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Valuation of the Dow Jones Industrial Average – August 2015 Update

photo (7)Each month ModernGraham takes a look at the Dow Jones Industrial Average, listing out each individual component in an easy to read table, and calculates a value for the index that is based on the ModernGraham valuation model’s estimates for intrinsic values for each component.  Over time this figure can be useful for determining whether the market as a whole is undervalued or overvalued.  Readers may find it useful to review the history of this screen to see how the index has moved in relation to its intrinsic value.

Readers may also find a screen of some of the best components of the Dow by reviewing 5 Undervalued Dow Companies to Research.

^DJI Chart

^DJI data by YCharts

At the time of writing, the Dow Jones Industrial Average (DJIA) was at 17,402.51. The ModernGraham Valuation of the DJIA was 19,118.97. As a result, the DJIA was trading at 91.02% 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 Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Dividend Yield
AXP American Express Company E 7/31/2015 $132.71 $80.98 61.02% 16.23 1.43%
AAPL Apple Inc. S 12/12/2014 $215.50 $115.24 53.48% 20.58 1.80%
BA Boeing Co E 5/17/2015 $195.80 $142.39 72.72% 20.55 2.56%
CAT Caterpillar Inc. S 7/21/2015 $82.62 $78.93 95.53% 13.40 3.90%
CSCO Cisco Systems, Inc. D 8/6/2015 $32.54 $27.90 85.74% 16.81 3.01%
CVX Chevron Corporation S 6/2/2015 $33.69 $86.81 257.67% 10.06 4.93%
DD E I Du Pont De Nemours And Co E 8/11/2015 $54.70 $53.27 97.39% 14.63 2.85%
DIS Walt Disney Co S 11/19/2014 $100.82 $106.96 106.09% 31.27 1.23%
GE General Electric Company S 3/2/2015 $9.65 $25.84 267.77% 19.43 3.56%
GS Goldman Sachs Group Inc S 11/10/2014 $71.04 $201.14 283.14% 14.37 1.29%
HD Home Depot Inc S 11/10/2014 $126.71 $117.71 92.90% 33.16 2.00%
IBM International Business Machines Corp. S 11/11/2014 $357.65 $156.11 43.65% 10.59 3.33%
INTC Intel Corporation D 5/18/2015 $32.91 $29.46 89.52% 14.10 3.26%
JNJ Johnson & Johnson D 6/1/2015 $85.77 $98.71 115.09% 18.77 3.04%
JPM JPMorgan Chase & Co. D 6/1/2015 $113.90 $67.23 59.03% 13.21 2.62%
KO The Coca-Cola Co S 3/3/2015 $19.68 $41.25 209.60% 22.30 3.20%
MCD McDonald’s Corporation S 11/11/2014 $99.75 $98.30 98.55% 18.94 3.46%
MMM 3M Co E 4/27/2015 $131.77 $148.52 112.71% 20.66 2.76%
MRK Merck & Co., Inc. S 11/12/2014 $8.19 $58.27 711.48% 26.13 3.09%
MSFT Microsoft Corporation E 8/6/2015 $19.31 $46.74 242.05% 21.64 2.65%
NKE Nike Inc E 8/12/2015 $95.34 $113.06 118.59% 32.96 0.99%
PFE Pfizer Inc. E 6/11/2015 $60.91 $35.35 58.04% 17.41 3.17%
PG Procter & Gamble Co S 2/16/2015 $31.58 $76.40 241.93% 19.64 3.47%
TRV Travelers Companies Inc D 5/15/2015 $253.10 $105.43 41.66% 11.98 2.31%
UNH UnitedHealth Group Inc S 11/15/2014 $136.02 $121.17 89.08% 22.91 1.65%
UTX United Technologies Corporation S 11/15/2014 $119.90 $98.69 82.31% 16.10 2.59%
V Visa Inc E 5/22/2015 $75.87 $73.57 96.97% 37.35 0.65%
VZ Verizon Communications Inc. S 3/4/2015 $37.76 $47.86 126.75% 22.68 4.60%
WMT Wal-Mart Stores, Inc. S 11/19/2014 $83.92 $72.61 86.52% 14.97 2.70%
XOM Exxon Mobil Corporation S 6/4/2015 $42.51 $78.81 185.39% 12.20 3.71%

Disclaimer:  The author held a long position in DIS and HD but did not hold a position in any other company mentioned in this article at the time of publication.

3 thoughts on “Valuation of the Dow Jones Industrial Average – August 2015 Update

  1. I’m confused. Why do you hold a position in Disney and Home Depot, if they are speculative. Graham espoused that a company should be sold if it fell into the category of speculative. Also, why do you lower the bar to make some companies defensive and enterprising when they do not meet all the qualifications? The purpose of Graham’s criteria were to only purchase shares of the highest financial strength. By lowering the bar, you are suggesting companies that should not be purchased. Graham opined such rigid criteria so as to gain the most reward with the least risk. I don’t understand your rationale in doing this.

    1. Both of those positions are very small holdings and were gifts from grandparents. The Disney one in particular is extremely small – I think it’s only 1 or 2 shares. I don’t consider them as officially part of my portfolio, but still disclose the holdings.

      I don’t feel that we’ve “lowered the bar” for any company to qualify. Rather, we’ve modernized the requirements to fit today’s environment and give some stability to the approach. The biggest example is current ratio, as many company don’t meet that requirement today but still have strong financial positions. By allowing a company to fail just one of the requirements for an investor type, it allows a company that doesn’t meet the current ratio requirement to still qualify if it meets all of the other requirements. Also, if a company meets all other factors, it can have a sub-par current ratio (i.e. 1.95 vs. 2.05) one quarter and still qualify for the investor type.

      The requirements still eliminate a very high percentage of companies from potential investment. ModernGraham currently covers 548 companies. Out of those, 315 are eliminated by the Graham requirements, and only 53 qualify for the Defensive Investor.

      1. Hi, I love your blog and your work. You create interesting research topics. I my opinion, the intrinsic values for Exxon and Chevron are too low, you must be using the current eps numbers only. I believe, to get a fair picture of their true value, you have to use the average of the last 10-12 years numbers, as they are at a cyclical low now. When I to the numbers for Chevron, I get a number in the $155-175 range.

        Best

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