By Paul R. La Monica

UnitedHealth is single-handedly bringing down the Dow Jones Industrial Average. Chalk it up to the fact that the Dow is a price-weighted average and not an index that ranks its components by market value.

Shares of UnitedHealth tumbled 22% after the company reported weak earnings and issued disappointing financial guidance. The Dow fell more than 400 points, or 1.1%, as a result.

But it was one of only five stocks in the 30-company average in the red on Thursday morning. The S&P 500 and Nasdaq were flat to slightly higher.

The decline in the Dow is because UnitedHealth, which traded at a stock price of about $585 before Thursday's plunge, had the biggest weighting in the Dow, making up about 9% of the average. UNH was up 15% so far this year before Thursday, making it the Dow's best performer.

No more. It is now down more than 10% in 2025.

Goldman Sachs was the second-largest Dow component as of the close on Wednesday, making up just under 8%. But Goldman had edged out UNH as the Dow's largest component Thursday morning. Goldman now trades for more than $500 a share while UNH has plunged to about $455.

What this means for average investors is that people are correct in following the Dow as a market barometer, without investing in the component companies in the way that they do with index funds tied to the S&P 500. Still, some Dow stocks may be worth owning.

There are several winners this year that look promising.

Shares of Verizon are up 11% this yea. The stock, which trades for just 9.5 times earnings estimates, could be a haven during these volatile times thanks to its gigantic dividend, which yields 6.2%. Revenue and earnings are expected to keep growing at a steady pace as well.

Biotech Amgen and the pharmaceuticals company Johnson & Johnson are also Dow standouts. They have gained 6% and 9% respectively this year despite concerns about the impact that vaccine skeptic Robert F. Kennedy Jr., President Donald Trump's Health and Human Services secretary, could have on government funding for drug development.

Both stocks are both fairly cheap. Amgen sells for around 13 times the per-share earnings it is expected to produce this year. J&J is at a price/earnings ratio of just under 15.

Travelers also is a compelling Dow pick. The company hiked its dividend as it reported stronger-than-expected earnings earlier this week. Shares are up 6% this year but still trade for just 14 times earnings forecasts.

Other Dow leaders aren't as attractively valued. Coca-Cola, which is now the Dow's top performer for 2025, with a nearly 16% gain, trades for about 24.5 times earnings estimates. That is a premium to the broader market -- the S&P 500 sells for 20 times -- despite relatively slow growth.

IBM, McDonald's, Visa and Walmart are also among the Dow stocks still in green this year. But none of them are particularly cheap: They range from a P/E of 22 for IBM to 35.5 for Walmart.

To put that in perspective, Walmart now is a more expensive stock than Amazon.com, a fellow Dow component, which trades at 28 times earnings forecasts. In fact, Walmart has the highest forward P/E of any Dow stock, meaning that it is also more expensive than Magnificent Seven Dow members Microsoft, Apple and Nvidia as well.

So even if Walmart and some of the other current leaders of the Dow in 2025 continue to hold up well in a choppy market, investors are going to have to pay up for them.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 17, 2025 11:46 ET (15:46 GMT)

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