Why Caterpillar, IBM, and Exxon Mobil Held Back the Dow This Week

The Dow Jones Industrials jumped to record highs, but these stocks missed out. Find out why.

May 31, 2014 at 5:02PM

The Dow Jones Industrials (DJINDICES:^DJI) had a strong week to finish the month of May, with the average emerging at an all-time record closing high on Friday. Gains in the Dow have been broad-based, with the vast majority of Dow component stocks rising for the week. But the Dow did leave a few lagging stocks behind, with Caterpillar (NYSE:CAT), IBM (NYSE:IBM), and ExxonMobil (NYSE:XOM) among the stocks that posted declines on an otherwise positive day for the market.


Source: Caterpillar.

Caterpillar fell 1.7% on the week, with most of the decline coming on Friday after Chief Information Officer Randy Krotowski announced that he would resign effective June 1. The CIO had only been with Caterpillar for two years, but the drop in the stock's price suggests how sensitive shareholders are to any signs of problems at the company. Still, Caterpillar's stock hadn't performed well even before the announcement, as the Dow component continues to struggle with weak demand for its heavy equipment, especially among mining-industry customers. The key to a Caterpillar rebound will likely be in North America, where conditions in the construction industry have improved dramatically and where prospects for future growth look most promising.

Ibm Logo

IBM declined 0.9% as investors reacted to the tech giant's investor day during the preceding week with a lack of enthusiasm. Even as IBM seeks to replace falling revenue from its hardware segment with higher-margin software and services, the Dow component faces ever-stronger competition from other tech companies with similar pedigrees of IT success. IBM's area of strength is in business analytics, as the big-data movement continues to draw enterprise customer demand. Even there, though, IBM's responsive investment in its Watson supercomputer line and other big-data initiatives involve substantial risks. Moreover, with IBM facing some security concerns about whether foreign buyers can trust its hardware not to be monitored by U.S. intelligence agencies, the Dow component will need to work to retain its strong international reputation.


Source: ExxonMobil.

ExxonMobil was down 0.8% despite moving forward with its partnership with Russian oil giant Rosneft on its planned Arctic drilling projects. Many had feared that Exxon would face a work stoppage or even forfeiture of its huge investment in Russia, but since sanctions don't yet cover Rosneft, Exxon was in a position to reaffirm its commitment to the project. Given the challenges that ExxonMobil has faced in coming up with economically viable new sources of oil and gas production, it's important for the oil giant to take advantage of every opportunity it has. Moreover, with an agreement to build a liquefied natural gas plant on the eastern coast of Russia, ExxonMobil will help Russia make greater use of its natural-gas resources and serve energy-hungry customers on the Pacific Rim. Still, with uncertainty about whether geopolitical events will stymie Exxon's efforts, shareholders remain nervous about the future.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of IBM. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

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