2 Dow Stocks to Buy More of in February

The market kicked off 2023 with a bang as the Dow Jones Industrial Average jumped higher by nearly 3% year to date. Yet, several of the blue-chip giants that make up this index remain well below the highs they set back when markets were soaring in 2021.

With those discounts in mind, let’s look at a few high-performing Dow stocks that still appear attractive after January’s rally. Read on for some good reasons to buy Nike (NKE 2.75%) and McDonald’s (MCD 1.46%) right now.

The Nike rebound

Nike stock raced higher by 9% in January but could have much bigger returns to come. It posted accelerating sales gains in late December, after all, with revenue jumping 27% in fiscal Q2. Nike benefited from a return to growth in the China market, but also from much higher demand in Europe and the U.S. for its newest footwear and apparel launches.

“Our growth was broad-based and driven by our expanding digital leadership and brand strength,” CEO John Donahoe told investors on Dec. 20.

The better news is that Nike is increasingly booking those sales directly with consumers rather than relying on retailing partners like Foot Locker. That shift should push profitability higher over the next several years, perhaps toward the nearly 60% gross margin that Lululemon Athletica enjoys.

A recession would threaten that bullish outlook. And Nike will need to be on top of its game to extend its market share lead against the competition. But its latest results demonstrate it has pricing power and sales momentum heading into 2023.

McDonald’s earns more

It might surprise you to learn that McDonald’s was one of the Dow’s better performers in 2022 after posting a 2% decline as the broader index fell 9%. Investors who buy the stock now might see similar outperformance in 2023.

The fast-food chain recently announced that sales gains sped up through late 2022, with comparable-store sales now rising at a 13% rate globally. Management warned about some headwinds acting as a drag on growth, including inflation. But look closer into its results and you’ll see why McDonald’s has such great potential.

The double-digit sales gain in Q4 came from a balance between higher traffic and increased spending, for one. Contrast that success with other Dow giants like Proctor & Gamble, which are relying exclusively on price increases to drive growth right now.

McDonald’s is also one of the most efficient businesses on the index, with an operating profit margin that routinely clocks in well above 44% of sales. Not even Apple, with its premium prices on expensive electronics, can approach that figure.

MCD Operating Margin (TTM) data by YCharts

McDonald’s stock valuation is high because its financial strengths are no secret on Wall Street. But that’s no reason to ignore this stellar business. The chain is poised to steadily expand its market share over the next several years, just as it did in the period leading up to — and through — the pandemic. Toss in cash returns from dividend payments and stock buybacks, and you’ve got all the necessary ingredients for an excellent addition to your portfolio.

Demitri Kalogeropoulos has positions in Apple, McDonald’s, and Nike. The Motley Fool has positions in and recommends Apple, Lululemon Athletica, and Nike. The Motley Fool recommends Foot Locker and recommends the following options: long January 2025 $47.50 calls on Nike, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.