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Last Week's Worst Performing Dow Components

By Matt Thalman - Sep 14, 2013 at 4:00PM

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An in-depth look at what caused a few stocks to become this week’s big Dow losers.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After losing 689 points, or 4.45%, during August, the Dow Jones Industrial Average (^DJI 2.68%) has made a remarkable comeback after just two weeks in September. Since the beginning of the month, the index has risen 565 points, or 3.82% -- mostly on its 453-point, or 3.03%, gain this week alone. The Dow now sits at 15,376, well above the 15,000 mark, but still below the 52-week high of 15,658. The S&P 500 and Nasdaq both also performed well last week, gaining 1.98% and 1.69%, respectively.

Before we jump into the big losers of the week, let's quickly look at the Dow's top performer. Walt Disney (DIS 3.69%) rose 8.63% amid the announcement that the company's board had approved up to $6 billion in share buybacks in 2014. If the company were to buy back the full $6 billion amount at today's price, that would amount to almost 90 million shares, or 5.45%, of the company's current float. The change in the number of shares currently available to investors would fall from 1.65 billion to around 1.56 billion, and while that's a nice reduction to the float, it comes at a time when Disney's shares are not only trading higher by more than 33% year to date but are also just slightly below the stock's all-time high. As investors, we want the companies we own to build our wealth by increasing shareholder value, and while this move may do just that in the long run, companies in general don't typically have a great track record of doing so when it comes to share buybacks. In most cases, CEOs and boards of directors tend to buy back larger amounts of stock when the company is performing well, but also trading at a premium, not a discount. Such is the case with Disney right now.  

The lonesome loser
The only Dow stock that lost value this past week was Hewlett-Packard (HPQ 4.01%), which fell 1.56%. The move primarily came on Thursday, after Dell (DELL.DL) shareholders voted to approve the buyout offer from Michael Dell and Silver Lake Partners to take the company private. Once Dell is taken private, the company will be out of the prying eyes of Wall Street and able to make tough decisions that will affect the company and hopefully make it stronger in the long run. Since Dell and HP compete in nearly every area of their operations, HP could feel stiffer competition if Dell's turnaround goes as planned. Many insiders have also said that Dell has put a number of contracts and deals on the back burner while management has dealt with getting the deal to take the company private. So now that shareholders have approved going private, Dell may begin announcing big IT contracts and business that potentially could have gone to HP.  

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,500.68 (2.68%) $823.32
HP Inc. Stock Quote
HP Inc.
HPQ
$35.23 (4.01%) $1.36
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$97.78 (3.69%) $3.48
Dell Technologies Inc. Stock Quote
Dell Technologies Inc.
DELL.DL

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

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