Dow Surpasses 42,000: 3 Magnificent Stocks to Buy Right Now

The Dow Jones Industrial Average is having a record year. The widely watched index broke the 40,000 mark in May for the first time. This week, the Dow topped 42,000 — setting another all-time high.

Should Investors Check Out Some of the Top Dow Jones Index Components? I think so. Here are three magnificent Dow stocks to buy right now.

1. Amazon

Amazon (AMZN -0.71%) easily outperforming the Dow Jones Industrial Average this year. Shares of the e-commerce and cloud services giant rose 27 percent, compared with an 11 percent gain for the Dow. I think Amazon still has plenty of room to run.

The company has demonstrated that it can successfully adapt to changing environments. For example, Chief Executive Officer (CEO) Andy Jassy noted in Amazon’s second quarter earnings call on August 1, 2024 that customers “continue to trade down on price when they can.” Weeks later, Amazon launched the new private label Amazon Saver, which offers discounted groceries, most priced under $5.

I expect Amazon will continue to reduce the costs of its e-commerce business and increase profitability with technological innovations, especially artificial intelligence (AI) and robotics. The company’s technological prowess should also help it improve customer service and speed up delivery.

However, Amazon’s biggest growth opportunity may be in helping other organizations implement AI. Amazon Web Services (AWS) remains the market leader in cloud services. It provides a wide range of tools to make implementing AI models easier and faster. AI adoption should accelerate migration to the cloud — and AWS is poised to be a key beneficiary.

2. The Home Depot

The Home Depothis (HD -0.06%) the year-to-date gain of 14% looks pretty good considering the poor financial results. The home improvement retailer reported weak year-over-year revenue growth in Q2, which would have been a decline had it not been for the acquisition of SRS Distribution. Home Depot’s earnings also fell from the year-ago period.

What’s weighing on The Home Depot? CEO Ted Decker diagnosed the problem in his second-quarter earnings call remarks: “Higher interest rates and greater macroeconomic uncertainty have weighed on overall consumer demand.” As a result, consumers spent less on home improvement projects.

But the Federal Reserve is now coming to the rescue. The Fed has announced a 0.5% cut in interest rates, with more cuts likely over the next few months. This should provide a spark for the construction and home improvement markets.

More importantly, the long-term outlook for The Home Depot is strong. The average age of homes in the US is over 40 years. You can bet that demand in the home improvement market will be healthy for a long time. With a market share of 17%, The Home Depot should reward investors for a long time.

3. Verizon Communications

Verizon Communications (See 0.16%) is another major contributor to the Dow’s record performance in 2024. Shares of the telecommunications leader are up nearly 19%.

Sure, Verizon’s revenue growth is nothing to speak of. In Q2, total revenue was up just 0.6% year-over-year. However, the company appears to be on the right track, with new services offering more options to businesses and consumers.

The main draw for Verizon is its dividend program. Verizon’s forward dividend yield exceeds 6%. The company has increased its dividend for 18 consecutive years, and I expect this impressive streak to continue.

I also think Verizon’s future may be brighter than its recent past. The company is already reaping the benefits of its investment in AI to improve operations. To that end, 6G networks, which will support a host of new capabilities for wireless users, could also provide a significant tailwind for Verizon by the end of the decade.