While the Dow Jones (^DJI) represents industry leaders, not every stock in the index is a safe bet. Some are facing headwinds like declining demand, rising costs, or disruptive new competitors.
Finding the best companies in the Dow Jones isn’t always straightforward, and that’s why we started StockStory. That said, here is one Dow Jones stock that could be a good addition to your portfolio and two that may face some trouble.
Two Stocks to Sell:
Home Depot (HD)
Market Cap: $356.8 billion
Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE: HD) is a home improvement retailer that sells everything from tools to building materials to appliances.
Why Is HD Not Exciting?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Estimated sales growth of 1.6% for the next 12 months implies demand will slow from its six-year trend
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 2.5 percentage points
Home Depot is trading at $358.78 per share, or 23.4x forward P/E. Read our free research report to see why you should think twice about including HD in your portfolio.
Nike (NKE)
Market Cap: $106.3 billion
Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE: NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.
Why Do We Think NKE Will Underperform?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall even further
- Eroding returns on capital suggest its historical profit centers are aging
At $72 per share, Nike trades at 42.1x forward P/E. To fully understand why you should be careful with NKE, check out our full research report (it’s free).
One Stock to Watch:
Merck (MRK)
Market Cap: $204.7 billion
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Are We Positive On MRK?
- Unparalleled scale of $63.92 billion in revenue gives it negotiating leverage and staying power in an industry with high barriers to entry
- Free cash flow margin grew by 10.7 percentage points over the last five years, giving the company more chips to play with
- Industry-leading 15.6% return on capital demonstrates management’s skill in finding high-return investments
Merck’s stock price of $81.52 implies a valuation ratio of 9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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