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Boeing and Visa: Big Short-Term Dow Losers, Huge Long-Term Winners

In some ways, Visa (NYSE: V  ) and Boeing (NYSE: BA  ) are the worst performers you'll find among the 30 Dow Jones Industrial Average  (DJINDICES: ^DJI  ) stocks today.

Visa is trading 7.3% below its 52-week high. That's the second-worst drop on the Dow. Year to date, Visa shares have dropped 2.5%, making them among the Dow's five worst performers in 2014.

Boeing is trading 10.5% below its 52-week high. It's the only Dow stock to fall farther from its annual peak than Visa. Boeing also tops the list of the Dow's year-to-date losers by falling 4.8%.

These are terrible short-term returns. Boeing and Visa investors have seen their asset values trampled into smithereens in 2014.

^DJI Chart

^DJI data by YCharts.

But don't be too quick to hit your "sell" button on these two companies today, even if it seems to be flashing red right in your face.

You see, Boeing has gained 27.4% in the last 52 weeks, while Visa shares climbed 16.6% higher. The Dow itself is only up by 12.4% over the same period.

This is not some incredible paradox. It's just Visa and Boeing swinging a bit faster than the average Dow stock, both up and down.

Visa has been riding a resurgent global economy for some time. This stock is a macroeconomic play on consumers whipping out their plastic at the checkout counters again, bolstered by lower unemployment and rising wages.

These trends have most certainly played out over the last 52 weeks and five years, lifting Visa shares to uncomfortably high valuations. In January, Visa's share price rose to nearly 5.5 times the company's book value -- an extremely high level from a historical perspective:

V Price to Book Value Chart

V Price to Book Value data by YCharts.

Meanwhile, Boeing is enjoying a long-term surge on the back of its emerging 787 Dreamliner cash machine. The Dreamliner's launch has been marred by onboard battery fires and the occasional customer complaint. You know, the usual rash of problems with game-changing product introductions in any industry.

But the 787 remains a favorite when airlines look for long-haul, large-capacity passenger aircraft. The jet promises to save airlines money in the long run thanks to extreme fuel efficiency. On this basis, analysts expect Boeing to grow its earnings by more than 10% annually over the next five years.

Both Boeing and Visa ran into macroeconomic worries in January, falling in unison when Chinese manufacturers saw a sudden productivity drop. That was bad news for the global economy overall, and particularly for the consumption-based fortunes of Visa. Low production volumes often point to low consumer-level sales, after all.

But these are all fairly modest and myopic concerns. Have you see how the fundamental growth drivers have played out for Visa and Boeing in the long term?

^DJI Chart

^DJI data by YCharts.

Zoom out to a five-year perspective and the negative chart squiggles in 2014 don't look so terrifying.

Of course, past performance is no guarantee of future returns. But that adage cuts both ways -- recent drops don't necessarily mean that Visa and Boeing will underperform the Dow for the rest of 2014 and beyond. On the other hand, their healthy long-term returns don't necessarily lead to another bounce.

Still, the drivers remain. There's nothing fundamentally broken about these blue-chip business models. Boeing is still just getting started with wrangling ultra-efficient Dreamliners across the globe, and Visa is moving into the next generation of payment systems.

Long story short, don't let a brief string of disappointing stock returns scare you away from Boeing and Visa. Do your homework on the Dow giants' long-term plans and rock-solid business models and you're more likely to find deep-discount values than crumbling fundamentals here.

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Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

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Related Tickers

8/28/2015 4:55 PM
^DJI $16643.01 Down -11.76 -0.07%
BA $133.24 Up +1.37 +1.04%
The Boeing Company CAPS Rating: ****
V $72.46 Up +0.06 +0.08%
Visa CAPS Rating: ****