Stocks are having a more-than-solid year, but plenty of the biggest and best-known names aren’t joining in the fun. The Dow Jones Industrial Industrial Average — that bastion of blue chip stocks — has actually been a disappointment in 2014.
Sure, the Dow crossed 17,000 for the first time in history recently, but it’s up just 3.4% on a price basis so far this year. That lags the S&P 500’s own gain of 7.2% by a wide enough margin to get a professional money manager fired.
That weakness extends past the Dow’s rarefied group of blue chip stocks. Heck, plenty of blue chip stocks not in the Dow are having a bad 2014. Indeed, some of the market’s best-known names that were last year’s market darlings aren’t just lagging this year — they’re delivering serious losses.
True, any time a stock goes through a period of outsized returns, it gets primed to take its share of disproportionate selling at some point. It’s not unusual for last year’s leaders to be this year’s laggards — and vice versa — blue chips or not.
It’s also the case that the market has a defensive bent this year, led by sectors such as utilities and healthcare. Hey, some blue chip stocks are wheezing just because they’re in the wrong sector for this part of the market cycle.
But some blue chip stocks really stand out for terrible performance this year — especially after the gains they put up in 2013. Here’s a look at three blue chip stocks missing out on the market party in 2014 — and whether they can hope to bounce back before year’s end:
MA Stock YTD Price Change: -8%
MasterCard (MA) gained 70% in 2013, beating the market’s own amazing year by 40 percentage points. Now, for the year-to-date through July 16, MA stock is off 8%. That lags the S&P 500 by about 15 percentage points.
The world’s second-largest payments processor after Visa (V) is facing a severe headwind that’s beyond its control. Retail sales in the U.S. can’t gain any momentum. Roughly 30% of MasterCard’s gross dollar volume comes from the U.S. About 10% of all personal consumption expenditures are made with one of its cards. The economy isn’t doing this blue chip any favors.
True, the outlook for consumer spending is better for the second half, but we’ve heard that before. It also doesn’t help that with a forward price-to-earnings (P/E) ratio of 22, MA stock doesn’t exactly scream “bargain.” MasterCard might manage to breakeven on the year, but it will be tough to catch up to the broader market.
Blue Chip Stocks Loser: Boeing (BA)
BA Stock YTD Price Change: -6.7%
Boeing (BA), a member of the Dow, rose a market-crushing 80% last year. The S&P 500, recall, added 30% in 2013. So far this year, however, BA stock has charted a different flight path, dropping 6.7%.
Heightened competition from Airbus is making the market nervous. The European rival booked nearly twice as much business as BA at the critical Farnborough International Airshow. BA was also hurt by a slow start to the year. Even before Farnborough, Boeing and Airbus received a combined 750 orders this year through May 31. Over the same period last year, they had combined orders of 1,020.
BA has good growth prospects this year and a long history of better-than-expected quarterly earnings. Furthermore, analysts keep revising their estimates upward. That gives BA a chance of ending the year in positive territory — and beating the market from here on out.
Blue Chip Stocks Loser: General Motors (GM)
GM Stock YTD Price Change: -9%
General Motors (GM) stock finished last year up 42%, outperforming the broader market by 12 percentage points. Cut to today, and GM stock is off 9% for the year-to-date to lag the S&P 500 by a wide margin.
GM stock is being pulled by two opposite forces this year. On the one side, there’s the recall debacle, now up to 29 million cars and trucks in North America alone. On the other side, GM sales look to be unstoppable. Customers don’t seem to care about the recalls, leading GM to put up market-beating sales figures month after month.
It’s tough to discount GM stock for headline risk. You never know when GM is going to issue another recall. But given GM’s sales momentum, it’s a better-than-even bet that eventually GM stock trades more on the fundamentals and less on the headlines. That sets GM stock up for a strong yearend run.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.