Why JPMorgan Chase, IBM, and UnitedHealth Group Were the Dow's Only Losers Last Week

On a strong week for the Dow, these stocks lagged behind. Find out why.

Apr 19, 2014 at 5:03PM
Longview

The Dow Jones Industrials (DJINDICES:^DJI) put up a solid performance last week, climbing more than 2% as the average once again made a push toward what bullish investors hope could be 2014's first all-time record high for the venerable average. Yet holding the Dow back were JPMorgan Chase (NYSE:JPM), IBM (NYSE:IBM), and UnitedHealth Group (NYSE:UNH), which were the only three Dow-component stocks to post losses for the holiday-shortened week.

Bank

Image source: Flickr.

All three losing members of the Dow Jones Industrials can blame unfavorable earnings reports for the lion's share of their losses last week. JPMorgan Chase fell just a fraction of a percent, starting off the week on the wrong foot with an earnings report that featured an 18.5% decline in earnings stemming from weakness in its corporate and investment bank unit, with a more-than-20% drop in revenue from its fixed-income operations. The big question facing JPMorgan Chase shareholders is whether the declines in revenue and net income were connected to adverse conditions in various financial markets, or whether they reflect permanent structural changes in the bank's ability to earn profits. JPMorgan Chase has historically succeeded in producing strong internal returns, though, and with share valuations discounting its potential for future growth, JPMorgan Chase stock might well have dropped to interesting levels for bargain-hunting investors.

IBM dropped almost 3% as the tech giant saw overall sales decline by 4%, falling short of what investors had hoped to see from Big Blue for the fifth straight quarter. The destruction in IBM's hardware business has been particularly severe, with a 23% drop in server-related revenue having been partially responsible for IBM's decision to sell off a major portion of its server business to Lenovo. By jettisoning poor-performing businesses, IBM hopes to emphasize higher-margin opportunities in data analytics and cloud computing, making more profit even if revenue continues to lag. Yet with so much intense competition in the cloud and big-data arenas, IBM will have to execute flawlessly if it wants to stay on track to meet its long-term financial goals.

UnitedHealth Group fell 4%, with the health-insurance leader citing higher costs resulting from the implementation of the Affordable Care Act. Although UnitedHealth saw gains in its Medicare Advantage and Medicaid enrollment, commercial-plan numbers dropped by 780,000, the company blamed health-care reform and government spending cuts for a $0.35 per share reduction in its earnings for the quarter. Still, UnitedHealth Group appears to be making the most of the opportunities under Obamacare, especially on the health-care services front. UnitedHealth's Optum segment saw revenue soar almost 30%, with its pharmacy benefits management unit OptumRx seeing even faster volume growth. It's hard to see those results as being gloomy, although it's uncertain whether Obamacare will continue to weigh on UnitedHealth earnings for the rest of 2014 and beyond.

Even when stocks lose ground, it's important to look closely to figure out why. Often, temporary share-price drops are buying opportunities if you have a long-term perspective.

Invest in the next wave of health care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology  behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and it's ability to make life-changing medical solutions never thought possible.  To learn how you can invest in this unbelievable new technology, click here now to see our free report.

Dan Caplinger owns warrants on JPMorgan Chase. The Motley Fool recommends UnitedHealth Group and owns shares of IBM and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers