The Dow Jones Industrial Average is up 1.32% through the first week of March despite being buffeted by waves of fear and optimism regarding the strength and direction of the economy.
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Despite this decent monthly return, not everyone enjoyed the fruits of success, as 11 of the 30 Dow stocks are down for the year. These losers are in a variety of industries from technology to telecom to basic materials.
Coming In Last
Alcoa (NYSE:AA) is the worst performer in the Dow Jones Industrial Average, down 14.3% since the start of 2010. Investors have sold off many basic materials stocks due to skepticism over world economic growth rates being strong enough to support current valuations. This skepticism was stoked further by news of China tightening interest rates to cool off its own growth. Investors are assuming that any major slowdown in Chinese economic growth would torpedo the commodity bull market.
Both AT&T (NYSE:T) and Verizon (NYSE:VZ) saw drops of approximately 9% year to date. There's been so much news lately regarding these two stocks that it's hard to discern which might have caused the underperformance.
On the earnings front, Verizon Communications reported earnings of $0.54 per share for the fourth quarter of 2009, right in line with analyst estimates. Despite the increasing sales of mobile subscribers, the company is under continuous pressure from industry competition.
AT & T also hit its earnings number head on when it reported fourth quarter of 2009 earnings of $0.51 which are expected to increase by 6% this quarter. The big news for the company was the addition of 2.7 million subscribers to its service, due mainly to its deal with Apple (Nasdaq:AAPL) on the iPhone.
One macro reason for the underperformance of these two stocks might be that telecom services is typically seen as a safe haven during a recession, and since the economy seems to be emerging from that recession, investors are seeking alternative investments.
Heavy Hitter Takes A Hit
Microsoft (Nasdaq:MSFT) also had a solid earnings report, and yet is still down 5.64% year to date. The company earned net income of $6.66 billion, or $0.74 per diluted share in its second fiscal quarter, double-digit year over year percentage gains in both categories.
Windows 7, the company's latest version of its operating system, led the charge during the quarter. The company reported sales of 60 million licenses for the product since its release, making it the fastest selling operating system it has ever sold.
The Bottom Line
The market has been fickle so far in 2010, rewarding some Dow stocks with major gains and other with significant under performance. Investors that were either lucky or skilled enough to avoid these four names are no doubt celebrating. (Just because a stock is in a slump doesn't mean it's time to sell. Some value managers make a living by investing in "dogs." For more information, refer to Don't Dump On The Dogs.)
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