August was another great month for the stock market, with indexes hitting fresh highs. The Dow Jones Industrial Average (DJINDICES:^DJI) has now gained roughly 16% so far in 2021 and several of its members, including Microsoft and American Express, are up over 30% so far.
On the other hand, a few of the Dow’s 30 components are flat or even down slightly as we approach the final quarter of the year. Let’s take a look at whether those declines make Disney (NYSE:DIS), Walmart (NYSE:WMT), and Coca-Cola (NYSE:KO) attractive buys right now.
Disney gave investors just about everything they could have hoped for in its last earnings report, yet that wasn’t enough for Wall Street. The stock was flat in August and is currently in negative territory so far for the year.
There are many reasons for loving this stock, including Disney’s success at building its own content delivery platform that’s giving it a more direct relationship with its fans. The company even brings a few advantages in this fight compared to the industry leader Netflix. Management is happy to try out premium payment options for first-run films, for example, utilize advertising, and bundle a wide range of services including sports through ESPN+.
Wall Street is instead focused on the potential headache that a COVID-19 resurgence might cause for Disney’s resorts, parks, and cruise lines. The company’s finances have also been strained by the pandemic. But patient investors can look past those short-term challenges and buy a great business at a relative discount today.
Investors have left Coca-Cola’s shares on the shelf this year as they looked for growth in other Dow sectors like tech and finance. Yet the beverage titan’s late July earnings report demonstrated the power of its dominant hold on a huge consumer staple niche. Sales volumes jumped 18% in Q2 and operating earnings soared 46% after adjusting for currency exchange shifts.
The even better news is that Coke is back to winning market share now that consumers are returning to more normal mobility patterns. It is having no trouble passing along higher costs to shoppers, either.
Wall Street is worried that the lingering threat from the pandemic will complicate management’s efforts to extend that rebound momentum into the second half of 2021. That’s a real risk, given how closely Coke’s demand trends sync with consumer mobility. But this industry leader is almost sure to be setting annual sales records over the long term, while showering investors with direct cash returns.
Walmart has been left out of the recent stock market rally for no good reason. Sure, the retailer warned investors to expect an elevated level of spending over the next few years as it pours cash into its supply chain, store remodeling, and the e-commerce division. But that spending is in response to a huge and persistent sales volume lift. The company added $40 billion of sales to its annual footprint last year alone and has continued growing through the first six months of 2021.
Sure, the 1% revenue increase in the most recent quarter might seem unimpressive compared to the double-digit gains being posted by tech giants like Microsoft. However, Walmart has its own growing exposure to attractive tech niches, including e-commerce, data monetization, and digital advertising.
These revenue streams promise to push margins higher over time even as the company continues to dominate the physical retailing landscape. Thus, investors might consider owning a piece of this business following the stock’s flat performance through the first eight months of 2021.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.