Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Stocks Lagging in the Dow's Monster Quarter

Wow! What a quarter. All three major indexes came out swinging and had impressive gains marked by surprisingly little volatility. Given the seemingly daily questions regarding Greece defaulting (technically yes), the domestic economy finally recovering (a strong maybe), and Linsanity's sustainability (resoundingly on hold), what we've seen is astonishing.

With that in mind, let's take a closer look at how the major indexes closed the first quarter and then take a closer look at three Dow components whose underwater performance over the past several months muted the index's broader returns.


Gain / Loss

Gain / Loss %

Ending Value

Dow Jones Industrial Average (INDEX: ^DJI  ) 51.99 0.40% 13,197.81
Nasdaq (INDEX: ^IXIC  ) 3.80 0.12% 3,099.16
S&P 500 4.99 0.36% 1,408.27

Source: Yahoo! Finance.

These are historical returns. The Nasdaq saw its best performance since 1991. That's right; not even the go-go dot-com boom of the late '90s that propelled the index above 4,500 saw a three-month stretch that topped the opening quarter of 2012. Not to be left out of the record books, the Dow and S&P 500 both notched their largest percentage gains since 1998 and their largest first-quarter points gains since, well, ever. The average Dow component turned in a gain of 11.2%, but several companies fared significantly worse.

So which companies were responsible for dragging down the Dow in 2012? It's actually a fairly diverse group that includes a telecom, an embattled tech legend, and a fast-food icon. Let's tackle the worst performer first.

Hewlett-Packard (NYSE: HPQ  ) has been in turmoil ever since the Mark Hurd scandal broke. Board dysfunction, the Autonomy purchase debacle, the pump-fake sale of its PC division, and the failed 11-month tenure of Leo Apotheker as CEO -- including his bizarre TouchPad decisions -- all combined for a disastrous stock performance. Not so shockingly, HP continued last year's 38% decline with an additional 7% shaved off in 2012. Things may be stabilizing for the company in the interim, but investors need to get a better sense of Meg Whitman's stewardship. She recently revealed a reorganization plan that has the printer and PC lines merging to cut costs and promote innovation. HP needs to show positive momentum soon, or it will find itself increasingly marginalized in today's rapidly changing environment.

Verizon (NYSE: VZ  ) has struggled this year from a stock-performance standpoint; subsidizing iPhone sales has compressed margins. But the company has a lot of things going for it. It dodged a bullet when AT&T wasn't allowed to merge with T-Mobile and has also been aggressively purchasing wireless spectrum. Free cash flow growth has been challenging, but Verizon is certainly faring better than its peers. But it will need to better leverage its strong market position and potentially wrestle back some control from handset makers if it really wants to see shares soar going forward.

Fast-food purveyor McDonald's (NYSE: MCD  ) rounds out the top three with a minor 2.2% decrease in shares over the past three months. The company's 31% gain led all Dow components in 2011, so it isn't surprising to see shares take a breather in 2012 after that tremendous run. European sales disappointed for February, arresting the stock's momentum, and a CEO change could mean a shifting in fortunes following the tremendous stewardship of Jim Skinner. However, newcomer Don Thompson was responsible for several winning initiatives, including the margin-expanding McCafe line, so McDonald's does appear that it will be in good hands. While the Golden Arches seems to have lost its golden touch this year, McDonald's is still a strong business with a great brand, and investors shouldn't write it off just because of this latest downturn.

A better approach
McDonald's may have hit a slight bump in Europe, but it still has tremendous growth potential, especially in China. The Motley Fool has created a special free report about three domestic stocks not only winning in the U.S., but also poised to conquer global markets. To uncover these stocks today, take a look at our special free report, "3 American Companies Set to Dominate the World." Don't miss out on this limited-time offer and your opportunity to discover these world beating businesses before the market does. Access your report -- it's totally free.

David Williamson holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of McDonald's. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (1) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 07, 2012, at 10:43 AM, tomd728 wrote:

    The only ETFs I have used,to date, are those

    dedicated to an Index performance.........a hedge

    as it may be.

    My overall knowledge and comfort level with these vehicles could be summarized on the back of a stamp with a crayon.

    So nothing profound coming from this corner (as usual) but I hope to develop, from this series, that comfort needed through my involvement here to use the "comments" and text to get into these

    vehicles and use for hedging or straight-on investment with the built in leverage.

    Do well and "see you 'round the campus"

    Tom Durkin

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1857135, ~/Articles/ArticleHandler.aspx, 10/28/2016 7:56:08 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,161.19 -8.49 -0.05%
S&P 500 2,126.41 -6.63 -0.31%
NASD 5,190.10 -25.87 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 4:33 PM
^DJI $18161.19 Down -8.49 -0.05%
^IXIC $5190.10 Down -25.87 -0.50%
NASDAQ Composite… CAPS Rating: No stars
HPQ $14.09 Up +0.10 +0.71%
HP CAPS Rating: ***
MCD $112.10 Up +0.02 +0.02%
McDonald's CAPS Rating: ***
VZ $48.21 Down -0.33 -0.68%
Verizon Communicat… CAPS Rating: ****