The Dow Jones Industrial Average, or Dow, is an index of 30 well-known blue-chip stocks. The index has been in existence since 1896, making it one of the oldest stock market barometers in the world. Today, investors view the Dow as a bellwether for the United States market and economy. After lagging the benchmark S&P 500 and Nasdaq indices for most of this year, the Dow has come to life in November, having gained 7% since Halloween. Despite all of that, there are still several Dow stocks to sell.
Many of the 30 stocks in the index are rallying hard right now. However, not every stock is rallying. Some components continue to trail the overall market and are a drag on the Dow index. These laggards are stocks that are facing multiple near-term issues. These issues are likely to impact their performance for the foreseeable future and should be avoided. Here are three sad Dow stocks to sell in December.
Chevron (CVX)
The price of West Texas Intermediate (WTI) crude oil is back down to $75 a barrel, which is bad news for oil major Chevron (NYSE:CVX) and its shareholders. Slumping oil prices have weighed on the company’s earnings and share price all year and seem likely to cause further damage going forward. Currently, CVX stock is down 18% this year and hovering near a 52-week low. Trading at only 10 times future earnings estimates, the shares are cheap right now and some investors might be tempted to bottom fish.
But not so fast. In addition to the decline in crude oil prices, Chevron is also contending with its $53 billion acquisition of Hess Corp. (NYSE:HES). The all-stock deal will see Chevron pay $171 for each share of Hess. The deal’s total value is estimated at $60 billion, including some Hess debt that Chevron has agreed to take on. The acquisition is subject to regulatory approval and a closing date for the transaction has not been set. However, such a big purchase has created additional uncertainty for CVX stock.
Through five years, CVX stock is up only 20% compared to a 65% gain in the benchmark S&P 500 index, making Chevron a sad Dow stock to sell in December.
Goldman Sachs (GS)
Many questions linger around Dow component Goldman Sachs (NYSE:GS). The investment bank is struggling to overcome a steep decline in deals on Wall Street, both mergers and acquisitions (M&A) and initial public offerings (IPOs), as well as a disastrous foray into consumer banking, and well-publicized criticisms of CEO David Solomon that have led to an exodus of senior executives. This has translated into a year-to-date decline of 2% in GS stock. Over 12 months, the share price is down 11%.
Goldman’s most recent financial results were better-than-expected, driven by a return to its traditional strengths of deal making and trading. Goldman was a lead underwriter on several high-profile IPOs earlier this fall, including online grocery retailer Instacart (NASDAQ:CART) and British chipmaker Arm Holdings (NASDAQ:ARM). However, neither of those IPOs performed as expected and there is no indication that the IPO market is going to rebound in 2024. Confidence in this bank and stock remains low.
Nike (NKE)
The wait for shares of sneaker and athletic apparel maker Nike (NYSE:NKE) to turnaround continues. While there have been some glimmers of hope in recent weeks amid the current market rally, NKE stock remains down 10% this year. And the stock remains 40% below the all-time high it reached in November 2021. This Dow stock continues to be held back by its heavy exposure to China. in China, the economy is slowing, as well as ongoing supply chain problems that surfaced as the Covid-19 pandemic ended.
Nike’s most recent quarterly print showed some encouraging signs. Inventories declined 10% from a year earlier and sales in China surprised by growing 5% year-over-year. However, Nike’s revenue missed Wall Street forecasts for the first time in two years, it continues to forecast tepid sales growth for this year in the mid-single digits, its inventories remain high by historic measures, and expectations are that holiday sales, in general, will be lukewarm this December. It all adds up to a ho-hum outlook for NKE stock. Avoid this and the other Dow stocks to sell.
On the date of publication, Joel Baglole 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.
