5 Outstanding Dow Components

Jan. 05, 2014 3:03 PM ETCAT, DD, TRV, UNH, VZ10 Comments
Benjamin Clark profile picture
Benjamin Clark

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected five undervalued companies reviewed by ModernGraham that are components of the Dow Jones Industrial Average. Each company has been determined to be suitable for the Defensive Investor or the Enterprising Investor according to the ModernGraham approach. Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

Investors should keep in mind the 7 Key Tips to Value Investing while proceeding with further research of all of the following companies:

  • Caterpillar Inc. (CAT) - Caterpillar is a very strong company based on its financials, and may be suitable for the defensive investor (and hence an enterprising investor as well). A prudent and intelligent investor should do more research, but it also appears that Caterpillar may be undervalued based on the amount of growth seen in its earnings per share over the last several years. Specifically, the company has grown EPSmg (normalized earnings) from $5.08 in 2008 to an estimated $6.25 for 2013. This growth outpaces the market's implied growth rate of 2.48%.
  • E I Du Pont De Nemours And Co (DD) - Du Pont is a strong company that may be suitable for an enterprising investor but not a defensive investor. The company's current ratio is too low and the price to book ratio is too high for comfort for the defensive investor. Since the Enterprising Investor does not require a current ratio as high as the Defensive Investor, the company does pass

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Benjamin Clark profile picture
Benjamin is one of TipRank's top bloggers.  He is the founder of ModernGraham.com, a value investing website devoted to the study and modernization of the teachings of Benjamin Graham.

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