Glance at the Dow – March 2014


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As one of the features in each month’s issue of ModernGraham Stocks & Screens, I take a look at the Dow Jones Industrial Average, listing out each individual component in an easy to read table, and calculate a value for the index that is based on the ModernGraham valuation model’s estimates for intrinsic values for each component.  “Glance at the Dow” will be included in a regular post on the blog on the second Wednesday of each month, and will continue to be included in each month’s ModernGraham Stocks & Screens, which is released on the fourth Wednesday of every month and includes screens of all the companies reviewed by ModernGraham.  I hope this is useful to all my subscribers, as another tool for evaluating Mr. Market’s current prices.

Dow Jones Industrial Average Chart

Dow Jones Industrial Average data by YCharts

Dow Jones Industrial Average data by YCharts

At the time of writing, the Dow Jones Industrial Average (DJIA) was at 16,351.25. The ModernGraham Valuation of the DJIA was 18,156.27. As a result, the DJIA was trading at 90.06% of its estimated value. This figure is within the ModernGraham margin of error, and therefore it appears the DJIA is presently fairly valued.  To see the individual valuation articles, please click on the company name in the table below.

Ticker Investor Type Latest Valuation Date ModernGraham Valuation Current Price Price as a percent of Value Price/EPSmg
AXP American Express Company E 1/23/2014 $115.45 $93.20 80.73% 23.07
BA The Boeing Company E 2/17/2014 $133.72 $125.67 93.98% 24.50
CAT Caterpillar Inc. D 1/29/2014 $161.33 $96.84 60.03% 15.35
CSCO Cisco Systems, Inc. D 2/1/2014 $31.26 $21.61 69.13% 13.26
CVX Chevron Corporation D 2/25/2014 $248.34 $114.51 46.11% 9.89
DD E I Du Pont De Nemours And Co E 2/6/2014 $45.79 $66.01 144.16% 21.93
DIS The Walt Disney Company S 11/19/2013 $71.18 $81.05 113.87% 26.93
GE General Electric Company D 3/1/2014 $3.77 $25.90 687.00% 19.47
GS Goldman Sachs Group Inc S 11/6/2013 $23.03 $169.89 737.69% 12.29
HD The Home Depot, Inc. S 11/6/2013 $68.76 $81.29 118.22% 28.32
IBM International Business Machines Corp. S 11/8/2013 $381.67 $186.76 48.93% 13.67
INTC Intel Corporation D 2/18/2014 $76.82 $24.73 32.19% 12.37
JNJ Johnson & Johnson E 2/25/2014 $39.99 $93.49 233.78% 21.95
JPM JPMorgan Chase & Co. D 2/23/2014 $137.57 $58.19 42.30% 13.20
KO The Coca-Cola Company S 3/2/2014 $47.57 $38.80 81.56% 19.80
MCD McDonald’s Corporation S 11/11/2013 $142.46 $98.78 69.34% 18.96
MMM 3M Co E 1/21/2014 $100.49 $132.51 131.86% 21.51
MRK Merck & Co., Inc. S 11/12/2013 $0.00 $56.69 N/A 27.39
MSFT Microsoft Corporation D 2/9/2014 $49.37 $38.02 77.01% 15.46
NKE Nike Inc E 2/10/2014 $61.49 $78.80 128.15% 30.54
PFE Pfizer Inc. E 11/13/2013 $16.12 $32.42 201.12% 23.66
PG The Procter & Gamble Company S 2/11/2014 $44.92 $78.95 175.76% 28.00
T AT&T Inc. S 10/28/2013 $12.00 $32.23 268.58% 17.14
TRV Travelers Companies Inc D 2/14/2014 $96.30 $83.58 86.79% 12.22
UNH UnitedHealth Group Inc. D 2/15/2014 $141.46 $77.78 54.98% 15.71
UTX United Technologies Corporation S 11/15/2013 $89.99 $115.64 128.50% 20.47
V Visa Inc E 2/16/2014 $251.97 $227.18 90.16% 34.74
VZ Verizon Communications Inc. S 3/4/2014 $13.83 $46.70 337.67% 26.09
WMT Wal-Mart Stores, Inc. S 11/19/2013 $101.49 $74.92 73.82% 15.74
XOM Exxon Mobil Corporation D 3/3/2014 $119.08 $94.01 78.95% 12.02

Disclaimer:  The author held a long position in DIS and HD at the time of publication.

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4 comments for “Glance at the Dow – March 2014

  1. Andy
    March 31, 2014 at 8:44 pm

    Thank you for this Glance at the Dow and for all of your posts. They are very helpful and appreciated. I get that E is for Enterprising and D is for Defensive but what does S stand for?

    • April 3, 2014 at 7:01 pm

      Andy, Thanks for the comment. Any company that does not qualify for either the Defensive Investor or the Enterprising Investor is deemed to be Speculative. So any company with an S is considered Speculative.

  2. Andy
    March 31, 2014 at 9:07 pm

    Two more questions. Your disclosure states that you currently hold shares of HD and DIS, both of which are overvalued. Have you held them for a long time?

    Your MG valuations for GE, T and JNJ appear extremely low compared to market valuation. Why the discrepancy? Thank you.

    • April 3, 2014 at 7:08 pm

      My holdings in HD and DIS are very small. HD was the first company I bought as an adult back in 2005, and the DIS holding is one share my wife received as a gift many years ago.

      The MG Value is based on Ben Graham’s formula, with slight modifications. The main variable at play is the growth rate. I estimate the growth based on the growth demonstrated in normalized earnings over the last five years. For some companies that can lead to very low estimates of intrinsic value if there has not been much growth. When that happens it indicates any value in the company must come from something other than the earnings.

      Hope that helps!

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