Dow stocks are known as the bellwethers of the economy, and they are some of the most stable businesses in the world. But lately, some of the Dow stocks have been beaten up because they have missed some important industry changes.
As we look forward to 2024, I think the problems that Dow stocksDisney(NYSE: DIS), Intel(NASDAQ: INTC), and Verizon(NYSE: VZ) have faced over the past few years will turn around and provide opportunities for investors.
Disney's life beyond cable TV
It's been a rough few years for Disney, but the company is set to turn the corner on its long-term strategy to be a streaming company. CEO Bob Iger has indicated that Disney+, Hulu, and ESPN+ will soon be combined into a single app, and we know that there's solid subscriber growth despite rising prices. The combination of higher revenue and lower costs will likely lead to profitability in streaming next year.
As Disney goes all-in on streaming, it could sell assets like cable and network channels that are no longer core to the company's strategy. We don't know what will be sold yet, but there are reports that Disney could sell ABC, and India assets are for sale, even if Iger recently denied those reports.
Cash could be used to pay down debt or help fund the $60 billion park commitment Disney recently made. On top of studios, cable networks, and streaming, parks are a big business for Disney, and with decades of experience, it'll be a core for many decades to come. I think the turnaround for Disney is well underway.
Intel has fallen behind in the chip business because it was more vertically integrated than competitors, and missed the mobile market and much of the custom chip market as a result. However, a restructuring of the business has split Intel into a chip design business and a manufacturing business, which will work with third-party partners.
As the tech industry has become more reliant on Taiwan Semiconductor(NYSE: TSM) and Asian suppliers, the U.S. has realized it needs to catch up in chip manufacturing. That's allowed Intel to bid for billions of dollars in subsidies to build manufacturing in the U.S. It's even gotten $11 billion to build manufacturing in Germany.
There's a lot that needs to be done to complete Intel's turnaround over the next few years, but the groundwork is laid. The company is betting that its technology can catch up to TSMC, and I think that with a lot of financial help from governments around the world, it's a bet that will pay off.
Verizon turns cash flows around
Investors don't like the capital-intensive business wireless telecommunications has become, but over the last year Verizon has become a cash flow machine. You can see in the chart below that operating cash flow and free cash flow have improved significantly this year. That trend should continue as investment in the 5G network slows and operating cash flow increases as Verizon raises prices on some products.
And there's more to Verizon's growth than just wireless subscribers. The company is growing rapidly in fixed wireless, which is broadband served over wireless 5G as opposed to cables running into a home. It's also bundling services like streaming in with wireless services.
I think Verizon is a great buy as it enters a cash flow generation phase and investors get a 6.9% dividend for simply holding shares in this telecom giant.
Big names and great buys
Disney, Intel, and Verizon may not be the high-growth names some investors are looking for, but that's the point of Dow stocks. These are stable businesses, and right now I think they're overlooked by the market. A lot is beginning to go right at each, and that bodes well for their profitability in 2024 and beyond.
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Travis Hoium has positions in Intel, Verizon Communications, and Walt Disney. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing and Walt Disney. The Motley Fool recommends Intel and Verizon Communications and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.