Although the Dow Jones Industrial Average and the S&P 500 often track each other fairly closely over long periods of time, individual years can see their performance diverge by considerable amounts.
This year is one of those times. Whereas the S&P 500 is in bear market territory with a 20% loss in 2022, the Dow 30 stocks have lost just half that amount. That still means they're in market correction territory, but it probably wouldn't be as bad as it is if not for the index's technology components.
Image source: Getty Images.
While it's called the Dow Jones Industrial Average, it's been a long time since it tracked just the pulse of the U.S's biggest industrial companies. And this year, with another "tech wreck" in the making, the Dow's tech component is weighing heavily on its performance.
Of the 10 worst stocks in the index, 40% of them are tech stocks that have lost an average of 35% of their value. Two-thirds of the three worst Dow Jones stocks are also tech stocks. Let's see which -- if any -- are worth buying today.
Salesforce
Customer relationship management (CRM) specialist Salesforce (CRM 1.05%) has been performing so poorly this year that activist hedge fund Starboard Value has taken a "significant" but undisclosed stake in the stock. Shares are down 37% in 2022 and have lost almost half their value over the past 12 months.
Yet Starboard founder Jeff Smith sees opportunity in the fallen former tech growth stock and believes Salesforce can turn around its "subpar mix of growth and profitability." The CRM specialist has struggled in recent periods, in large part because of unfavorable currency exchange rates, as one-third of its revenue is generated in international markets.
While it's founded on helping companies maintain customer relationships and expanding sales, Salesforce has been an aggressive acquirer and has expanded into marketing, e-commerce, and data analytics. That hasn't helped its growth trajectory, however, even as co-CEO Marc Benioff maintains Salesforce is on track for $50 billion in annual sales in fiscal 2026.
Smith may see Salesforce as "embedded in the fabric" of its enterprise-class customers, but it's not a favorable market for business at the moment, and bucking the trend could be a difficult task for the tech company.
Image source: Getty Images.
Nike
The non-tech stock on this list is Nike (NKE -0.20%), which has lost 44% this year and is the second-worst performer on the Dow. Consumer spending has slowed under the weight of inflation at 40-year highs and elevated gas prices. With consumer prices far exceeding the income gains made in 2022, people are prioritizing putting food on the table and gas in the tank over buying sneakers that can run into the hundreds of dollars.
The slowdown caused a palpable build-up in Nike's inventory, which is forcing it to get promotional to bring those levels down, a move that's hurting profit margins. The sports apparel company slashed its margin outlook for the rest of the year as a result, and with a possible anemic Christmas shopping season just starting, the outlook for the immediate future is dreary.
Not everyone believes it's as bad as it seems, however. My colleague Jeremy Bowman thinks the sell-off in Nike stock is overdone, and he sees its shares as a "screaming buy." Growth may not be as strong as before, but sales are still growing, and Nike has some of the most recognizable brands on the market. Indeed, Brand Finance says Nike is still the world's most valuable apparel brand, and has been since the company consultant began tracking brand values.
I still find it difficult to see where Nike's inflection point is for the foreseeable future, as the Federal Reserve will certainly be stomping on the brakes of economic growth by raising interest rates further. Nike's not going away, but neither is now the time to be buying its stock.
Intel
Chipmaker Intel (INTC -0.41%) might be rising in the wake of its own disappointing earnings results and those of Advanced Micro Devices (AMD 2.42%), which lowered its revenue forecast for the third quarter due to a significant weakening in the PC market.
But Wall Street really isn't expecting its turnaround roadmap to begin bearing fruit until next year at the earliest. Shares of Intel are down 45% this year, making it the worst-performing stock on the Dow Jones Industrial Average.
Intel is separating its manufacturing from its product group in a bid to create a fabless foundry infrastructure, which is a seemingly smart move by the tech giant, but it will take at least several years before it can grab any meaningful share of the market.
With spending by consumers and enterprise-level customers expected to slow further in the coming periods, investors may want to stay on the sidelines to see just how the significant cuts Intel's making to control costs play out. There should be plenty of time to move into the semiconductor stock in the future.
