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Why These Stocks Have Pulled Down the Dow in 2014

The Dow Jones Industrials (DJINDICES: ^DJI  ) haven't given investors the same roaring start this year that they got in 2013, with the average still down 250 points even after a very strong February. Getting much of the blame for the Dow's (^DJI) bad performance to start off the year are four well-known stocks: Chevron (NYSE: CVX  ) , AT&T (NYSE: T  ) , Coca-Cola (NYSE: KO  ) , and Travelers (NYSE: TRV  ) , all of which are down about 7% to 8% so far in 2014.

Perhaps the least shocking stock on this list is AT&T (T), which has had to deal with the threat of a major price war in the U.S. wireless industry. Even as AT&T and its rivals have spent billions building out ever-faster wireless networks, the specter of price competition could threaten their long-term profitability, in a reply of what happened with long-distance telephone rates in the 1990s and early 2000s. With that past experience hobbling AT&T and completely crushing then-rival MCI, investors are in no hurry for a repeat of that episode in telecom-stock history. Yet for now, AT&T (T) seems to be focusing on the U.S. market, having decided not to make a major acquisition of Vodafone in the near future.

Coca-Cola's (KO) appearance on the list also makes sense given the soft-drink maker's lack of strong growth in recent years. As trends go against traditional sugary carbonated beverages, Coca-Cola has done a reasonably good job trying to adapt, with still drinks like water and juices helping to round out its overall offerings. Yet what some saw as a desperate move to partner with Green Mountain Coffee Roasters (GMCR) and take a 10% stake in the Keurig home-brewer maker shows just how hard it has been for Coca-Cola (KO) to find growth opportunities in a sluggish market.

Chevron's (CVX) pullback seems tied to the long-term problems that the energy giant has faced for a while now. Given the size of the company, Chevron has to work hard simply to maintain its production levels, let alone boost them. That puts it at a competitive disadvantage compared to smaller companies, which have more growth potential simply by virtue of their not having so many longtime legacy assets in various states of production decline. For its part, Chevron has worked hard to extend its reach around the world and take advantage of lucrative opportunities in many key energy markets. But oil prices have been fairly stagnant lately, and even the surge in natural-gas prices has only returned them back to more normal levels. The big test for Chevron (CVX) will be whether the inevitable end of cold winter weather will cause nat-gas prices to plunge and the former state of worry to reassert itself.

But Travelers' (TRV) decline arguably makes the least sense, as the company has continued to see solid earnings growth from favorable loss experience over the past year. Yet after its fourth-quarter report, the stock sank, as investors apparently feared that the huge gains stemmed solely from favorable weather and a lack of catastrophic losses, and that more normal times in the future will bring the company's earnings back down to earth. That might be true in the long run, but Travelers (TRV) has made some key progress in boosting its returns on capital and introducing new products aimed at getting a bigger share of some important insurance lines like the personal auto industry. With CEO Fishman arguing that the emphasis should be on long-term retention rather than short-term profit, Travelers is setting the stage for success years down the road.

Don't get worried
There's plenty of time for all four of these stocks to rebound during the rest of 2014. Especially for Travelers, short-term concerns could easily reverse and send the stocks soaring if more favorable conditions help boost the companies' prospects this year and beyond.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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Related Tickers

8/28/2015 4:55 PM
^DJI $16643.01 Down -11.76 -0.07%
CVX $80.43 Up +2.79 +3.59%
Chevron CAPS Rating: ****
KO $39.45 Up +0.18 +0.46%
Coca-Cola CAPS Rating: ****
T $33.29 Down -0.15 -0.45%
AT&T CAPS Rating: ****
TRV $100.43 Down -0.97 -0.96%
The Travelers Comp… CAPS Rating: ****