Photo by Wance Paleri on Unsplash
 

The Dow Jones Industrial Average (DJI) also known as the Dow 30 will likely finish 2022 with a negative return. The Index is down about 8.0% year-to-date (YTD) as of this writing. This year will be the first negative return in two years. The three worst-performing Dow Jones Stocks in 2022 were Salesforce (CRM), Intel (INTC), and Walt Disney (DIS), which all have negative total returns.

Last year, the Dow 30 was at +19.0% at this point in late December. The Technology sector and growth stocks drove returns in the prior two years. However, the story is different this year, with most tech stocks underperforming the broader market. This year, the Energy and Utilities sectors performed well. The best-performing Dow 30 stock was Chevron (CVX), up about 51.9%. The oil major is joined by Merck (MRK) at +49.8% and Travelers Companies at +22.2%. 
 

Market Overview

After two excellent years, 2022 has been challenging. Investor fears of rising interest rates in response to high inflation and recession drumbeats have scared institutional and retail investors alike. High inflation in 2021 trended higher and peaked in 2022 at the highest level in four decades. However, unlike in 1982, unemployment is nearing a record low with 23 months of job growth. Moreover, after a brief slowdown in the first half of 2022, the Gross Domestic Product (GDP) grew robustly at around 3.2%. At present, fears of a recession seem overdone, but inflation affects the stock market negatively.

The tech-heavy Nasdaq-100 has fallen 32.3%% (as of December 22, 2021) and is in a bear market. A down year was likely expected after the past two stellar years.

Like most indices, the Dow Jones Industrial Average has declined roughly 9.1% YTD and will have a negative year. Previously out-of-favor sectors and stocks are driving positive returns, while technology stocks are detracting from the Dow’s performance.

The S&P 500 Index is doing worse than the Dow 30 but better than the Nasdaq-100, at about (-18.5%) YTD. This performance is worse than in 2020 and 2021, which had solid positive returns. An S&P 500 Index or a Total Stock Market Index Fund is usually a staple in 401(k) retirement portfolios.

This year the Dow 30 has fallen approximately 8.0%, as seen in the chart from Stock Rover*, doing better than the Nasdaq-100 and the Russell 2000 (-20.7%) Indices. As a result, the Dow 30 will probably be the best-performing index in 2022.

Source: Stock Rover*
 

Last Year’s Worst Performers

The three worst-performing Dow Jones stocks in 2020 were Boeing (BA), Walgreens Boots Alliance (WBA), and Chevron (CVX). The three worst-performing Dow Jones stocks in 2021 were Walt Disney (DIS), Verizon Communications (VZ), and Boeing (BA).

Walt Disney (DIS) is on this list again this year for the second year. Verizon and Boeing have negative returns in 2022, but not as much as other Dow stocks. Verizon is a good dividend stock for investors seeking income and a good reward versus risk profile.
 

3 Worst Performing Dow Jones Stocks in 2022

The three worst-performing Dow Jones Stocks in 2022 were: Sales Force (CRM), Intel (INTC), and Walt Disney (DIS), based on our watch list in Stock Rover*.

Source: Stock Rover*

The year 2022 is Disney’s second year of poor performance. The firm is struggling with the aftereffects of the COVID-19 pandemic, high labor costs, inflation, missteps in Florida, and now a CEO change. With more firms designing their own semiconductor chips for dedicated applications, Intel is challenged. These firms utilize third-party fabs, like Taiwan Semiconductor (TSM), to produce their chips. Salesforce is experiencing slowing top-line growth combined with executive departures.

We summarize each stock’s challenges in 2022 and the positives as the basis for further research.
 

Disney’s Tumultuous Year

The Walt Disney Company because of its fictional characters, movies, and theme parks. The company owns or controls brands like Disney, Marvel, Lucasfilm, 20^th Century Fox, Pixar, ESPN, ABC, Hulu, etc. Also, it holds many franchises such as Iron Man, Thor, Little Mermaid, Lion King, Captain America, Star Wars, Marvel, and many more. The theme parks are in the US, China, Japan, and Europe. In addition, numerous licensing deals extend Disney’s reach. The firm is the leading media and entertainment company globally.

Total revenue was $82,722 million in fiscal 2022 and the past twelve months.

The COVID-19 pandemic had an outsized effect on Disney’s operations. Local government and travel restrictions impacted attendance at the company’s theme parks, movies, sporting channels, and cruises. But the company’s revenue and earnings have rebounded. But media and entertainment are moving towards an omnichannel model with streaming at the forefront. This is a competitive space with Netflix, Amazon Prime, Paramount, etc., trying to gain subscribers. That said, Disney will probably be a survivor and market leader for many more years based on the strength of its franchises.

Other challenges include rising labor costs, increasing competition, and the hit-or-miss nature of blockbuster movies. Also, Disney experienced missteps in the executive suite, and Bob Iger is back as CEO.

Disney suspended the dividend early in the pandemic and has not yet resumed paying it. Hence, the company is one of three Doe 30 companies not paying dividends, along with Boeing and Salesforce. It may be a few more years before Disney pays a dividend because of the high debt caused by the COVID-19 pandemic and the 20^th Century Fox acquisition.

Investors may want to wait before taking the plunge into Disney. The stock price is low, but the uncertainty is high.

Source: Stock Rover*
 

Intel: The Chips are Down

Intel is the global leader in microprocessors and microchips. The company designs and produces CPUs and chipsets for PCs, servers, mobile phones, vehicles, wireless products, networking products, field programmable gate arrays (FPGAs), etc. Intel’s x86 chip permitted it to achieve 85%+ market share of CPUs for PCs and servers. Today, Intel’s chips are sold under the Xeon, Core, Pentium, Celeron, Atom, Evo, Movidius, Iris, and other brand names.

Total revenue was $79,024 million in 2021 and $69,540 million in the last twelve months.

Intel has historically been the market leader because of its manufacturing prowess and ability to design the fastest chips. But this paradigm has increasingly come under attack, causing market share losses. First, the formerly moribund Advanced Micro Devices (AMD) provides intense competition under competent leadership. Second, customers design their ARM-based chips and produce them in third-party fabs. Lastly, Nvidia (NVDA) competes in specialized graphics and artificial intelligence chips.

Moreover, the chip industry is cyclical. After the pandemic provided tailwinds, the inevitable downturn started. Consequently, the stock price has plunged to levels last seen in 2014. Simultaneously, the dividend yield has soared to 5.6%+, the highest in a decade.

Intel’s dividend is safe for now, but it bears watching. As a result, investors should probably take a wait-and-see approach with Intel.

Source: Portfolio Insight*
 

Salesforce is a Unique Dow Stock

Salesforce is unique as a Dow stock because it does not pay dividends. Granted, Disney and Boeing are not currently paying a dividend, but they usually do so. Besides that, Salesforce provides customer relationship management software to enterprises worldwide. The company offers several platforms, including Customer 360 and Slack. It provides services too in Sales, Marketing, Commerce, Tableau, and MuleSoft.

Total revenue was $26,492 million in fiscal 2021 and $30,294 million in the last twelve months.

The main issue affecting Salesforce is slowing growth rates. The firm is still a high-growth stock. But high inflation and recession fears are causing customers to take longer for purchases and often at lower prices. Also, the software company recently lost its co-CEO and other executives. However, the founder is still leading the company so the impact may be minimal.

Salesforce is a top software pick for many because of its growth history. That said, investors tend to sell high-growth stocks if expectations are unmet.

Source: Stock Rover*

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