The Dow Jones doesn’t offer as much diversification as other indices. While the S&P 500 contains 500 stocks and the Nasdaq 100 has 100 holdings, the Dow Jones only has 30 companies. The smaller portfolio size gives the index less room for error.
Walgreens (NASDAQ:WBA) got booted from the index in favor of Amazon (NASDAQ:AMZN). The index has been removing companies with low growth prospects and replacing them with big tech companies. It wouldn’t surprise me if most of the Magnificent Seven stocks were added to the Dow Jones at some point in its history.
Most indexes have a few unpromising stocks that should get removed and don’t offer much upside for long-term investors. Selling these stocks can protect you from losses, but you can also deploy that capital into more promising opportunities. These are the three Dow stocks to sell in April.
Nike (NKE)
Nike (NYSE:NKE) is losing ground to smaller rivals gaining market share and releasing innovative products. Nike’s revenue came in higher in Q3 FY24 compared to the same period last year, but it was by a small margin. The athletic giant grew its revenue by less than 1% year-over-year (YoY).
Net income increased by 18.5% YoY. That’s a better growth rate, but investors cannot realistically expect profits to maintain that pace if revenue is roughly flat YoY.
The stock’s returns over the past few years have been wildly unimpressive. Shares are down by 12.6% year-to-date (YTD) and have fallen by 23% over the past year. Nike stock is only up by 10.5% over the past five years.
Nike’s stock gains haven’t kept up with inflation. U.S. inflation came in at 8.00% in 2022 and 4.70% in 2021. Those are just two years and do not include 2023 data. A change does not seem to be imminent.
Disney (DIS)
Disney (NYSE:DIS) has gotten ahead of itself with a 35% YTD gain. The stock now carries a 26 forward P/E ratio as investors watch the Nelson Peltz battle closely. Disney’s recent earnings report resembled Nike’s. The House of Mouse reported a 49.4% YoY increase in net income, while revenue only increased by 0.16% YoY.
Those aren’t the financials you’d want to see from a long-term investment. Disney has destroyed iconic franchises, with some feeling as if they are beyond repair. “Star Wars: Rise Of Skywalker” performed worse than the two movies that came before it, and the company’s recent “Star Wars” films haven’t performed well.
People will continue to watch a series or a trilogy if the content is good. Disney seemed to be on top of the world right before the pandemic, thanks to “Avengers: End Game” trouncing records with a net profit 78% higher than “Avengers: Infinity War.”
CEO Bob Iger isn’t the right capital for this ship. He recently stated he is “working very hard not to let this distract [him].” If you have to work very hard to stay focused, it sounds like you are getting distracted. Iger said he is instead focusing on generating returns for the shareholders. That commitment to rewarding shareholders has resulted in a paltry 9% gain over the past five years, with shares trading close to where they were in November 2015.
Boeing (BA)
Boeing (NYSE:BA) was one of the golden standards for aviation, but cultural issues and safety concerns have piled up. The stock is down by 50% over the past five years and looks nowhere close to reclaiming its pre-pandemic price. The stock is also down 25% since the start of the year.
Boeing relentlessly focused on saving time and money when working on airplanes. The company outsourced important tasks, leading to a series of issues in recent years. People are mixed about flying on new Boeing planes. On one hand, there are a few high-profile incidents, but most of the planes make it to their destinations okay. We don’t hear about those flights, and several experts say they would “happily fly any Boeing aircraft.”
However, this article highlights the fear people have of flying on Boeing 737s. Sure, most of these planes land safely, but you don’t want to be on the one flight with issues. It’s creating fear, drawing attention from officials and impacting the business. Boeing has been losing ground to Airbus (OTCMKTS:EADSY).
Boeing has to rebuild its reputation. The company has already fired executives, and CEO Dave Calhoun mentioned he will leave the company by the end of the year. Will that be enough to save the stock? I’d rather put my money into another company instead of taking a chance on an aviation company with a limited potential upside.
On the date of publication, Marc Guberti did not hold (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.
