While the Dow Jones 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 positioned for long-term growth and two that may face some trouble.
Two Stocks to Sell:
Honeywell (HON)
Market Cap: $121.6 billion
Originally founded in 1906 as a thermostat company, Honeywell (NASDAQ: HON) is a multinational conglomerate known for its aerospace systems, building technologies, performance materials, and safety and productivity solutions.
Why Does HON Give Us Pause?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 3.9% annually
- Free cash flow margin shrank by 3.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Honeywell’s stock price of $190.05 implies a valuation ratio of 17.3x forward price-to-earnings. Read our free research report to see why you should think twice about including HON in your portfolio.
Sherwin-Williams (SHW)
Market Cap: $80.73 billion
Widely known for its success in the paint industry, Sherwin-Williams (NYSE: SHW) is a manufacturer of paints, coatings, and related products.
Why Are We Hesitant About SHW?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Projected sales growth of 2.6% for the next 12 months suggests sluggish demand
- 8.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $325.43 per share, Sherwin-Williams trades at 25.7x forward price-to-earnings. Check out our free in-depth research report to learn more about why SHW doesn’t pass our bar.
One Stock to Watch:
McDonald's (MCD)
Market Cap: $214.4 billion
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Is MCD Interesting?
- Same-store sales growth averaged 4.5% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Asset-lite franchise model is reflected in its superior unit economics and a best-in-class gross margin of 56.9%
- MCD is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
McDonald's is trading at $305.90 per share, or 24.1x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
