Now that August has come to an end, I thought it'd be useful to look back and reflect on the three worst-performing stocks on the Dow Jones Industrial Average (INDEX: ^DJI). While doing so shouldn't necessarily inform one's decisions to buy or sell these stocks, it's nevertheless helpful to uncover the levers that push stocks up and down.
1. Coca-Cola (NYSE: KO), down 8%
The uncoveted crown for worst-performing Dow stock in August goes to Coca-Cola, one of the Dow's most storied companies and a favorite of none other than Warren Buffett. For the month, shares in the company are down more than 8%.
The explanation for these dismal returns is twofold. First, Coke started the month at an extreme disadvantage. In the last week of July, its shares crested a 52-week high after shooting up 5% on the back of better-than-expected earnings. For the quarter ended June 19 and reported on July 17, the company noted sales growth of 2.7% and earnings per share of $1.22, higher than the $1.19 analysts expected.
And second, the drought here at home and increased demand for farm products abroad have contributed to dramatically higher commodity prices. One of the most significant for Coke is corn, which is processed and then used as a sweetener in beverages. The price of corn is up more than 20% since the beginning of January and is expected to add $300 million in costs by the end of the year.
Despite these factors, many analysts here at the Fool remain bullish on Coke. For one Fool's take, check out Nicole Seghetti's column about three reasons to buy its stock. Coke currently trades for 20 times earnings and yields 2.7%.
2. Intel (Nasdaq: INTC), down 6%
Chipmaker Intel comes in second for August, down approximately 6% over the past 30 days.
The storyline for Intel hasn't changed much over the past few years. The principal concern is its overreliance on the decaying PC market, which accounts for nearly two-thirds of the company's sales. In large part because of this, as fellow Fool Evan Niu noted recently, numerous tech analysts have revised their estimates on the company downward.
Intel nevertheless beat earnings estimates for the second quarter of the year. For the three months ended June 30 and reported on July 17, GAAP reported sales were 3.6% higher on a year-over-year basis. And earnings per share came in at $0.57, ahead of the $0.55 analysts expected. Despite the beat, Fool tech analyst Eric Bleeker was surprised by the market's reaction in sending the shares surging upward, as he called the report "not exactly barn-burning."
Shares in the chipmaker are trading for a paltry 10 times earnings and yield a generous 3.6%. According to our new in-depth report on the company: "Intel looks moderately attractive, especially for value investors. If the company can break into the booming smart device segment, it could enjoy meaningful growth, but that remains far from certain at present."
3. Verizon (NYSE: VZ), down 5%
Most investors know Verizon for its 4.7% dividend yield, second only to its competitor AT&T's (NYSE: T) 4.8% on the Dow. Following close on Intel's heels, the telecom giant saw its share price decline by more than 5% for the month. And like Intel, there weren't any notable catalysts for Verizon's decline.
Ironically, there were two pieces of news that emerged during the month that were unquestionably favorable to Verizon. First, news emerged that the Justice Department had given its thumbs-up to a blockbuster deal between Verizon, Vodafone (NYSE: VOD), and a cabal of cable operators for a cache of unused wireless spectrum.
And second, rumors about the impending release of an updated iPhone continue to take shape. According to my colleague Anders Bylund, the phone is reported to sport "superfast 4G LTE networking, a slightly larger screen made by Sharp rather than Samsung, and maybe even a spiffy new NFC chip for buying stuff with your iPhone and not your credit card." At least the first is particularly good for Verizon, as it leads the pack rolling out its 4G LTE network.
All told, shares in the telecom giant are up nearly 8% for the year.
Foolish bottom line
Although past performance is no indication of the future, it's always helpful to understand why stocks perform the way they do in the event that history repeats itself as its bound to do. With this in mind, I invite you to download a copy of our newest free report about three Dow stocks every investor should own. Claim your free copy while it's still available.
