It was another historic year for Wall Street's premier health barometer, the Dow Jones Industrial Average (^DJI 1.56%). The iconic index rose 13% last year and came within a stone's throw of eclipsing 49,000.
In the 129 years since its inception, the Dow Jones has evolved from an industrial-focused 12-stock index to one that's now home to 30 well-known, diverse, multinational businesses. But just because these companies have been historically successful, it doesn't mean all 30 are worth buying in 2026.
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As we turn to the next chapter on Wall Street, two Dow stocks stand out as phenomenal buys in 2026, while another may struggle to justify its premium valuation.
Dow stock No. 1 to buy hand over fist in 2026: Visa
Although the Dow Jones Industrial Average is packed with time-tested, profitable companies, world-leading payment processor Visa (V 0.81%) stands out as a genius buy in the new year.
Like most financial stocks, Visa is a cyclical company that ebbs and flows with the health of the U.S. and global economy. However, the U.S. economy's peaks and troughs aren't mirror images of each other. Whereas the average U.S. recession has lasted just 10 months over the previous eight decades, the typical economic expansion persists for approximately five years. Lengthy periods of economic growth incentivize consumers and businesses to spend, which is fantastic news for a company whose bottom line is fueled by merchant fees.
NYSE: V
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Visa can also benefit from the Federal Reserve's ongoing rate-easing cycle. Lower interest rates are designed to encourage corporate borrowing and consumer spending. The impact of three 25-basis-point rate cuts to end 2025 should begin to show up in economic data during the latter half of 2026.
What's more, Visa isn't a lender. Being solely focused on payment facilitation means it doesn't have to set aside capital to cover credit card delinquencies and/or loan losses. When recessions do occur, few financial stocks have historically rebounded faster than Visa.
Another compelling reason to add Visa to your portfolio in 2026 is its opportunity in overseas markets. Visa has maintained a double-digit growth rate in cross-border payment volume for years, signaling the extent of its expansion runway in international markets.
To round things out, Visa's forward price-to-earnings (P/E) ratio of 24 represents a 13% discount to its average forward P/E ratio over the last five years.
Image source: Getty Images.
Dow stock No. 2 to buy hand over fist in 2026: UnitedHealth Group
A second Dow Jones Industrial Average component that's begging to be bought in the new year is its worst performer in 2025, health insurer and healthcare services provider UnitedHealth Group (UNH 2.78%).
Let's not beat around the bush -- UnitedHealth Group had several issues last year, and none of them should be swept under the rug. Among the most significant, management failed to recognize a shift in Medicare Advantage operating costs and higher utilization rates among its insured members. When coupled with a U.S. Justice Department probe concerning its Medicare Advantage billing practices, it became the perfect storm.
The silver lining for UnitedHealth is that it's faced headwinds before and has consistently evolved into a stronger company over time.
For instance, UnitedHealth hasn't wasted any time adjusting its insurance operations. It's pulling out of some unprofitable Medicare Advantage markets and will look to increase premiums, where applicable, throughout its health insurance operations. Since periods of increased outlays are a given for insurance companies, they rarely have any trouble passing along higher premiums to their members. This should result in a clear improvement in UnitedHealth's insurance margins in 2026.
NYSE: UNH
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Stephen Hemsley returning as CEO is another catalyst that can propel this stock higher in the new year. On top of reining in insurance costs, Hemsley is attempting to reignite growth in healthcare services segment Optum, which has made UnitedHealth such a phenomenal long-term investment. The incorporation of artificial intelligence (AI) and the unification of key platforms should be a boon for Optum Insight, which provides technology-focused solutions for healthcare companies.
There's also an attractive value proposition with UnitedHealth Group stock following an abysmal 2025. Though its projected P/E of 19 in 2026 is in line with its five-year average, adjustments being made by management have the potential to ramp the company's earnings per share back to the $27.66 it earned in 2024 within a couple of years.
The Dow Jones Industrial Average stock to avoid in 2026: Nvidia
However, not every Dow stock makes for a smart buy in the new year. Although it's been the face of the AI revolution and one of the hottest stocks to own over the last three years, Nvidia (NVDA 1.53%) is the Dow 30 component to avoid in 2026.
To be crystal clear, I'm not insinuating Nvidia is a bad company. On the contrary, its graphics processing units (GPUs) are the top option for businesses overseeing AI-accelerated data centers. No external rivals have come close to matching Nvidia's GPUs on a compute basis, which has led to exceptional pricing power and a juicy gross margin.
NASDAQ: NVDA
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The concerns I have with Nvidia in 2026 are threefold.
To begin with, historical precedent suggests there's a heightened possibility of an AI bubble forming and bursting. Every game-changing technology dating back to the advent of the internet in the mid-1990s has navigated its way through a bubble-bursting event. While demand for AI infrastructure has been robust, businesses appear to be years away from optimizing this technology. If the AI bubble bursts, Nvidia shares would take it on the chin.
Secondly, Nvidia has to contend with growing internal competition. Although its GPUs have outpaced external rivals, many of its top customers by net sales are developing their own GPUs or solutions to use in their data centers. Even though this internally developed technology isn't as fast as Nvidia's hardware, it's considerably cheaper and more readily accessible. In other words, it can cost Nvidia valuable data center space or slow future GPU replacement cycles.
The third and final factor is Nvidia's valuation. While its forward P/E ratio of 25 isn't particularly high, the price-to-sales (P/S) ratio tells a different story. No industry-leading company at the forefront of a next-big-thing trend has been able to sustain a P/S ratio of 30 or above over the last three decades. Nvidia hit a P/S ratio of 30 in early November. Though its P/S ratio has since fallen to 25 as sales have increased, this is still a historically high valuation premium.
