For the first time in its 128-year history, the Dow Jones Industrial Average hit the 16,000 mark late last week. The 30-stock Dow has now set 40 all-time highs this year and is up over 20 percent since January. While Dow members like Nike and Boeing have had an extremely successful year, with their stock prices up 51 and 76 percent, respectively. There are a few companies that struggled to have a profitable 2013. We'll discuss them and what you should do if you hold any of their stocks below:
- AT&T – The communications company has seen 3 percent decline since May largely due to increased competition. Wireless service, one of AT&T's most important revenue generators, must compete not only with large rivals like Verizon and T-Mobile, but also a growing number of prepaid carriers that offer a wider range of affordable options. The company has not yet made clear to investors how it will improve its earnings other than to say that it will begin offering a larger selection of smartphones.
- Caterpillar – In the past five months, stock prices for the heavy-equipment maker have dropped 6 percent. A large portion of the company's revenue comes from developing and emerging economies, but construction and infrastructure improvements in these areas have slowed in the past year. In addition, the devaluation of commodities has lessened the demand for mining equipment. It's possible that Caterpillar will bounce back from this slump once more building and mining companies move toward expansion in their business cycle.
- Coca-Cola – The soft drink company's share price has fallen 10 percent. One of its biggest challenges is dealing with public health concerns regarding the role of sugary drinks in the obesity epidemic. In addition, recent research has suggested that aspartame, the sweetener used in Diet Coke, may cause health problems. Coca-Cola does, however, sell more than just its namesake soda. Demand for bottled water, juice and energy drinks is growing, and it may be wise for the company to focus more of its efforts in that sector of the business.
- IBM – Since the Dow hit the 15,000 mark in May, share prices have fallen almost 10 percent. While the company has managed to maintain profit growth, drops in sales of its systems in emerging markets like Brazil, Russia, India and China may make this revenue harder to come by. Some seasoned investors also say that the company's share price – hovering around $180 – is much too high given its lacking sales. Despite this discouraging time for the tech giant, things may soon turn around. Company CEO Ginni Rometty told the Motley Fool that IBM's expertise in cloud computing and enterprise data analytics could possibly draw in more customers and increase sales.
So should you dump these stocks as quickly as possible? Not necessarily. It's important to remember that the 30 companies listed in the Dow, including the four above, have been strong and profitable for decades. Despite a poor showing in 2013, they all have good long-term prospects and it's possible that they will turn around eventually.
All of the lagging companies do, however, have major obstacles to overcome and will possibly need to revise their business strategies. For this reason, it may not be wise of profitable for an investor to play the long game with these stocks. With portfolio monitoring tools from SmartStops, you can make an informed decision about how you should go forward with lagging investments.
Categories: Stock News