Since the bear market lows during the financial crisis in early 2009, the Dow Jones Industrials (DJINDICES:^DJI) have recovered all of their lost ground and then some, gaining more than 10,000 points and posting returns of more than 150% -- not even including dividends. In the interim, all 30 of the Dow's current components have gained ground. But several stocks haven't contributed nearly as much as others toward the bull-market run. As we celebrate the New Year, let's take a closer look at Cisco Systems (NASDAQ:CSCO), ExxonMobil (NYSE:XOM), Wal-Mart (NYSE:WMT), and AT&T (NYSE:T) to see why they haven't done as well as the overall Dow.
For Cisco, the past five years have been a big roller-coaster ride, as the tech giant initially soared along with most of the market during 2009 and early 2010. But then, Cisco started making some key mistakes, including an ill-fated consumer videoconferencing initiative that in the end never reached anywhere near its full potential in light of free good-enough alternatives like Skype and FaceTime. The Flip acquisition also ended in failure, resulting in a corporate restructuring to reemphasize its core strengths. Yet by then, Cisco had allowed networking competitors to gain traction, and even though the stock has recovered from its worst level, its 73% gains since the 2009 lows reflect the highly competitive environment it faces.
ExxonMobil has gained just 75% since early 2009 despite the ongoing revolution in energy production that has occurred in recent years. Oil prices gained ground from the lowest levels of late 2008, but low natural-gas prices made Exxon's acquisition of XTO Energy look ill-timed. Moreover, given its gargantuan size, finding replacements for Exxon's natural production declines from its aging wells remains a constant challenge. With a relative glut of energy products on the market, many analysts expect weaker energy prices to come in 2014, and that could send Exxon down from its recent all-time highs.
In assessing Wal-Mart's 87% gains, it's important to remember that Wal-Mart was among the few stocks that survived the 2008 bear market unscathed. Even after taking advantage of recessionary conditions in the economy to lure price-conscious shoppers into its fold, Wal-Mart suffered falling U.S. same-store sales for nine straight quarters before finally turning things around in late 2011. Nevertheless, with ongoing competition from both directions, including deep-discount dollar stores and higher-end department stores, Wal-Mart has struggled to find new growth opportunities in an increasingly online shopping world.
AT&T gained 113%, with its most ignominious defeat coming when it unsuccessfully tried to buy out T-Mobile. The deal ended with AT&T suffering the double-hit of not only having regulators quash the deal but also having to pay a massive breakup fee to T-Mobile as part of their merger agreement, which included $3 billion in cash as well as spectrum assets worth between $1 billion and $3 billion. Nevertheless, AT&T has grown steadily since the failed merger, and its biggest challenge now is figuring out where to direct its ample cash flow toward future growth opportunities.
Will these stocks catch up?
The problem with owning lagging stocks in a bull market is that just because a stock doesn't rise as much in an upward-moving stock market doesn't mean that it won't fall dramatically in the next bear market. Nevertheless, these companies have the potential to turn things around if conditions for their businesses get more favorable in the year ahead.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.