The Dow Jones Industrial Average has not exactly been keeping up with the other indices so far this year. That fact has left behind a number of undervalued Dow stocks for value investing.

In many cases, these are blue-chip stocks that have simply been out of favor.

In some instances, you have names like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) leading the market higher, and JPMorgan (NYSE:JPM) is a best-in-breed bank stock. However, many others have lagged, and it shows in their year-to-date performance.

The Nasdaq has soared roughly 30% so far this year, while the S&P 500 is up a respectable 14%. But the Dow and the Russell 2000 are barely positive on the year, up just 2.13% and 5.53% as of June 28, respectively.

With those numbers in place as we near the end of the second quarter — and the halfway mark of 2023 — the Dow is the worst performer of the four major U.S. indices. Will that change in the second half?

Let’s look at some of the most undervalued Dow stocks.

Undervalued Dow Stocks: Disney (DIS)

Starting the list off with a company recently highlighted in the news, Disney (NYSE:DIS) comes to mind when looking for undervalued Dow stocks.

Now keep in mind there are plenty of other cheaper picks (on a price-to-earnings basis) with higher yields. However, they are also low-growth and/or struggling companies. That’s not to say Disney doesn’t have its share of problems — clearly — as the stock is down more than 50% from its all-time high.

However, one could argue that this name is ripe with potential.

Disney is the king of entertainment, dominating with its portfolio of theme parks, studio hits, cruise lines, deep content catalog and streaming business. The firm operates three streaming segments — ESPN+, Disney+ and Hulu — and has more than 230 million paying subscribers.

It’s not the most affordable choice on the Dow, but trading at less than 17 times next year’s targeted earnings and down big from the highs, it’s worth considering if Bob Iger can pull off another big feat during his stint as CEO.

Retailer Rocked by Sellers: Walgreens (WBA)

Walgreens (NASDAQ:WBA) and CVS Health (NYSE:CVS) have been out of favor among investors. However, Walgreens just took it on the chin. Shares fell 9.3% to 52-week lows on June 27 after the company reported disappointing quarterly results.

While the company grew sales almost 9% year over year to $35.4 billion — and beat expectations by more than $1 billion — earnings of just $1 a share missed analysts’ expectations by 7 cents. In other words, margins are under pressure.

Even worse, that was the company’s third fiscal quarter, and while it only missed earnings estimates by 7 cents, the event notably reduced its full-year outlook. Management now expects earnings of $4.00 to $4.05 a share vs. the previously expected range of $4.45 to $4.65 a share.

However, there’s good news.

The company is almost done with this fiscal year, and analysts expect the company to return to growth — albeit just modest growth — in fiscal 2024. Further, consider that shares trade at just 7 times the newly expected earnings figure, while WBA stock pays out a 6.8% dividend yield.

Lastly, for those worried about the payout, note that the company has raised its dividend for 47 consecutive years.

Blue-Chip Stocks: Johnson & Johnson (JNJ)

Johnson & Johnson (NYSE:JNJ) underwent some pretty terrible and abnormal price action earlier this year. The stock logged a consistent loss for nine straight weeks — something it hasn’t done in years.

Now though, the stock is trading much better.

Shares have rallied for four straight weeks, and the stock looks like it could continue to push higher in the coming months. If it doesn’t, that gives long-term investors more time to scoop up the stock.

Johnson & Johnson is a dividend stud. Not only has the company paid out its dividend for several decades, but it has also actually raised that payout for 62 consecutive years. That’s after the company gave a 5.3% boost to its payout in April.

Last quarter, the company delivered a top- and bottom-line beat and raised its full-year outlook for both measures. Keep in mind, it was only the company’s fiscal first quarter at the time. Despite the positives, shares trade at just over 15 times earnings and still pay a dividend yield close to 3%.

On the date of publication, Bret Kenwell held a long position in JNJ. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.