Care to guess how many Dow Jones Industrial Average stocks are in positive territory for the month of March?
There are still another couple of days of trading to make it a complete bloodbath. April can’t get here soon enough and I’m not just talking about the better weather.
The carnage, however, isn’t restricted to Dow stocks.
As of March 27, nine out of 11 S&P 500 sectors were in negative territory. That’s not likely to change much in the final three trading sessions.
April is historically one of the best months in terms of S&P 500 performance. In the past ten years, April has been the best performing month for the index.
As for the Dow, April is the strongest month, averaging a 1.9% monthly gain since 1950.
With that in mind, I thought I’d recommend seven poorly performing Dow stocks to buy now.
Poorly Performing Dow Stocks to Buy Now: General Electric (GE)
No other Dow stock has suffered as much as General Electric Company (NYSE:GE) over the past couple of years. GE is down 23% year to date, which is on top of a 42% drubbing in 2017.
Heck, it has done so miserably, even Jim Cramer apologized for recommending the House that Jack Built. That said, he still feels investors who’ve held through the bad times should hang tight.
I’m not so confident that CEO John Flannery can fix the company’s total lack of vision. However, rumors that a certain billionaire is looking at jumping back into GE stock could be the catalyst investors were hoping for.
“Berkshire Hathaway has a history of investing in storied businesses struggling at steep valuation dislocations. In many ways, GE’s current situation fits the profile of an ideal Warren Buffett investment,” analyst Deane Dray wrote in a note to clients Tuesday. “GE is a 125-year-old iconic industrial brand with strong assets, market leadership in many industries, and a business model that Mr. Buffett understands.”
If Buffett does do a deal in the next 30 days, you can be sure GE stock will gain ground in April.
Poorly Performing Dow Stocks to Buy: Home Depot (HD)
No company has ridden the housing boom to the extent Home Depot Inc (NYSE:HD) has over the past five years, illustrated by a 22% annualized total return in that period.
However, 2018 has been an entirely different picture for the home improvement retailer with its stock down 6% year to date.
Now, not only is it underperforming the Dow, it’s underperforming its home improvement peer group, which has investors wondering if this is the beginning of something more ominous.
InvestorPlace contributor Louis Navellier recently suggested that rising interest rates will keep people in their existing homes longer, which should translate into increased renovations; always a good thing for Home Depot and its stock.
I’m with Navellier on this one. Same-store sales are still strong as is the economy suggesting the correction is nothing more than HD stock taking a breather.
Home Depot’s stock woes in the first three months of 2108 are good news for investors looking to buy on the dip.
Poorly Performing Dow Stocks to Buy: Exxon Mobil (XOM)
Now that Rex Tillerson’s out of the White House, maybe he’d like his old job back at Exxon Mobil Corporation (NYSE:XOM) which has seen a 4% decline in March and 11% year to date.
Aren’t oil prices going higher?
Oh, they are, but that actually works against XOM, which seems to do better when prices are lower and it can generate revenues from its refining and retail operations while everyone else is hemorrhaging cash.
InvestorPlace’s Vince Martin thinks there are better plays in a higher-priced oil environment.
“In a falling-price market, that’s actually a good thing. XOM stock handily outperformed the energy sector as a whole amid the O&G crash of the past few years,” Martin wrote March 13. “But for investors betting that prices will rise, producers like Anadarko Petroleum Corporation (NYSE:APC) make much more sense.”
Despite his skepticism about XOM stock, he has actually been buying, suggesting it’s too cheap to ignore.
I did a quick free cash flow yield calculation and it came to 4.5% — $14.7B free cash flow divided into $329.7B enterprise value — which is decent if not deep-value territory.
I’ve never been a fan of XOM stock, but if April is good for the Dow, I suspect it will be good for Exxon Mobil too.
Poorly Performing Dow Stocks to Buy: Proctor & Gamble (PG)
If you’ve owned Proctor & Gamble Co (NYSE:PG) non-stop for the last 15 years, you’ve generated a 6.1% annualized total return over that time, 591 basis points less than the Dow.
In fact, PG stock has underperformed the Dow in three of the last five years.
Proctor & Gamble has gone through how many turnarounds in the past decade? It seems the company is always operating in that mode — not unlike GE.
In an age when a startup like Brandless can gain serious traction, PG investors have got to reconsider what it means to be the world’s largest consumer-products company.
Fortunately, these things are cyclical.
Logos were out; now they’re back in. Popularity for brand names such as Head & Shoulders ebbs and flows. The trick is to get into PG stock before the tide turns upward.
Over the past five years, PG stock has had two big moves to the downside and a number of smaller corrections over that period. Each time, the stock has recovered in a relatively short period.
Below $80, you ought to be buying. Below $70, you ought to be backing up the truck.
Poorly Performing Dow Stocks to Buy: McDonald’s (MCD)
McDonald’s Corporation (NYSE:MCD) stock has been on a roll the last three years since CEO Steve Easterbrook was hired to reboot the Golden Arches, up 25% including dividends compounded annually.
That sure as heck beats the Dow.
Now down more than 7% year to date, investors are wondering if Easterbrook’s Midas Touch is starting to wear off.
“We continue to believe that the opportunity cost of advertising the $1, $2, $3 menu has been significant,” RBC Capital Markets analyst David Palmer said in a note to clients March 12. “So far in 2018, marketing of the new $1, $2, $3 menu diverted attention away from the return of the Tenders. In addition, the new value menu marketing has stolen thunder away from the Big Mac Trio and $1 coffee promotions that were successful in 1Q last year.”
The fact is, McDonald’s made an attempt to win back some of its price-conscious customers, but it has fallen on deaf ears.
While the failure of the $1, $2, $3 menu to catch on might prevent MCD stock from hitting $200 by the end of the year, I still think the latest mini-correction in its stock price is an opportunity to buy one of the best restaurant operators in the world.
Poorly Performing Dow Stocks to Buy: Johnson & Johnson (JNJ)
Talk about a consistent stock.
Prior to 2018, Johnson & Johnson (NYSE:JNJ) delivered eight positive years in the markets out of 10 for an annualized total return of 9.1%, slightly less than the Dow as a whole.
However, given that the two down years saw negative annual returns of 7.6% in 2008 and 0.7% in 2010, I think it’s safe to say that its risk-adjusted returns are some of the best amongst the 30 Dow holdings.
Down 9% year to date, it’s the biggest decline in over a decade, it’s not unwise to consider if something’s changed at JNJ to cause this to happen.
InvestorPlace contributor Brett Kenwell doesn’t think so.
“Its recent pullback lowers the valuation and raises the dividend yield for new buyers. JNJ stock trades at a rather reasonable 16.5 times this year’s earnings,” wrote Kenwell March 15. “Given that analysts expect earnings to grow 11% this year, that’s pretty attractive. If J&J hits analysts’ estimates, it will grow revenue more than 6% in 2018 as well.”
Opportunities to own quality dividend stocks at reasonable valuations don’t come around all that often.
If you don’t own JNJ, you should be buying while simultaneously hoping that it falls some more, so you can buy some more. It seems like a no-brainer.
Poorly Performing Dow Stocks to Buy: Coca-Cola (KO)
Most investors are probably aware that The Coca-Cola Co (NYSE:KO) is Berkshire Hathaway Inc.’s (NYSE:BRK.A, NYSE:BRK.B) fourth-largest equity holding valued at $18.3 billion as of the end of December.
Of all the stocks owned in Berkshire’s portfolio, it’s the one whose products Warren Buffett probably uses the most. He’s a Cherry Coke addict. If there’s a stock he’s least be likely to sell while he’s alive, KO would be it.
Like PG, KO has performed abysmally in recent years, delivering an annualized total return of 4.3% over the past five years, not even half the Dow’s return in the same period.
However, unlike Wells Fargo & Co (NYSE:WFC), which I believe he should have jettisoned as soon as it was made clear how underhanded the bank’s sales tactics are, I see a ray of light for Coca-Cola stock. On March 7, the company announced that it was launching an alcoholic drink into the Japanese market, its first attempt at a booze-related product.
Rum and coke. Bourbon and coke. Canadian whiskey and coke. You get my drift. It’s such a natural, I can’t believe it took the company 125 years.
However, we can’t get too excited about the news because the Japanese product contains not one ounce of Coke; rather it’s a mixture of sparkling water, flavoring and the Japanese drink, shochu, which is often distilled from rice.
Here’s my solution to Coke stock woes. CEO James Quincey should sit down ASAP with Brown-Forman Corporation (NYSE:BF.B) CEO Paul Varga and hammer out a deal that makes the Brown family happy.
What could be better than Jack Daniels tying up with Coca-Cola Classic? I can’t think of anything, can you?
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.