The 10 Most Overvalued Stocks in the Dow

This is part 3 of my three-part series dissecting the Dow Jones Industrial Average. I am going refer to this as the big tech version because I will be focusing on and featuring Apple stock. In part 1 I covered the most fairly valued of the 30 Dow Jones Industrial stocks. In part 2, I covered the second 10 where most of them were overvalued. In this part 3, I am going to present the 10 most overvalued of the group.

Another message that I want to deliver with this video and for that matter this series, is that valuation, although vitally important, is not the final answer. In addition to valuation, you also have to focus on future growth because that is where you are going to make your money. The idea is to invest in a business at a sound valuation so that you can participate fully in the results of that business.

If you overpay you will earn less than the business produces in the long run and vice versa. On the other hand, you can make up for low growth by finding really undervalued stocks that allow you to get what I like to call natural leverage.

What this means is that in addition to modest growth and perhaps dividend income, you can also achieve price earnings ratio expansion. Under this scenario, by investing in a bargain price you end up earning more than the business produces through this natural leverage.

But perhaps the most important message I want to convey is investor awareness. Mr. Market can misappraise stocks for extended periods of time both over and under. Therefore, I contend that the key to long-term success is to be aware of either.

If the business is overvalued because it is popular, it can make sense to continue to ride that wave as long as the popularity continues. Nevertheless, you should simultaneously be aware of the risk you are taking so that you can protect yourself in the long run.

In this video I will be reviewing Apple (AAPL), Microsoft (MSFT), Boeing (BA), Walt Disney (DIS), McDonalds (MCD), Honeywell International (HON), Salesforce (CRM), Visa (V), Nike (NKE), Chevron (CVX).

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— Chuck Carnevale

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