The Dow Jones Industrial Average has had a rather rough 2014.
The year began with a huge January selloff in the DJIA that sent the blue chip index below both its short-term, 50-day moving average as well as its long-term, 200-day MA.
In February, Dow Jones stocks staged a most-impressive rebound, vaulting back up above key trendlines. March brought about another bout of selling in the Dow that once again took the DJIA below the 50-day MA. That decline was quickly followed by a rebound in Dow Jones stocks back up above short-term support. So far in April, it has been a case of déjà vu for the DJIA, with a decline early in the month that once again dropped Dow Jones stocks below the 50-day MA, then back up above the 50-day.
Given all of the volatility this year, you might be surprised to learn that the DJIA now is just slightly in the red for the year, down 0.45% through this morning’s open.
Interestingly, of the 30 Dow Jones stocks that make up the index, 16 are currently in the red for 2014 while 14 are positive year-to-date. That’s about as balanced as it gets.
Perhaps most interestingly are the companies that have put in the worst performance so far in 2014. That’s because dwelling at the cellar of the DJIA are several stocks that have traditionally been strong winners. Yet while these Dow components are down in 2014, that doesn’t mean you should shun them.
In fact, now is the time to jump on these three down-but-not-out Dow Jones stocks.
Dow Jones Stocks to Buy: Boeing (BA)
Year-to-Date Return: -5%
Percentage Off 52-Week High: 10%
Dividend Yield: 2.3%
Defense and aviation giant Boeing (BA) is fifth-worst among Dow Jones stocks so far this year, down 6.55% through April 22. Yet the selling in BA shares is likely to be grounded soon, especially after the outstanding earnings beat and upbeat forecast Boeing just delivered.
On Wednesday, Boeing reported adjusted Q1 earnings of $1.76, 3 cents more per share than the same quarter a year ago and well above consensus estimates for EPS of $1.56. Revenue also came in strong at $20.5 billion, representing an 8% jump over the previous year’s Q1.
The real upbeat news for BA shares, however, was the lifted 2014 earnings outlook. The company now says it expects EPS in the range of $7.15 to $7.35, up from the previous range of $7 to $7.20 per share. The top end of that metric is far more in line with current estimates, and it is part of the reason why BA stock rose 2% in early Wednesday trade. Analysts expect to see full-year earnings of $7.38 per share.
Like Visa, Boeing has been a strong Dow Jones performer over the past five years, with gains of nearly 240%. And despite the pullback in 2014, I fully expect BA shares to once again gain altitude.
Dow Jones Stocks to Buy: Visa (V)
Year-to-Date Return: -6%
Percentage Off 52-Week High: 11%
Dividend Yield: 0.76%
Credit card processor Visa (V) has been an extremely big DJIA winner in the past, with the shares vaulting nearly 260% over the last five years.
Lately, however, investors have failed to charge up their Visa cards. The result has been a 6% decline in V stock year-to-date.
The selling in Visa stock was prompted in part by fear that first-quarter charge volumes would come in below expectations. Those fears were dismissed by analyst David Koning of Robert W. Baird in a research note that upgraded rival MasterCard (MA). Koning cited metrics from JPMorgan (JPM) and Wells Fargo (WFC) showing that credit card use volumes were about where they were in Q4.
The key to Visa’s fortunes, however, might be the growth of mobile and digital payment systems operated by the company, and particularly in underserved international markets. In fact, analysts at Pacific Crest recently initiated coverage on Visa stock with an “outperform,” specifically citing the growth of mobile and digital payments.
So, while V currently might be down, this DJIA component is by no means out. If the company can successfully expand operations, and if consumer spending picks up, look for another big run higher in Visa stock.
Dow Jones Stocks to Buy: Goldman Sachs (GS)
Year-to-Date Return: -9%
Percentage Off High: 11%
Dividend Yield: 1.31%
Stalwart financial giant Goldman Sachs (GS) is one of those “too-big-to-fail” Wall Street titans that those on both the left and right side of the political spectrum love to hate, and for good reason. The company is, rightfully in my view, seen as being too close to the financial powerbrokers in Washington, and that tends to make everyone with a sense of skepticism and fairness a little too uncomfortable.
Even more uncomfortable, especially for GS shareholders, has been the performance of Goldman — one of the newest Dow Jones stocks (added in 2013). Through April 22, the stock has been the worst performer in the DJIA, sinking 9.48%. Goldman shares did make some gains last week after the company reported better-than-expected Q1 earnings of $4.02 a share (the consensus was calling for EPS of just $3.45). While revenue in Q1 actually fell 7.6% to $9.33 billion from the same three months last year, the metric did best estimates calling for a top line of $8.7 billion.
The key for Goldman going forward — and the one thing that can get GS shares out of their current funk — is more M&A underwriting activity and more investment banking gains. The firm will need these areas to prosper to offset a decline in its bond trading operations. Goldman is already off to a good start on the investment banking front, with revenues increasing about 13% in that segment in Q1.
While GS shares might be down so far this year, they are by no means out. The fiscal power, along with the brain power of those at the helm — and of course, the political connectedness — make GS stock one that’s never far from delivering big profits to investors.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.