Best and Worst Dow Stocks for 2015  

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Every year I like to challenge myself and see if I can predict the stocks that will perform the best, and the worst, for the year. For this article, we’re looking specifically at stocks in the Dow Jones Industrial Average, which contains some of the most widely held stocks around.

best-dow-stocksOverall, I expect 2015 to be a very choppy year, and the market will likely end up either modestly higher or down as much as 15%.

There’s just too much that is systemically at risk, and stocks are trading well beyond what I consider reasonable levels — at least, in aggregate  There’s still plenty of value to find in individual issues.

Best Dow Stocks — Visa Inc (V)

My first winner for the year as Dow stocks go is Visa Inc (V). The trend towards levering up again on debt has returned. Much of the prosperity we’ve witnessed over the past several decades has been the result of debt. Borrow money at low rates, invest it at higher rates. Or, worse, borrow it, spend it and then don’t pay it back.

Who better than to take advantage of this global trend than a credit card and financial services company focused on debt.  Consumer debt, in particular, is big for Visa. The NY Federal Reserve’s most recent consumer debt report shows us that, for the third quarter in a row, after five years of declining consumer debt balances, those balances are rising again.

I think Visa will be the best performer of Dow stocks this year.

Best Dow Stocks — Walt Disney Co (DIS)

Visa will be followed closely by Walt Disney Co (DIS). Disney has assets like no other entertainment company out there. Disney is all things entertainment. Yes, the movie division with Marvel, Pixar and LucasFilm is a holy trinity that can’t be beat. Beyond that, though, its fingers reach into all elements of entertainment, and people are constantly consuming content (and buying merchandise).

Disney even did well during the financial crisis. When things get bad, people want to escape into entertainment. It’s the perfect company in many ways and a winner of the Dow stocks.

Worst Dow Stocks — International Business Machines Corp. (IBM)

For the second year in a row, I’m going to proclaim that International Business Machines Corp. (IBM) will be the worst Dow performer. IBM is a moribund business that has shown no inclination to innovate. Revenues aren’t growing. Earnings are falling. The company continues to financially engineer its bottom line by buying back shares.

For all the talk of “the cloud”, there are plenty of competitors in this space. I’ve never been impressed by Watson, and I’m not seeing how IBM is penetrating new markets. As I like to put it, when you hear “IBM” what do you think of? I think of an old PC computer. I imagine that is the impression most people have when it comes to this most venerable of Dow stocks.

There are also reports of management being oppressive and too focused on being cheap. Management is all about buybacks, forgetting that IBM is about engineers and software people. It’s about the people! But talent continues to bail on the company, likely due to the short-sighted tactics.

Most of all, the big question is when will IBM invent something? Think about how Apple Inc. (AAPL) in constantly inventing and growing and offering new things. IBM doesn’t, and as long as that’s the case, it’ll be a loser in my book.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he was long DIS and AAPL. He has 20 years’ experience in the stock market, and has written more than 1,200 articles on investing. He is the Manager of the forthcoming Liberty Portfolio. He can be reached at TheLibertyPortfolio@gmail.com.

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