globally dominant. Even though Windows isn't going to be a significant growth driver moving forward, this segment generates exceptionally high margins and bountiful cash flow that Microsoft is using to invest in the cloud and artificial intelligence (AI), among other initiatives.
With the exception of Windows OS and gaming/devices, all of Microsoft's operating segments were growing (excluding currency movements), as of the December-ended quarter. The eye-popper of the bunch continues to be Azure, which has snapped up an estimated 23% of worldwide cloud infrastructure service market share, according to Canalys. Sans currency movements, Azure helped deliver 38% year-over-year sales growth in Microsoft's fiscal second quarter. Enterprise cloud spending still looks to be in its early stages, which bodes well for Azure.
This is a good time to mention that Microsoft's incredible cash flow allows it to take chances that the vast majority of its competition can't afford to. For instance, Microsoft has leaned on its cash-rich balance sheet for more than 200 acquisitions, including LinkedIn, Nuance Communications, and Skype, among others. These acquisitions expand Microsoft's ecosystem, provide cross-selling opportunities, and give the company access to new potential customers.
Lastly, Microsoft is the other publicly traded company, aside from Johnson & Johnson, to bear the AAA credit rating from S&P. S&P has more faith in Microsoft to service and repay its debts than it does of the U.S. federal government (AA rating) doing the same.
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Visa
The third Dow stock you can confidently buy now and hold forever is payment processor Visa (V 0.65%).
Some investors may be hesitant about putting their money to work in financial stocks with a number of indicators pointing to a U.S. recession in the not-too-distant future. Financial stocks are cyclical, which means a company like Visa is likely to see consumer and enterprise spending slow or retrace during a recession.
But there's another side to this story -- and it very much favors long-term optimists. Although recessions are an inevitable part of the economic cycle, they don't last very long. By comparison, periods of economic expansion are almost always measured in years. Buying and holding shares in a company like Visa allows investors to take advantage of the natural expansion of the U.S. and global economy, along with consumer and enterprise spending, over time.
In addition to time being an ally, it also doesn't hurt that Visa finds itself in the pole position in the world's leading market for consumption (the U.S.). In 2021, Visa accounted for 52.6% of credit card network purchase volume in the United States. Further, it's the only one of the four major payment networks to have demonstrably expanded its share of U.S. credit card network purchase volume since the financial crisis.
Visa has plenty of opportunity to grow beyond the borders of the U.S. as well. Southeastern Asia, the Middle East, and Africa, remain largely underbanked and are ripe for payment disruption. Visa has the capital to push its infrastructure into these regions organically, but can also lean on acquisitions, if need be.
Visa's management team is the final puzzle piece that makes this company tick. Although Visa could, very easily, become a lender and collect interest income and fees, it's strictly chosen to stick with payment processing. This relatively conservative choice makes sense once recessions arise. Since Visa isn't a lender, it won't have to set aside capital to cover loan losses. Not having to tie up capital allows it to bounce back from economic downturns faster than most financial stocks.
