Given the current market conditions, you’d want to consider offloading some Dow Stocks to sell before dragging your portfolio down further.

While the S&P 500 and the Nasdaq indices have soared by double-digit margins in the past 12 months, the Dow Jones Industrial Average lags with a modest 3.8% increase. The Dow’s performance has been weighed down by underperforming giants among its 30 components, which sparked fresh demands for a makeover of the prolific index.

On the flip side, we’ve witnessed a monumental tech-driven rally that has effectively bypassed traditional, blue-chip companies that dominate the Dow. The market’s focus is skewed towards AI-powered tech stocks that notched up record gains last year.

Hence, it would be prudent for those looking to curb their downside risk to rotate out of these three Dow stocks. These stocks are up against multiple headwinds and have performed sluggishly of late, pointing to limited upside potential ahead.

Nike (NKE)

Nike (NYSE:NKE) is a powerhouse in athletic apparel and footwear but is now under major duress. The firm has dominated global markets for decades but faces major challenges now. Over the past year, its management has raised concerns over weakening consumer demand in North America, a slow recovery in the Chinese market, and growing competition weighing down the business.

Moreover, its most recent quarterly earnings print cash a shadow over the entire sector. Recently, fourth-quarter (Q4) sales and first-quarter (Q1) projections for fiscal year (FY) 2025 fell below expectations. During Nike’s Q4 earnings call, CEO John Donahoe predicted revenue declines in the mid-single-digit range in FY25.

In efforts to control the bleeding, the company has initiated belt-tightening measures, including reducing its workforce by about 2%. This move is part of the broader effort to streamline operations and curb production costs as the company braces for top-and-bottom-line declines this year.

International Business Machines (IBM)

Tech giant International Business Machines (NYSE:IBM) has seen its stock jump north of 30% in the past year, fueled largely by AI initiatives. However, despite multiple announcements of AI advancements and strategic partnerships, these initiatives have yet to result in significant revenue growth. The firm continues facing challenges in transforming its AI hype into tangible financial success, with its sales growth languishing behind its historical averages.

Moreover, its reliance on mergers and acquisitions rather than organic growth continues to raise concerns. It’s shelling out billions like its most recent $7 billion deal to acquire cloud company HashiCorp (NASDAQ:HCP). Consequently, this approach continues diluting shareholder value while further draining IBM’s cash reserves.

Coupled with a declining dividend yield, these factors make IBM a relatively unattractive bet for yield-focused investors. It’s currently yielding 3.85% on a trailing-twelve-month (TTM) basis, 20% behind its 5-year average. Hence, IBM’s current positioning casts a shadow over its appeal amid an uncertain investing landscape.

McDonald’s (MCD)

Fast-food giant, McDonald’s (NYSE:MCD) faces a shaky near-term future with tensions rising in the Middle East and commodity prices soaring.

The firm witnessed a marked slowdown in its Q1 performance, with global comparable sales creeping up by just 1.9%, missing the 2.3% analyst expectations. The discrepancy is starker when compared to the previous year’s robust 12.6% growth.

Moreover, the fast-food bellwether is facing major challenges due to ongoing food price inflation, which is impacting consumer spending and the affordability of MCD’s menu items. This inflationary pressure has compelled MCD to raise prices, limiting its value appeal, which it is known for.

Furthermore, the Middle East conflict has had a considerable impact on its business, with questions over the future. The concerns surrounding the region have effectively dimmed the bright spots seen in markets like Japan and Europe. Globally, the firm is grappling with only modest growth and tough competition, complicating its operational landscape. With these diverse geopolitical challenges, MCD is steering through a potentially rocky future.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.