History Says the Dow Jones Is Headed Higher: 2 Blue Chip Stocks to Buy Now and Hold for Years

The Dow Jones Industrial Average closed higher for 13 consecutive days in July amid signs of economic resilience. That winning streak hints at more gains in the remaining months of the year. In the past four decades, the blue-chip index has traded higher for at least 10 consecutive days only five other times, and it returned an average of 16.8% during the years in which those win streaks took place.

So what? The Dow Jones is up 6% year to date, but history says the index could add another 11% if the current year falls in line with the average. Here are two blue-chip Dow stocks to buy now -- and should benefit if that trend holds up.

1. Microsoft

Microsoft (MSFT 0.62%) beat expectations on the top and bottom lines in the fiscal fourth quarter (ended June 30). Revenue jumped 8% to $56.2 billion as strong growth in enterprise software and cloud services offset weakness in advertising and Windows licensing agreements, and GAAP earnings jumped 21% to $2.69 per diluted share.

Investors have three reasons to be bullish on Microsoft. First, many of its enterprise software products are the gold standards in their respective verticals, including Microsoft 365 for office productivity, Dynamics 365 for enterprise resource planning (ERP), and Microsoft Teams for unified communications. All three of those markets are expected to grow at a double-digit pace through 2030.

Second, Microsoft is bringing generative artificial intelligence (AI) capabilities to its enterprise software. For instance, Microsoft 365 Copilot leans on generative AI to write content in Word, analyze data in Excel, and draft emails in Outlook. Similarly, Dynamics 365 Copilot leans on generative AI to streamline workflows, ranging from sales to supply chain management. Those add-on products put Microsoft in front of a massive opportunity. Ark Invest says AI software revenue will increase at 42% annually through 2030.

Third, Microsoft Azure is gaining share in cloud computing. It accounted for 22% of cloud infrastructure and platform services in the most recent quarter, up one percentage point from one year ago and up two percentage points from two years ago. That momentum comes from strength in hybrid computing, AI supercomputing infrastructure, and AI developer services, according to CEO Satya Nadella, and Azure's exclusive partnership with ChatGPT creator OpenAI should continue to draw new business to the platform in the future. The cloud computing market is forecast to grow at a 14.1% annualized rate through 2030, according to Grand View Research.

Here's the bottom line: Microsoft has a strong presence in enterprise software and cloud computing, two markets expected to grow at a double-digit pace through 2030, and its decision to lean into AI could further turbocharge sales. Indeed, Morgan Stanley analyst Keith Weiss recently called Microsoft the software company "best positioned" to monetize generative AI.

All things considered, investors can reasonably expect revenue to grow in the low-double-digits through the end of the decade. That makes its current price-to-sales ratio of 11.3 times sales look reasonable despite being at a slight premium to the five-year average of 10.2 times sales. Investors should feel comfortable buying a small position in this blue-chip stock right now.

2. Visa

Payments company Visa (V 0.75%) reported encouraging financial results in the third fiscal quarter (ended June 30). Revenue rose 12% to $8.1 billion, driven by strong growth in payments volume and processed transactions, and GAAP earnings soared 25% to $2.00 per diluted share. That strong bottom-line growth can be attributed to excellent cost control and the $3 billion the company spent on share repurchases.

Investors have good reason to be bullish on Visa. It operates the largest payments network on the planet in terms of acceptance locations and purchase transaction volume, and that scale gives rise to a durable cost advantage. Specifically, Visa pays next to nothing to process each incremental transaction, and it can spread its expenses over more transactions than its peers. As a result, Visa has a higher profit margin than its closest rival Mastercard, and a much higher profit margin than American Express and Discover Financial Services.

Looking ahead, Visa has a two-fold tailwind at its back. First, the global economy tends to expand from one year to the next, due in part to increases in consumer spending and business investments. Second, more of those transactions move to electronic channels like credit cards, digital wallets, and bank payments each year. Indeed, credit card revenue alone is projected to grow at 9% annually through 2031, according to InsightAce Analytic.

Visa should be able to match that pace at a minimum. Beyond payment cards, the company has opportunities in value-added services and account-based payments, and its revenue increased at 10.7% annually over the last decade. Assuming a similar trajectory in the future, Visa looks reasonably priced at 15.8 times sales, and that valuation is a slight discount to its five-year average of 18.2. Investors would do well to consider buying a small position in this blue-chip stock today.