Last month wasn't great for the overall stock market, but it was very bad for a few blue-chip stocks.
Most investors realize that big declines can be buying opportunities, but they should also recognize when jumping into a distressed stock is a bad idea. The current weakness of stocks may be just a harbinger of what is to come. How do you know the difference? You dig deeper and think about the bigger picture.
With that as background, here's a closer look at Dow Jones Industrial Average's (DJI: ^DJI) April's Biggest Losers These companies may be leaders, but that doesn't necessarily make them great picks right now.
The Dow Jones is the worst ever
The Dow Jones Industrial Average fell 5% last month. However, this setback does not withstand the losses suffered by some of her constituents. shares Boeing (NYSE: BS), Universal business machines (NYSE: IBM)And Home Depot (NYSE: HD) Both fell nearly 13% in April, while the tech giant retreated Intel Corporation (NASDAQ: INTC) It watched its shares decline by more than 30%.
What happened?
Shares of aircraft maker Boeing lost ground throughout the month. However, first-quarter results released in late April finally validated this sell-off. Revenue fell 8% year-over-year, as continuing design and manufacturing problems with its newest 737 and 787 aircraft dented demand. The company also posted a huge loss of $355 million, reminding investors that these problems aren't just inconveniences — there's a clear financial cost to them. Then there's the added disruption of the impending CEO switch. Current CEO Dave Calhoun will step down at the end of the year, but there is already drama over who should replace him.
IBM's setback is also mostly earnings-related, despite announcing a cloud acquisition Programming a company Hashi Corp Didn't help. Q1 earnings of $1.68 per share beat estimates of $1.60, but revenue was $14.46 billion. Didn't live up to expectations With a value of $14.55 billion. While most analysts are generally optimistic about the idea of integrating HashiCorp into IBM's existing cloud software business, now or may not be the ideal time to reach such a deal. HashiCorp's $6.4 billion offer is also expensive.
As for Home Depot stock, don't blame earnings for its poor April performance — it won't release its first-quarter financial numbers until mid-May. Blame the macro environment instead. Inflation proved to be an issue during the home improvement retailer's fiscal fourth quarter (ending Jan. 28), sending sales down 3% year-over-year. Nothing has changed significantly in the meantime. In fact, the environment for housing construction and improvement has worsened in light of persistent inflation and high interest rates.
Finally, Intel shares collapsed in April in anticipation of bad news about its first-quarter results. Although revenue rose 9% year-over-year, the chipmaker still faces significant challenges. Its first-quarter top line of $12.7 billion fell slightly short of analyst estimates, while revenue guidance of between $12.5 billion and $13.5 billion for the current quarter was now below the consensus of $13.6 billion. It's the second quarter in a row that Intel's expectations haven't been up to par, though these back-to-back disappointments may just remind shareholders of the company's deep-rooted problems.
But the question remains… Should you buy any (or all) of April's worst-performing Dow Jones stocks?
To buy, or not to buy, these dips?
If you're looking for a comprehensive, universally applicable answer, the answer should be no — now is not the time to buy April's worst-performing Dow Jones stocks.
But such an answer oversimplifies the matter.
While all pullbacks are potential buying opportunities, not all pullbacks are worth acting on. As I mentioned earlier, sharp sell-offs are sometimes a glimpse of what's to come. Other times, sales occur because something unexpected and insurmountable comes up. It is also worth noting that the calendar month is not a sound basis for determining whether the sell-off has run its course. Retracements can start in the middle of the month, and the stock may slide for two or three months (or more) before finding a bottom.
In other words, April's poor performance is only a small part of a much bigger picture that you should consider before diving in. With that in mind, Home Depot and Intel are not worth intervening in the wake of last month's missteps.
Clearly, inflation and high interest rates are still with us, and are likely to stay with us for a while. The Fed does not intend to cut interest rates until later this year, and even then, these cuts are likely to be modest. This will not only limit the demand for new homes but will also limit the demand for home upgrades. Both are headwinds for Home Depot.
And Intel? She's been struggling for years. Its biggest competitive advantage now is simply its enormous ability to meet the growing need for computer processors and related technology. However, competitors benefit from its struggles. Meanwhile, the company may struggle to build the factories needed to develop its own foundry business. It's a distraction that can last for years.
But what about IBM and Boeing? There is an upside to both.
IBM arguably He is Overpaying HashiCorp. However, this premium may be worth it to get an attractive deal. Given IBM's overwhelming success with its acquisition of Red Hat in 2019, investors should be cautiously optimistic that this purchase will pay off as well. Meanwhile, the tech sector remains a cash cow, even if it's sluggish. Leveraging its high-margin software business, IBM saw fourth-quarter operating cash flow rise 10% year-over-year to $4.2 billion, extending a multi-quarter growth trend.
Newcomers will also enter IBM stock while the dividend yield is 4%.
As for Boeing, yes, the company is a mess. However, much of this chaos is already reflected in the stock price. Shares bounced back shortly after the COVID-19 pandemic hit in 2020, down 33% from their 52-week high. The company has a lot to discover, but in the end it is forced to do so; The new CEO should help.
But most of all, the aviation industry cannot get around the fact that it will need to buy 42,000 new aircraft over the next 20 years. One way or another, Boeing is going to have to be a major supplier of those passenger planes. Just keep in mind that any investment should be a (very) long-term position.
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James Bromley He has no position in any of the stocks mentioned. The Motley Fool has posts on and recommends Home Depot. The Motley Fool recommends Intel and International Business Machines and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has Disclosure policy.
Is it time to buy April's worst-performing Dow Jones stocks? Originally published by The Motley Fool