What goes down often goes up. That's the underlying premise of several investing strategies. They're built on the idea of reversion to the mean.
Several stocks in the Dow Jones Industrial Average have fallen year to date. Some of them have been especially big losers. But perhaps these lackluster blue-chip stocks could turn things around. Should you buy the worst-performing Dow Jones stocks of 2023 so far?
Three strikes?
No Dow Jones stock has plunged as much this year as 3M Company (MMM -0.66%). Shares of the industrial conglomerate are down more than 30% year to date. 3M stock also plummeted 32% last year. It barely delivered a positive return in 2021 -- a year when the Dow Jones Industrial Average itself soared nearly 19%.
Should it be "three strikes and you're out" with 3M? Some investors think so. They point to the company's history of failing to deliver on its guidance, declining revenue, and legal risk related to lawsuits over allegedly defective earplugs it sold to the U.S. military.
Others note that 3M remains a Dividend King with 65 consecutive years of dividend increases and a juicy dividend yield of over 5.8%. They believe the stock's valuation (shares trade at around 12 times forward earnings) adequately prices in the risks that the company faces.
My view is that there's too much uncertainty with 3M right now. Investors can wait for a better pitch than swinging at this beaten-down stock.
Big Blue in the red
IBM (IBM -8.25%) delivered positive stock performances in 2021 and 2022. It's been a different story for Big Blue so far this year, though, with its shares down close to 10%.
The technology giant's revenue growth is weak right now, with sales increasing by only 0.4% year over year in the first quarter of 2023. However, IBM's situation looks better on a constant-currency basis. The strong U.S. dollar has hurt the company because of its significant level of international sales.
There are some reasons for optimism. IBM remains highly profitable. Its earnings soared more than 26% year over year in Q1. The company expects to grow its free cash flow by more than $1 billion this year. And its dividend yield of nearly 5.3% is attractive.
I think growth-oriented investors can find much better alternatives than IBM. But the stock appears to be a decent pick for income investors.
An not-so-healthy start
UnitedHealth Group (UNH 1.35%) ranks as the third-worst-performing stock in the Dow Jones Industrial Average this year. Shares of the healthcare juggernaut have fallen around 8% so far.
Business appears to be humming along quite nicely for UnitedHealth Group, though. The company's total revenue jumped 15% year over year in the first quarter. Earnings rose 14% on an adjusted basis and handily topped Wall Street estimates.
The main problem for UnitedHealth Group seems to be that it simply isn't winning the expectations game. Even though the company raised its full-year earnings guidance, the stock slid lower after its Q1 update.
I'm more bullish about UnitedHealth Group than I am about the other two big Dow losers of 2023 thus far. My take is that the company should have solid growth prospects with its Medicare Advantage business. And if there's a recession on the way for the U.S. as the Fed appears to think will be the case, investors could again turn to UnitedHealth Group as a safe-haven stock
Despite its sluggish start, I expect UnitedHealth Group will rebound. This is a beaten-down Dow stock that I think investors can buy on the dip without any anxiety.
