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Is It Time to Buy the Dow Jones' 3 Worst-Performing September Stocks?

By Matthew Frankel, CFP® – Updated Oct 4, 2020 at 10:51AM

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These stocks had a rough month, but could they be strong buys now?

I won't keep you in suspense. The three worst-performing stocks of the 30 components of the Dow Jones Industrial Average in September were Chevron (CVX -1.20%), Apple (AAPL -1.37%), and (CRM -2.57%). Here's a chart of how each component performed, followed by a short explanation of why each one performed so poorly last month.

CVX Chart

CVX data by YCharts

With Chevron, the worst performer of the three, the answer is rather easy. Oil prices continue to be weak and were generally lower throughout September than they were in August. The West Texas Intermediate crude price ended September about 6% lower than where it started, and there were some pretty big price drops during the month. Brent crude, the global oil benchmark, fared even worse, plunging nearly 10% in September alone.

Apple's underperformance is a little bit trickier. The stock experienced a huge rally in advance of its stock split at the end of August, so many investors may have chosen to take profits after the split went into effect. (In full disclosure, I sold about half of my Apple position at the beginning of September.) The overall tech sector was rather weak throughout the month, and Apple's mid-month product event failed to wow investors.

Salesforce is another victim of the overall tech sector weakness. The tech-heavy Nasdaq significantly underperformed the S&P for September, and even getting in on the red-hot Snowflake (SNOW -2.20%) IPO and being added to the Dow during the month wasn't enough to overcome the sector headwinds.

Are they good buys, or should investors stay away?

In the case of oil stocks, my general attitude is to stay away. To be fair, Chevron is certainly in better shape than rival ExxonMobil (XOM -1.19%) -- which is why the latter was removed from the Dow and Chevron wasn't. But there is still far too much uncertainty when it comes to oil demand to justify an investment.

Worker next to an oil pump.

Image source: Getty Images.

With Apple, I'm still bullish on the stock long-term, as I sold some of my shares to rebalance my portfolio, not because I'm losing faith in the company. For investors who had been waiting for a pullback, now could be a smart time to get in, especially ahead of the highly anticipated iPhone 12 reveal later this month.

Finally, Salesforce is a stock that I've had my eye on for some time, but valuation has been an obstacle. Even after September's dip, it's not a cheap stock at about 10 times trailing-12-month sales and 97 times earnings. However, with impressive 30% year-over-year revenue growth in the first half of 2020, it's definitely a stock to keep on your watch list if you're looking for more tech exposure.

The bottom line is that all three of these Dow components are generally well-run companies that are among the leaders in their respective industries, but they all underperformed for different reasons. The two tech underperformers could be good additions to your portfolio if you've been thinking about buying, but I'm not inclined to put any more money to work in the oil industry, even at a discount.

Matthew Frankel, CFP owns shares of Apple and has the following options: short October 2020 $140 calls on Apple. The Motley Fool owns shares of and recommends Apple and The Motley Fool recommends Snowflake Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Apple Stock Quote
$146.28 (-1.37%) $-2.04
Chevron Stock Quote
$180.31 (-1.20%) $-2.18
Salesforce Stock Quote
$143.22 (-2.57%) $-3.77
Exxon Mobil Stock Quote
Exxon Mobil
$109.48 (-1.19%) $-1.32
Snowflake Stock Quote
$150.65 (-2.20%) $-3.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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