Glance at the Dow

I decided to put together a list of the Dow Jones Industrial Average and see how our valuation formula values each component.  I’ve listed the result below.  I also ran the test for each component to determine if it would pass our list of guidelines for the defensive and enterprising investors and calculated how the current price compares to the valuation.  Please note that by no means do we ever make any recommendations to buy or to sell and take a moment to read our disclaimer while you’re at it.

Dow Component Symbol Defensive Enterprising Value Price
3M MMM No Yes $137 $76.51
Alcoa AA Yes Yes $85 $36.60
American Express AXP No No $60 $41.53
American International Group AIG Yes Yes $15 $42.88
AT&T T No Yes $68 $35.01
Bank of America BAC Yes Yes $68 $36.74
Boeing BA No Yes $135 $76.60
Caterpillar CAT No Yes $172 $69.84
Chevron Corp CVX Yes Yes $284 $85.26
Citigroup C Yes Yes n/a $20.91
Coca-Cola KO No Yes $54 $58.85
DuPont DD No Yes $104 $45
ExxonMobil XOM No Yes $233 $82.49
General Electric GE No Yes $46 $32.23
General Motors GM No No n/a $21.96
Hewlett-Packard HPQ No Yes $71 $47.31
Home Depot HD Yes Yes $61 $25.88
Intel INTC No Yes $34 $20.07
IBM IBM No Yes $154 $113.94
Johnson & Johnson JNJ No Yes $66 $61.51
JPMorgan Chase JPM Yes Yes $130 $37.56
McDonald’s MCD No Yes $46 $52.27
Merck MRK No No n/a $41.75
Microsoft MSFT No Yes $35 $27.87
Pfizer PFE Yes Yes $47 $21.35
Proctor & Gamble PG No Yes $98 $65.80
United Technologies Corp UTX No Yes $109 $67.49
Verizon Communications VZ No Yes $63 $35.08
Wal-mart WMT No Yes $65 $49.90
Walt Disney DIS Yes Yes $63 $30.76

You’ll notice that a great deal of these are significantly undervalued currently according to our formula.  This is evidence that quantitative studies are only part of the requirements of prudent investing.  The intelligent investor must also take into account management styles and determine the likelihood of the market eventually meeting the estimated value.

Review of Previous Undervalued Company

4 Weeks Ago- Johnson & Johnson (JNJ)

Johnson & Johnson has had a very flat month.  When we initially looked at it, it was trading at $64.58 – today it closed at $64.82 for a big gain of 0.3%.  The stock started the month down but has since recovered.  With any company this size, there are a number of news stories almost every day, but the most recent big news is that Johnson & Johnson has sued rivals Boston Scientific, Guidant, and Abbott Labs.  The lawsuit claims that the rivals reached an agreement on the acquisition of Guidant by Boston Scientific because of information leaked to Abbott.  We do not believe this lawsuit will negatively affect Johnson & Johnson in the long-run, but instead may be beneficial to the company as it could be detrimental to their competitors.

We believe Johnson & Johnson is still a very good value for the enterprising investor following Benjamin Graham’s strategies.  We believe Johnson & Johnson has potential to reach $81 within the next few years.

Neither of us held a position in Johnson & Johnson at the time of publication.  Also, please read our disclaimer.

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