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5 Dow Stocks Likely to Struggle in 2012

Investors have faced tough times for years, and things only seem to be getting worse. As Europe stubbornly fails to resolve its problems and Washington gridlock threatens the U.S. economy as well, 2012 could be a dangerous time for the stock market.

In times like these, the key is to protect your capital. That doesn't mean dumping stocks entirely, but it does mean making sure you have the best-quality stocks you can find -- and weeding out ones that aren't making the grade. You simply can't afford to take on big risk when the rewards simply aren't there.

Today, I'm looking at five stocks from the Dow Jones Industrials (INDEX: ^DJI  ) for which the consensus of analysts expects the worst returns next year. Those five Dow stocks are as follows:


Current Price

Target Price

Expected Gain

Expected Sales Growth

Expected EPS Growth

Verizon (NYSE: VZ  ) 38.42 39.14 2% 4.1% 15.9%
IBM (NYSE: IBM  ) 187.48 196.00 5% 3% 10.1%
McDonald's (NYSE: MCD  ) 98.14 103.48 5% 5.6% 9.6%
Wal-Mart (NYSE: WMT  ) 57.95 61.70 6% 5.2% 9.4%
Home Depot (NYSE: HD  ) 39.42 42.24 7% 3.4% 14.2%

Source: Yahoo! Finance. Prices as of Dec. 15 close.

Several of these stocks also made our list of Dow stocks that made investors happy in 2011, so no one's saying that these companies don't have strong businesses. But with so little upside potential, it's entirely possible that the shares have already run their course -- and if an overall downturn in stocks does happen, then these past winners could be the first on the chopping block.

Even though you shouldn't just sell first and ask questions later based simply on pessimistic target prices, it gives you a good way to focus your research. So let's take a closer look at these five stocks to find out what else we can learn.

Are analysts too pessimistic?
That's the way to look at those stocks from the bearish perspective, which the consensus of analysts seems to favor. While analysts make plenty of mistakes, they're more often too rosy in their outlooks than too dour.

Still, with these stocks appearing fully priced, the slightest bad news could send them reeling. With such high expectations, you might want a stock that gives you a bigger margin of safety for next year.

To find exactly those kinds of stocks, I have a suggestion: Check out this free special report from the Motley Fool, which details five stocks that the Fool owns for its own portfolio. We think you should own them, too, but you can't buy them if you don't know what they are. So check out these stock ideas for yourself.

Fool contributor Dan Caplinger is always ready for a good struggle. You can follow him on Twitter. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Wal-Mart and IBM. Motley Fool newsletter services have recommended buying shares of Home Depot, McDonald's, and Wal-Mart and creating a diagonal call position in Wal-Mart. 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 Fool's disclosure policy stands up for you.

Read/Post Comments (4) | Recommend This Article (18)

Comments from our Foolish Readers

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 December 18, 2011, at 6:36 PM, rcleven wrote:

    Are we trying to sell subscriptions? Are you talking to investors or traders? Me, I'll keep my mote stocks and keep dividends.

  • Report this Comment On December 19, 2011, at 12:03 AM, DoinWerk wrote:

    These all seem like solid div plays to fade the Euro mess if that blows up with not much risk. If Euro doesn't, the market will move higher and these 5 stocks will move up with it. Sorry, I actually like all these companies for 2012 and the long term.

  • Report this Comment On December 24, 2011, at 10:12 AM, meathooks wrote:

    Food for thought. If MCD suffers from European exposure and food price inflation then chances are that these analyst should just keep their money stuffed in a mattress--because the entire DOW will be down as well. Therefore, the premise of the analyst argument is flawed because if I truly believe that a company paying a 2.9% yield with the strongest fast food brand is America will falter I should probably second guess investing in any company in 2012. For long term investors I like MCD.

    Chicken nuggets are 5% meat and people still buy them up--what other brand could do that?

  • Report this Comment On December 27, 2011, at 10:41 AM, Ironbob wrote:

    One of the silliest articles ever. MCD cracked open the coffee market and sells its products at cut rare prices compared to Starbucks. As for food inflation, if they are growing the business and same store sales increase a little, the author seems to think that their competition isn't under the same pressure?

    IBM has to "prove themselves"? HUH??

    T-M deal dead and that means nothing to VZ??

    HELLO, rental properties are exploding, HELLOOOO, can you say HOME DEPOT??

    Without a doubt some of the dumbest analyses ever.

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