The market's bullishness in 2023 has been led by the biggest growth stocks of the tech-heavy Nasdaq Composite. In fact, the Nasdaq-100 became so top-heavy that in July the exchange was forced to rebalance the index, reducing the overall impact its top technology names had on the value of the market-cap-weighted benchmark.
If this budding bull market is truly built to last, however, the next few years probably won't look like the last few months. Leaders come and go. Other kinds of blue chip stocks will fall back into favor.
With that as the backdrop, here's a closer look at three slower-moving, less-explosive stocks from the 30 blue-chip stocks that make up the Dow Jones Industrial Average that have the potential to outpace most of their peers for the long haul.
1. Visa
Visa (V 0.33%) isn't just a credit card middleman. It's the world's biggest such middleman, handling 40% of the planet's card-based transactions (according to numbers from Nilson). The company facilitates more than $14 trillion worth of purchases per year at more than 100 million locales, supporting roughly 15,000 financial institutions' branded cards. Moreover, with the exception of mid-2020 to mid-2021 -- at the height of the COVID-19 pandemic -- not once since going public in 2008 has Visa failed to grow its quarterly top line on a year-over-year basis. And, since 2021 it's more than bounced back from its pandemic-prompted lull, reporting record-breaking revenue last year.
Its existing payment network is well entrenched, which is how and why the company's been able to continue growing and hold onto its lead on the rest of the market.
Yet, there's still plenty of room for continued growth even if Visa doesn't add meaningfully more market share in the foreseeable future. The San Francisco branch of the Federal Reserve reports in its most recent Diary of Consumer Payment Choice report that in 2022, 18% of purchases made in the United States were handled with cash. Another 13% was done using ACH (automated clearing house) options that directly withdraw money from a bank account.
Given all the work Visa's innovation labs are doing to get more cards into consumers' hands and giving current cardholders more reasons to use their plastic rather than paper, the rest of the payments market is a major growth opportunity. Presumably, the rest of the world is moving in the same direction, opening the door to the same prospective growth.
Analysts see it that way, anyway. They're calling for top-line growth of more than 11% this fiscal year, and for nearly 11% growth next year.
2. Microsoft
Microsoft (MSFT 2.22%) was one of the seven Nasdaq-listed stocks that had rallied so much since late last year that a special rebalancing of the index became necessary. Unlike most of those other six tickers, however, Microsoft shares don't pose a major pullback risk stemming from a disappointing quarter.
OK, Microsoft's revenue guidance for the quarter now underway was a letdown. The company expects a top line of somewhere between $53.8 billion to $54.8 billion versus the consensus analyst estimate of $54.9 billion. Microsoft's cloud business's growth is slowing, too, rattling investors who became accustomed to seeing strong forward progress from this particular profit center.
Take a step back and look at the bigger picture, though. Last quarter's sales were still up 8% year over year (and higher by 10% on a constant-currency basis) despite the challenging economic backdrop, while operating income improved by 18% (and 21% on a constant-currency basis). The analyst community is calling for comparable top- and bottom-line growth this fiscal year as well as next.
Now take yet another step back and look at the even bigger picture. Try to envision a scenario where the world no longer uses computers, abandons office productivity software, stops playing video games, and no longer needs cloud computing services.
The prospect is preposterous, of course. As long as all of these markets exist, Microsoft will be generating strong revenue.
3. UnitedHealth Group
Last but not least, add UnitedHealth Group (UNH -0.10%) to your list of Dow Jones stocks you want to own during the next bull market, then the one after that, and then the one after that.
Blazing growth? No, the health insurance business just doesn't offer it ... not even to stalwarts like UnitedHealth. What this company lacks in growth firepower, however, it makes up for in reliability and predictability.
Like Visa, this particular insurer hasn't failed to produce year-over-year revenue growth in any quarter in over a decade. Unlike Visa, UnitedHealth managed to do so even in the midst of the COVID-19 pandemic. Profits are a slightly different story, as you can see. Indeed, COVID-19 proved particularly costly for the company, pinching profits in late 2020 due to a swell of expensive hospital stays.
UNH Revenue (Quarterly) data by YCharts
The health insurance business is still a resilient one, though. That's because one year's premiums are ultimately based on last year's costs, then marked up. And, given that most people believe they must have this sort of protection, insurers enjoy tremendous pricing power and price inelasticity. Moreover, being a market leader, UnitedHealth Group enjoys tremendous leverage when negotiating with healthcare service providers' prices.
Perhaps the top reason to take a look at Dow component UnitedHealth right now, however, is that the stock's still so undervalued despite healthy gains since late 2019. Priced at $512 per share, this stock's not only priced well below the consensus target near $570, but is trading even below the lowest analyst target of $520.
In this same vein, of the 26 analysts following UnitedHealth Group, 19 of them consider it an outright buy.
That's a lot of professionals saying this well-watched prolific stock is being underestimated by the broad market at this time. If that's because most investors are looking for technology and growth stocks instead, continued marketwide bullishness will eventually re-favor names like UnitedHealth.
