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Different investors usher in a new bull market in other ways. In my opinion, a new bull market begins when two criteria are met. First, an index will need to have recovered at least 20% from recent bear market lows. Second, you want to set a new all-time high.
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American Express (AXP -1. 06%) was added to the Dow Jones in 1982, making it one of the five oldest members of the index. The company is a giant in the money industry and offers global credit card payment processing.
The Dow’s performance has been helped quite a bit by American Express in 2023. Amex stock has soared more than 20% year to date, with the company’s third-quarter update providing a nice catalyst.
Amex reported its sixth consecutive quarter of record earnings in the third quarter. Its earnings consistent with the constant percentage also rose 34% year-over-year to a record level. With the U. S. economy With the U. S. poised for additional growth, American Express deserves to be able to continue its momentum in 2024.
Even after posting false profits this year, American Express stock is trading at a forward price-to-earnings ratio of about 14. 5. That’s a much more attractive valuation than its fellow Dow Jones member and main rival to Visa credit cards. Inventory has enough room to maneuver in the new year.
It is conceivable that the Dow Jones will have a strong bull market without Microsoft (MSFT -0. 07%) performing well. However, I think it’s unlikely. Microsoft accounts for more than 6. 5% of the index, behind UnitedHealth Group and Goldman Sachs.
Microsoft has been very hot in 2023, with its shares up more than 50%. The company has been a big beneficiary of the explosion of interest in generative AI, thanks to its partnership and significant stake in ChatGPT creator OpenAI. .
Some might worry that the party could soon be over for Microsoft. After all, its stock now trades at a forward earnings multiple of 33, which reflects a premium valuation. However, the generative AI boom should provide a major tailwind for the company for years to come.
I also like the fact that Microsoft is well placed in several other hot technology areas. The company is now even more vital in the video game market with the acquisition of Activision Blizzard. It is a leading provider of cloud services and a leader in cybersecurity. also one of the few corporations at the forefront of quantum computing research.
Unlike American Express and Microsoft, Verizon Communications (VZ 0. 72%) maintained the Dow Jones in 2023. Shares of the telecommunications company are down nearly 5% this year.
However, there is much more to the story. Verizon’s inventory had fallen more than 20% since the beginning of October, but had a big recovery at the end of the month, thanks to strong third-quarter results.
Verizon beat Wall Street earnings estimates. Its year-to-date cash was up $2. 2 billion year over year, enough to prompt the company to raise its full-year cash guidance.
Value investors may find the stock really interesting as its shares are trading at just 8 times expected earnings.
Income investors have a lot to like about Verizon, too, with a dividend yield that currently stands at 7.1%. The company has increased its dividend for 17 consecutive years. With the company generating more free cash flow, I expect this streak of dividend hikes will continue in 2024.
American Express is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Microsoft. The Motley Fool has positions in and recommends Goldman Sachs Group, Microsoft, and Visa. The Motley Fool recommends UnitedHealth Group and Verizon Communications. The Motley Fool has a disclosure policy.
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