In this article, we discuss the 10 worst performing Dow stocks on a year-to-date basis along with the current market conditions.
After the disastrous performance of 2022, the market has recovered better than expected and is on a growth trajectory. According to BlackRock’s Q4 2024 Equity Market Outlook, despite concerns about the economy, fundamentals have kept stocks resilient. Opportunities are seen in large-cap stocks, which may outperform both mega and small caps.
Volatility is viewed as normal and can create buying opportunities, especially when driven by market sentiment rather than fundamentals. Historically, market corrections of 10% or more are common but long-term investors have still enjoyed solid returns.
The report states that elections and Fed rate cuts may also impact the market, with rate cuts typically benefiting large-cap and high-quality stocks. Healthcare and consumer staples sectors have traditionally performed well after rate cuts, while cyclical sectors may improve as the economy recovers.
Finally, it mentioned that technology, which is usually a laggard in rate-cutting cycles, looks well-positioned this time due to innovations like AI. Long-term patience is essential in navigating volatility, as the market has proven resilient over decades through various crises.
READ ALSO 8 Best Communication Stocks To Buy According to Analysts and 10 Worst Performing Blue Chip Stocks in 2024
Evaluating Volatility and Valuations in Today’s Stock Market
In a CNBC interview, chief strategist and economist of Solus Alternative Asset, Dan Greenhaus discussed stock market volatility, with mega-cap earnings and the upcoming election contributing to potential fluctuations. He mentioned that the market is already experiencing some volatility, as reflected in the elevated VIX. Despite this, he highlighted that the economy is still growing, albeit at a slower pace, and earnings are rising, which is creating a generally favorable environment for equities.
Greenhaus also addressed concerns about market valuations and noted that while current multiples are high historically, determining what constitutes “rich” valuation levels can be difficult without hindsight.
Lastly, Greenhaus referenced a trading strategy of “buying high and selling higher,” suggesting that investors should remain engaged in the market even during record highs.
With that, we look at the 10 Worst Performing Dow Stocks Year-to-Date.
10 Worst Performing Dow Stocks Year-to-Date
Our Methodology
For this article, we checked the year-to-date performance of all the Dow components and selected 10 stocks out of 30, that had the worst share price performance on a year-to-date basis on October 21. We listed the stocks in descending order of their share price performance. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Worst Performing Dow Stocks Year-to-Date
10. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 92
Share Price Performance Year-to-Date: 6.5%
The Walt Disney Company (NYSE:DIS), commonly known as Disney, is an American multinational entertainment and media conglomerate headquartered in California. It is known for its diverse portfolio, including its renowned film studios, television networks and direct-to-consumer streaming platforms such as Disney+ and Hulu. The company also manages a wide range of theme parks, resorts, and consumer products.
Disney (NYSE:DIS) had a strong start to the year as its stock performed well in the first quarter. However, its decline started in the second quarter and was highlighted by Meridian Funds in its Meridian Hedged Equity Fund’s Q2 2024 investor letter. The firm said that the company’s stock struggled in the quarter mainly due to worries about slowing growth in its theme park division.
Although park revenue increased by 10% compared to last year, management indicated a decline in post-pandemic demand and rising costs, which resulted in a less optimistic outlook for park operating income for the second half of the year.
Furthermore, according to Goldman Sachs, the company’s Parks and Experiences segment may lose between $150 million and $200 million due to Hurricane Milton, as reported by WSJ. This potential loss would be greater than the $100 million impact Disney experienced from Hurricane Irma in 2017. It is one of the worst-performing Dow stocks on a year-to-date basis.
Despite all that, Disney (NYSE:DIS) is a fundamentally strong company with significant future growth prospects. You can read about it here: The Walt Disney Company (DIS): A Bull Case Theory.
9. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 67
Share Price Performance Year-to-Date: 6%
McDonald’s Corporation (NYSE:MCD) is a global leader in the fast food industry, known for its widespread presence and iconic menu items. With a diverse menu featuring its famous burgers, fries, and seasonal offerings, the company serves millions of customers daily across more than 100 countries. The company also generates revenue through real estate and owns a large percentage of its restaurant properties.
McDonald (NYSE:MCD) is 9th on our list of worst-performing Dow stocks. Its challenges were highlighted by CEO Chris Kempczinski at the company’s Q2 earnings call. He mentioned that the company faced challenges due to a more cautious consumer base, especially among lower-income households. He noted a significant slowdown in the quick-service restaurant (QSR) sector, with declining traffic in major markets like the U.S., Australia, Canada, and Germany, compounded by geopolitical tensions in the Middle East.
These factors led to a drop in comparable sales across all segments. Moreover, the CEO also discussed internal challenges, he said:
“But there were also factors within our control that contributed to our underperformance, most notably our value execution.”
Nevertheless, McDonald’s (NYSE:MCD) year-to-date share price decline is mostly due to its abysmal performance in the first half. Between July 1 and October 21, the stock has gained nearly 26% which shows that it’s on a decent path to recovery.
Moreover, the company’s $5 menu is being applauded by many as Mad Money host Jim Cramer said:
“Kudos to McDonald’s for recognizing they have to come up with a cheap alternative that people can afford, I wish other companies would follow suit.”
On October 15, The Fly reported that Morgan Stanley analyst Brian Harbour increased McDonald’s (NYSE:MCD) price target from $296 to $340 and maintained an Overweight rating on the stock before its third-quarter results. He noted improvements in the company’s U.S. business, which helped lift the stock from a slump in the second quarter.
However, he indicated that international performance might still face challenges, leading to a “mixed” outlook for the quarter. While Morgan Stanley plans to approach the upcoming earnings report with some caution, it expects the company’s performance in fiscal year 2025 to be similar to this year.