The first quarter wasn’t pretty for the Dow Jones Industrials (DJINDICES: ^DJI). The average posted a loss for the first time in nine quarters, losing more than 600 points in turbulent trading that marked the return of volatility to the stock market.
Out of the Dow’s 30 stocks, 21 lost ground during the first quarter, helping to explain the 2.5% drop in the average. Yet three stocks in particular were the biggest decliners in the Dow during the period, each falling more than 10% and underperforming the overall average dramatically. None of the three names comes as a huge surprise to investors who’ve followed the Dow lately, but continued woes raise questions about their likelihood of rebounding in the future.
The worst 3 Dow stocks in the first quarter of 2018
Stock Total Return
General Electric (NYSE: GE) (22.1%)
Procter & Gamble (NYSE: PG) (13.1%)
DowDuPont (NYSE: DWDP) (10.1%)
Data source: Yahoo! Finance.
Power off for GE
General Electric was by far the worst performer in the Dow in 2017, and many value investors had hoped to see a rebound for the conglomerate at the beginning of this year. Yet that didn’t come to pass, as investors failed to see a strong response from GE management in plotting a pathway forward to bounce back from its past challenges.
Investors were already prepared coming into 2018 for several of General Electric’s key businesses, including power and oil services, to remain weak. But the quarter’s earnings report revealed an unexpected problem in the form of a $6.2 billion after-tax charge because of the conglomerate’s portfolio of insurance exposure that it had retained after its divestiture of major financial assets. With ongoing potential issues that the conglomerate is still facing, GE hasn’t yet shown signs of stabilizing, let alone clawing its way back to success.
Image source: Procter & Gamble.
P&G plods along
Consumer giants are supposed to be good places for conservative investors to put money during tough markets, and Procter & Gamble’s manifold billion-dollar brands have been a stalwart in the consumer products industry for decades. Yet growth has been hard to come by, and P&G’s quarterly results during the period were no different, sporting sales gains of just 3% and relatively flat earnings after taking one-time factors into account.
Retaining market share has been a problem for P&G, and a lot depends on what impact activist investor Nelson Peltz has on the company as he takes his spot on its board of directors. Focusing on the consumer giant’s most popular products could be a winning strategy for Procter & Gamble, but some believe more dramatic strategic moves could be necessary in order for the stock to behave the way shareholders would like to see.
DowDuPont’s chemistry
Finally, DowDuPont also posted significant losses, and of these three stocks, it’s the one that’s most in limbo at the moment. The company has completed the merger of Dow Chemical and DuPont, but it is now looking forward to its future breakup into three components. One company will be responsible for manufacturing basic chemicals and polymers in the materials science area. A second will hold the merged company’s specialty products lines in the aerospace, semiconductor, biosciences, and occupational safety arenas. The last will get the seeds, genomics, and other agricultural assets from Dow and DuPont.
The split-up isn’t likely to happen until 2019, which will leave investors in DowDuPont facing an imminent breakup without being able to make forward progress. That’s not bad for those who believe in the prospects for all three businesses, but for those who’d prefer to pick one over the others, the waiting will make the stock less attractive.
What’s next for the Dow?
Many expect the Dow to bounce back in the rest of 2018, as it has in many past years. To do so, investors would prefer to see better performance from laggards like DowDuPont, Procter & Gamble, and General Electric, as that would indicate shifting conditions that could be more favorable for the stock market as a whole.
