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Last Week's Dow Losers

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On a week when the markets got a contracting gross domestic product number and lower job growth than they were expecting, all three of the major indexes still managed to end the week higher. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) finished the week up 113.81 points, or 0.81%, and now sits at 14,009. The index is now within 155 points of its all-time high after it climbed 149 points this past Friday. The S&P 500, meanwhile, moved higher by 0.67%, or 10.21 points, and the Nasdaq gained 29 points, or 0.93%. Only nine of the Dow's 30 components ended the week in the red, but four of them were down more than 1.5%.

The big winners
Before I get to the Dow losers, let's quickly review the index's biggest winner. Verizon (NYSE: VZ  ) ended the week higher by 4.42%, after recently posting a fairly strong quarterly report and an upgrade from Piper Jaffary. All of the wireless services providers received a bump this week on news that, as of today, the Digital Millennium Copyright Act makes it illegal for customers to unlock their cell phones and move to different service providers.  

The big losers
Shares of Hewlett-Packard (NYSE: HPQ  ) ended the week lower by 3.11%, making it the second worst Dow stock of the week. The world's No. 2 personal-computer manufacturer, Lenovo, announced a 34% quarterly profit increase this week and increased its PC market share at a time when the industry as a whole is shrinking. That was the last thing HP shareholders wanted to hear, as HP's sales slide lower every quarter because of the consumer shift to mobile computing. HP also announced on Friday that it will close a site in Germany and cut at least 850 jobs in an effort to restructure its business.  

The world's largest oil company, ExxonMobil (NYSE: XOM  ) , lost 1.84% of its value this past week. The company announced earnings on Friday that neither blew investors away nor crushed their hopes in the stock. Oil product fell by 5% in the quarter, though earnings rose by 6% and the company narrowly missed a full-year earnings record. The company's oil refining business helped it offset the lack of production and lower price for oil during the quarter.

Exxon shares took a notable hit on Wednesday as investors worried about the situation in Iraq. The company has contracts with two political factions in the country, and it seems likely that ExxonMobil will be able to work with only one in the future. How this will affect oil production or profits in the future remains to be seen, but investors don't seem to like the situation Exxon has found itself in.  

The Dow's biggest loser of the week was Merck (NYSE: MRK  ) , as shares fell 4.78% during the past five trading days. During its quarterly earnings announcement on Friday, the company said profits fell by 7%, citing strong generic competition. The company also said it won't go through with plans to seek FDA approval for an osteoporosis drug this year and will instead wait until sometime next year. Many observers believe this osteoporosis drug will be a great success for Merck, which could use the revenue from a new drug as a number of large names go off patent in the coming years.  

Analysts had been expecting a profit decline, and management said it expects 2013 revenue and profits to be in line with those of 2012.

Finally, shares of Boeing ended the week down just 0.21%, as the company continues to struggle with its 787 Dreamliner. News came this week that Tesla Motors CEO Elon Musk is assisting Boeing with its lithium-ion battery issues. Musk could be a great resource for Boeing's engineers, given that Tesla builds fully electric cars that run on batteries and give drivers up to 300 miles per charge. The relationship may be on the rocks, though, as Musk reportedly believes the way Boeing is using the battery is "inherently unsafe." There has already been one fire and an emergency landing because of the 787 battery systems.  

With great opportunity comes great responsibility. For Boeing, which operates as a major player in a multitrillion-dollar market, the opportunity is absolutely massive. However, the company's execution problems and emerging competitors have investors wondering whether Boeing will live up to its shareholder responsibilities. In this premium research report, two of the Fool's best industrial minds have collaborated to provide investors with the key must-know issues around Boeing. They'll be updating the report as key news hits, so make sure to claim a copy today by clicking here now.

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  • Report this Comment On February 04, 2013, at 10:28 AM, 12368818 wrote:

    Nokia is an opportunity with big upside.

    Nokia´s shorts have even increased from the last two weeks.

    In NYSE Nokia short interest has hit 8.3%, and in Helsinki Nokia short interest has also hit record high 12.15% (this number only counted with investors with over 0.5% of short positions, below 0.5% not listed because of EU law).

    The percentage numbers are counted with

    Nokia´s total share number which is approximately 3.75 billion shares.

    When now Dows and S&P have hit all time highs, there are barely any cheap stocks than Nokia.

    Nokia which has come down 90% from its highest is a stock to consider,

    because it is extremely cheap and the reward can be one of the biggest in NYSE for the future.

    Nokia is a stock with great upside opportunity and why:

    1) Nokia´s bankruptcy is already remote.

    Nokia has increased net cash to about $5.7 billion.

    Nokia´s worst loss has been $290 million a quarter in 2012.

    Even with this kind of loss, Nokia could still deal by its own net cash for at least 4 years!

    2) Nokia won´t have to deal with that kind of loss in the future and why

    A. Nokia has cut cost expenses. The layoff in 2012 starts to be fully effective in 2013.

    B. Now Nokia has to pay royalty to Microsoft, but Nokia has patent incomes.

    C. Nokia has managed to make the important tough work for the basis of its new platform WP.

    Nokia has already sold over 15 million Lumia phones up to date (9.9 million units from Lumia debut till the end of September 2012 + 4.4 million units in the last quarter of 2012 + January 2013).

    D. Nokia has now a high end phone that can make “halo effects” and be compared to Apple´s and Samsung´s most high-end phone, the Lumia 920.

    The demand of this phone is still high in many countries around the world. The 4Q12´s Lumia sales did not include the sales of Lumia 920 in many countries, such as India, Asia-Pacific, UAE, Latin America, and many other countries around the world yet, because the phone was arriving these countries only starting from January 2013.

    Even in Europe, many countries start to get this phone starting 1Q13, for example the Netherlands announced the phone arriving in January.

    And China Mobile received only first lot of Lumias 920T around Christmas, the second and third lot and further have arrived China, and the phone is still selling out.

    E. China Mobile deal. When now, both China Mobile and China Unicom are subsidizing the Lumia 920 heavily, the 2-year or 3-year contract is starting from

    0 or 1 yuan, and considering only less than 1/5 of Chinese people are using highest-end smartphones,

    this will result into a huge number of 2-year or 3-year contract users for Nokia in China! Besides, 3G penetration in China is still very low, there is a huge opportunity there. Additionally, among the highest end phones, Nokia Lumia 920 is significantly much cheaper than for example iPhone 5 and Galaxy Note II. Nokia has an advantage in both the price competition and the biggest carriers´ backing in China!

    F. Nokia Siemens Networks (NSN). During these few months NSN has won many 3G and 4G contracts in many countries.

    According to NSN, they have network equipment that can boost the speed of 4G many times faster. This shows that, beside PureView camera technology, HD+ sensitive screen technology, advanced mapping platform HERE and City Lens, Nokia has also top innovations in building 4G LTE networks.

    G. MWC is coming soon. There are still more to come from Nokia.

    According to The Verge, Nokia will launch PureView camera phone, and also Lumia Catwalk (code name) and Lumia Laser (code name) for Verizon.

    According to CEO Stephen Elop, Nokia is also planning a lot of interesting things with Verizon.

    Nokia is likely launching tablet as well, even with some loyal fans of Nokia around the world buying some of Nokia´s tablets, this will be a good gain for Nokia.

    Nokia will launch more Lumia phones in the coming months to attract different consumer demands. More lower price-point,

    mid-range and high-end WP8 Lumias are to come.

    In 1Q13, beside Lumia 920 and Lumia 820 which are making their way to more markets and with better supplies, Nokia is also attracting the mass markets with budget WP phones Lumia 620 and Lumia 505.

    F. Asha phones. Asha phones are now selling almost 10 million units a quarter.

    Asha phones are affordable and competitive. Asha phones have now more and more smartphone features.

    Apart from features like Facebook, Twitter etc. Asha phones

    have internet access and access to thousands of Nokia´s most popular apps.

    Nokia has also brought an app called “Nearby” into Asha phones. Nearby is almost the same as City Lens in Lumia phones which is exclusive and unique in mapping and location data.

    There is still plenty of room for Asha phones to grow, because the price is competitive (cheapest android is right now about $100, while Asha is only about $70 without any contract).

    Apart from the features and price mentioned above, there are important and good selling points in Asha phones against cheapest androids, for example 40 free most popular games!

    Asha phones are still profitable for Nokia, because the OS is from Nokia itself, Nokia does not have to pay royalty for it.

    3) While bankruptcy is remote, Nokia´s stock price is still heavily undervalued.

    NYSE tech stocks are usually 2x book value, Nokia is still way much below that.

    According to Morningstar´s valuation, the sum of parts of Nokia (NSN, Navteq, feature phones, smartphones and patent portfolio)

    is worth much more than Nokia´s stock price right now, not to mention Nokia´s $5.7 billion net cash added to that value!

    Two years ago NOK was still about $15, now the stock is only over $4, the reason is that the stock has been over sold.

    Nokia is the most short sold stock in both Helsinki and New York! The shorts are much over 20% in Nokia´s total share number which is approximately 3.75 billion shares.

    This is a huge number, considering Apple´s short interest is only around 1% and Samsung´s around 2%. When Nokia is here to stay, the shorts need to be covered and the stock will skyrocket from these levels.

    Nokia Apple Intel Microsoft Cirrus Logic

    0.32 3.0 2 3.0 3.76

    Note that Nokia is currently selling at 0.32 price/sales ratio. This means that if the company manages to restructure and return to normal profitability, the stock has the potential to become a 10x bagger (even from today’s price levels) – assuming the market will value Nokia 3.0x sales like Apple or Microsoft. But even a price/sales ratio of 2, like Intel has, means a 6x bagger from these levels.

  • Report this Comment On February 04, 2013, at 10:29 AM, 12368818 wrote:

    Reasons why Nokia is more likely the third horse in the race than BlackBerry:

    1) Competitive prices (with those prices Nokia has already returned to profitability in the recent quarter).

    2) Ecosystem (Windows Phones, Windows tablets, Windows PCs, Xbox games, Xbox Music, Microsoft Office, SkyDrive and so on).

    3) Nokia´s exclusive innovations in Lumia phones

    (PureView camera technology, HD+ sensitive screen technology, advanced mapping platform Here and City Lens, free music with no adds, offline turn by turn GPS, rich sound recording etc).

    4) China Mobile and China Unicom are subsidizing Lumia 920/Lumia 920T for a 2-year or 3-year contract starting from 0 or 1 yuan.

    Beside price competition, Nokia has already partnered with the two biggest operators in China

    (China Mobile and China Unicom together have about 90% of all subscribers in China, and China is now the biggest smartphone market in the world because of the huge population).

    5) Nokia has been just voted as the most trusted brand in the world´s second largest country India, where Nokia´s Asha phones are also selling very well.

    6) Nokia Siemens Networks (NSN) has advanced and competitive technology to build LTE networks.

    According to the Verge and other sources, Nokia may launch these devices as early as February at MWC:

    Lumia Eos (PureView camera phone)

    Lumia Catwalk (international flagship phone)

    Lumia Laser (Verizon flagship phone)

    Windows RT tablet (with added battery in the cover)

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