The Dow may not represent the market as a whole, but the companies in the index do a pretty good job of representing the economy. With the Federal Reserve continuing its quantitative easing program, money should continue to move away from bonds as people seek yield. Still, there is some risk that the pace of this move will slow and could even reverse depending how much tapering actually occurs in 2014. This will definitely affect my choices for 2014's selections.
That's why I'm going to select a company that you should own for the long haul anyway, and why I'm choosing it for the third year in a row. Walt Disney (NYSE:DIS) has only strengthened its position as the global leader in diversified entertainment. After buying Pixar and Marvel studios, Disney continued its acquisitive ways by spending $4 billion on Lucasfilm. Having now added the Star Wars franchise to its vault, the company sets itself up for decades of revenue generation by exploiting this juggernaut franchise. The same goes for the purchase of the Indiana Jones franchise. Even without these additions, the massive collection of entertainment assets under the Disney name provides it with virtual insulation against everything save Armageddon. The stock trades at a 2014 P/E of 19.5, against 16.5% growth this year. The company has $6.8 billion in cash and generated $6.7 billion in free cash flow in FY13. It's on solid ground.
I didn't intend to wait until the third trading day to write this article, but I'm glad I did. I think Boeing (NYSE:BA) has a great year (and longer) ahead of it. Although the company was already looking good as it entered a new cycle in aerospace construction, the vote by unions to build composite wings for the 777 in Washington in exchange for pension concessions means less expenses over the long term for the company. The company has almost $21 billion in cash on hand, with net cash of $16 per share, giving it an effective stock price of $121. At 12% long term growth and a P/E of 14.5, and almost $10 billion of FCF in the TTM, it's another winner.
Finally, the Dow added one of the best companies ever to the index this past year. What could be better than buying a company that is part of an effective duopoly? Visa (NYSE:V) owns a massive share of the credit card market. It offers many other financial services, and is a global brand name. Meanwhile, the American consumer just keeps drawing down debt. The company has $7 billion in cash, and no debt, so it effectively trades at $210. It pumped out $2.6 billion in FCF in FY13, and trades at a P/E of 24. It's a bit expensive for 18% long-term growth, but I give a duopoly a premium.
Disclosure: I am long DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.