These 3 Stocks Have Held Back the Dow for Years

Lately, new all-time record highs have become commonplace for the Dow Jones Industrials (DJINDICES: ^DJI  ) , with the average setting new high-water marks on more than 20 occasions so far in 2013. But even more impressive is the long-term record of performance that the Dow has established for investors whose time horizons are measured in decades rather than days. For instance, over the past 15 years, the Dow has managed to post an average annual gain of about 6%, including dividends, despite the fact that the average had already soared by 1998 because of the big bull market of the 1980s and 1990s.

Yet despite Dow's long-term strength, some of its longtime components haven't managed to keep up with its gains. With some help from S&P Capital IQ, here are three stocks that haven't quite kept up with the Dow on a total-return basis over the past 15 years.

3. DuPont (NYSE: DD  )
Of the three stocks mentioned here, DuPont has been in the Dow the longest, having joined the average in 1935. Having survived the Great Depression and several economic cycles since, the company has remains a giant in the chemicals industry. Yet since 1998, the stock has only managed a total cumulative return of 16%, or about 1% per year.

Perhaps the easiest way to understand the challenges that DuPont has faced is to look at how oil prices have risen over the past 15 years. With crude oil having traded just above $10 per barrel in late 1998, the explosive move higher for oil prices since then has led to greatly increased costs for the chemical giant, which needs substantial amounts of petroleum for its plastics production. The company has actually done a good job of dealing with oil costs by passing on costs to customers, but that didn't make adjusting to the new energy-price reality any easier for DuPont.

2. Hewlett-Packard (NYSE: HPQ  )
HP joined the Dow in 1997, in what proved to be another example of the Dow's bad timing in bringing in technology companies. Since mid-1998, the stock has basically been flat, as its dividends have been just enough to offset share-price declines.

With the tech boom already in its middle stages 15 years ago, HP has suffered from multiple crashes since then. The first came in the tech bust of 2000 to 2002, in which the company lost three-quarters of its value. Yet even though HP's swoon in the financial crisis of 2008 was actually fairly mild compared to its peers, what has hurt the tech company since 2010 has been the decline in its core PC business. Turnaround attempts have taken a long time to get moving in the right direction, but even with the recent rebound in its stock, HP has a lot of catching up to do to match the Dow's long-term returns.

1. Alcoa (NYSE: AA  )
Alcoa has lost nearly 40% since 1998, and nearly all of those losses came during the market meltdown five years ago. Having soared during the bull market of the 1990s, Alcoa held its own throughout the expansionary period of the early and mid-2000s, but the aluminum giant has never properly recovered from its big losses in 2008 and 2009.

Looking forward, Alcoa continues to face challenges from tough aluminum pricing conditions and competition from Chinese producers that have created a glut of the metal on the world markets. Until the situation reverses itself and until the global economy picks up, Alcoa could continue to languish.

Dealing with laggards
Even within the Dow, some stocks don't always perform as well as you'd like over long periods of time. Yet the value of tracking a diversified set of stocks like the Dow is that you can survive bad performance from stocks like these without putting your overall returns at risk.

Despite its past performance, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this prospect and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant simply click here now to get started.


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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 May 19, 2013, at 9:49 AM, funfundvierzig wrote:

    The much shrunken and shrinking DuPont Company no longer and has not for many years represented the healthy and growing U. S. economy. The editors of Dow-Jones should consider removing DD from their venerable Index, the Dow-30.

    The largest and most prestigious chemical enterprise in the world for practically all of the 20th century, DuPont had plummeted to a number 10 rank amongst global chemical concerns by 2008 in revenues. The Company's inbred and entrenched Management offer no particularly promising strategies or change for the future, little more than continued shrinkage.

    Merely the perspective of one individual retail investor with both long and short positions in DD...funfun..

  • Report this Comment On May 19, 2013, at 9:57 AM, funfundvierzig wrote:

    Ironically, in a moment of bad timing and remarkable ineptness back in 1998, then DuPont Chairman & CEO Chad O. Holliday, Jr. dumped an enormous quantity of wealth in oil and natural gas by shedding DuPont's wholly owned subsidiary, Conoco, Inc. Holliday ditched Conoco when oil was fetching only $10 a barrel!

    In turn, Holliday overpaid for what was then the leading and most innovative seed enterprise on the globe, Pioneer Hi-Bred Int'l. After years of mismanagement and misfiring, and starved for research dollars, Pioneer gave way to Monsanto's lead in GM seed innovation and current global dominance.

    ...funfun..

  • Report this Comment On May 19, 2013, at 10:38 AM, benjonson wrote:

    Alcoa has lost 80% since its October 1999 and April 2007 highs and 50% since January 2011.

  • Report this Comment On May 19, 2013, at 12:40 PM, brookarcher wrote:

    Try these this week: VRNM (Verenium Corp., enzyme supplier to ethanol industry), PEIX (Pacific Ethanol), MCP (Molycorp rare earths) and WEST (Westinghouse Solar).

    Talk about an udervalued stock, try Verenium Corp. (NASDAQ: VRNM), enzyme supplier for ethanol producers. It's acts as a nice little ETF-like play for ethanol. When oil prices go up ethanol is more in demand. Same with homeland security and the desire for domestic energy production. The stock was recently alerted in Buried Stocks Facebook group as a bargain buy. It's a low float stock close to S1 pivot point. Expecting a corrective bounce as shorts cover this week.

    Pacific Ethanol just restructured it's shares. Now it's so lo float it's bound to be much more volatile and volatility mean movement. Right now I wouldn't bet against locally produced ethanol especially if they're producing it from non-food plant sources like Pacific Ethanol's Sorghum fuel is produced.

    Earth isn't producing any more elements that it already has. Rare earths, elements used to make the magnets that produce electricity and used for many other modern products; are monopolized by China . . . except for the rare company that mines it domestically like Molycorp. The bottom's in on this one especially as China constrains exports of it's rare earths.

    Finally Westinghouse Solar is being accumulated by insiders like Robert F. Kennedy Jr. who sit's on their board. They know something we don't? Recent partnering with Australian company CBD opens new markets with new resources. The last time this stock was talked about on Buried Stocks Facebook group (Dec 2012-Feb 2013) it went up over 300%. That was before the insider accumulation. With RFKjr getting some skin in the game who knows where the roof is on this one?

  • Report this Comment On May 19, 2013, at 4:12 PM, ryanchandler25 wrote:

    HP messed up when they acquired Compact in 2001. Dumbest move ever.

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