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The Dow Jones comprises 30 stocks in several sectors. Getting exposure to this popular index will give you a diversified portfolio. However, portfolios with many holdings are bound to have a few unprofitable investments. This reality has led to this list of Dow stocks to sell.
Investors can periodically monitor their holdings and trim the ones that don’t offer as much promise. While investors saw many stocks rally in 2023, not every stock is due to achieve a repeat performance. These Dow stocks look troubling for long-term investors.
Disney (DIS)
Disney (NYSE:DIS) has been burning through money for its streaming company while being a dead-end stock for almost a decade. Shares are down by 9% over the past year and have dropped by 18% over the past five years.
Investors may become more confident if the company fulfills its promise to reach profitability for its streaming business in Q4 of fiscal 2024. The company achieved 7% year-over-year revenue growth. The company’s “Experiences” segment grew at the fastest pace and was up by 16% year-over-year.
However, most of the company’s segments didn’t exhibit much growth, with the large “Entertainment” sector only increasing by 3% year-over-year.
Direct-to-consumer revenue (i.e., streaming) only grew by 12% year-over-year which isn’t the best for what’s supposed to be a growth driver. The company has made great progress with trimming operating losses for streaming and may even gain value in 2025 or 2026. It’s possible for streaming to make the switch and become highly profitable in a few years.
However, Disney currently faces several obstacles including a string of movie flops and apathy toward iconic brands. The Marvels had the worst opening weekend among MCU movies. This helps make it one of those Dow stocks to sell.
The article cites “superhero fatigue” as one of the components of the movie’s underperformance. Disney has become reliant on superhero movies in recent years and will have to think outside of the box. The company has a history of doing just that. However, Disney is currently focusing on acquiring iconic brands and focusing on those stories instead of creating original, nostalgia-free content that captivates audiences.
Home Depot (HD)
Home Depot (NYSE:HD) is a well-run company that finds itself with an elevated stock price during a challenging market. Shares shot up from $276 in late October to $355 to start the year.
Investors are getting excited about the prospects of lower interest rates, but that doesn’t mean every stock should be a part of the rally. Home Depot has reported declining revenue and net income for a few quarters, including the third quarter.
Ted Decker, chairman, President, and CEO, mentioned reduced demand for big-ticket, discretionary purchases while smaller projects saw continued engagement. While lower interest rates will make it easier for people to take out loans for big projects, reduced rates can lead to more inflation which crept up last month.
Lower interest rates will elevate housing prices and make it more difficult for people to enter the market. A key issue — a limited supply of available homes — can further elevate prices and make buying a home less accessible. That development would hurt Home Depot’s stock.
Macroeconomic conditions don’t seem conducive for a Home Depot stock rally. The stock has limited upside from here and looks due for a correction. All in all, it’s one of those Dow stocks to sell.
Verizon (VZ)
Verizon (NYSE:VZ) trades at a cheap valuation for a reason. The company has matured and has very limited opportunities for growth. Revenue and net income both decreased year-over-year in the third quarter of 2023.
Any increases or decreases in revenue and earnings are usually small. They’re not enough to cause outrage among investors but also aren’t enough to get people excited.
Verizon stock actually popped when it released earnings because its losses weren’t as bad as Wall Street feared. However, the stock still faces several obstacles, including its high debt. Verizon currently exhibits a 0.64 quick ratio which means its current liabilities exceed its current assets.
Verizon will have to refinance some of its debt at elevated interest rates to lighten the burden. It’s also hard to see how a company can sustain its dividend in the long run if current liabilities frequently exceed current assets. It doesn’t help that annual dividend growth has come to a crawl.
Although a dividend yield of roughly 7% looks appealing, the stock has significantly underperformed. Shares are down by 8% over the past year and have dropped almost one-third of their value over the past five years. Investors may want to sit on the sidelines for this stock.
On the date of publication, Marc Guberti did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.