Is it time to buy the 3 worst performing Dow Jones stocks this year?

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The Dow Jones Industrial Average is having a record year compared to the S&P500 or the Nasdaq Compound, down 11% since the start of the year, compared to losses of 14% and 22%, respectively, for the other indices. While these two have been in official bear market territory (and the Nasdaq still is), the Dow never hit that low.

This is not the case for its various components, however. Almost a third of stocks in the Dow 30 are down 20% or more so far in 2022, and with the possibility that the economy will soon be officially declared in recession, let’s see if the three worst performing stocks in the index are worth buying at their depressed prices.

Image source: Getty Images.

Selling power

Customer relationship management specialist Selling power (RCMP 2.52%) lost almost 35% of its value this year, although it slipped well before the start of 2022 as economic conditions began to deteriorate in the United States and abroad.

While revenues continue to grow — and Salesforce seems to continue to surprise the market with its resilience — they aren’t growing at the same pace as the company matures, and investors are worried about the impact a global recession will have. on operations. The cloud-based software giant had to adjust its full-year guidance in June due to the impact of the US dollar on companies with strong international exposure.

With Salesforce generating a third of its revenue from foreign markets, it now expects revenue to grow 17% for the year from its previous currency-adjusted growth forecast of 20% — a little more than its 21% growth forecast made in March.

Co-CEO Marc Benioff still maintains that Salesforce is on track to achieve $50 billion in annual sales in fiscal year 2026, a long-term planning goal originally set two years ago when the cloud company was skyrocketing. It may still be possible, but industry peers like ServiceNow and Working day have also reduced their outlook and this may make it harder for Salesforce to swim against the tide.

Nike

Nike (NKE 0.91%) is the second-worst performing Dow Jones stock, with losses of just over 35% as sales faltered to rise just 3% last quarter on a currency-neutral basis. Consumer spending is slowing, leading to an accumulation of inventories, which rose 23% for the period. Nike says that means it will have to be more promotional to get rid of its merchandise.

Its downsizing promises lower profits and margins for the coming fiscal quarter, and possibly the year, and they were already contracting across the board. Nike, however, is increasingly pushing its direct-to-consumer model to keep sales as high as they are, but this is coming under pressure from higher shipping costs.

Yet Nike is the most valuable clothing brand in the world, according to Brand Finance, and has been since the consultancy began tracking those values. This means that even if the stock trades at 29 times earnings, 23 times next year estimates and 68 times the free cash flow it produces, it likely deserves a premium over the competition. It’s debatable whether it’s worth it, however, and investors may want to wait and see if a global economic downturn that’s really pinching consumers is still unfolding.

Intel

It is only in August that Intelit is (INTC 0.35%) the performance deteriorated so much that it became the worst performing stock in the Dow Jones Industrial Average. Not that the chipmaker has done well at any time this year, but after the company delayed the launch of its desktop graphics cards until Q3, the stock really took a dip.

Yet Intel is only marginally worse than Nike, with shares down 35.1% year-to-date, and with nowhere to go but up in a market dominated by Nvidia and Advanced micro-systems, he should see an improvement – eventually. Still, investors have to wonder how much of a dent it can make in the space, unless it can break in at a lower price to entice buyers, though that could also limit profits.

Like many other companies, the rest of Intel’s business is suffering from supply chain issues and ongoing COVID-19-related lockdowns in China, but also from its own missteps, which have led the chipmaker to miss Wall Street’s estimates badly and dramatically in the last quarter. lower revenue forecast for the year.

Yet unlike Salsforce or Nike, the semiconductor stock is valued at an actual discount, trading at seven times earnings, 12 times next year’s estimates and a bargain nine times free cash flow than expected. ‘she produces. Of the three, Intel is the only one that could be considered a safe buy.

Rich Duprey has no position in the stocks mentioned. The Motley Fool holds roles and endorses Advanced Micro Devices, Intel, Nike, Nvidia, Salesforce, Inc., ServiceNow, Inc., and Workday. The Motley Fool recommends the following options: $57.50 long calls on Intel in January 2023 and $57.50 short puts on Intel in January 2023. The Motley Fool has a disclosure policy.

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