June’s Worst Dow Stocks

Published on Friday, 29 June 2012 20:25 Written by Todd Shriber

As has been duly noted, the Dow Jones Industrial Average was a juggernaut of an index during the month of June, but naysayers are likely to point to the fact that the blue-chip index accrued the bulk of its monthly gains on one day. That being the last trading day of the month when the Dow rallied 2.2%. That enabled the 30-stock index to post a monthly gain of just over 4%.

The gains were led by pharmaceuticals names such as Merck (NYSE: MRK) and Pfizer (NYSE: PFE) along higher beta fare such as Bank of America (NYSE: BAC). Unfortunately for the bulls, a monthly gain of 4% does not mean all of the Dow’s constituents closed higher in June.

There were a few notable exceptions and let’s get into them here with a look at the Dow’s June turkeys.

Procter & Gamble (NYSE: PG):

Explaining why the world’s largest maker of consumer products lost 2.7% during June is easy: The company issued a profit warning that underscored weakness in global markets. Ohio-based P&G is still searching for the right approach to emerging markets. Beyond that, the company has been raising prices on many of its ubiquitous brands, forcing cost-conscious consumers to head to other brands or generics.

Simply put, in a risk off environment where staples stocks have been thriving, P&G should be a leader, not a laggard.

Caterpillar (NYSE: CAT):

It is also not surprising to see Caterpillar make the list of the Dow’s worst performers for the month of June. As the world’s largest maker of construction and mining equipment, Caterpillar is a high-beta stock heavily exposed to the global business cycle.

With demand for commodities waning and fears about slowdowns in the U.S. and China rising, investors need to be cautious with Caterpillar. Then again it should be noted Caterpillar’s risk-adjusted gain of 4.5 percent in the three years through June 26 topped that of 20 competitors with sales of more than $2 billion in the Bloomberg Industries Construction & Mining Machinery Index, according to Bloomberg News.

McDonald’s (NYSE: MCD):

McDonald’s, the world’s largest fast food chain, is another example of a stock that isn’t all that surprising to see on this list. The company is heavily dependent on global markets, developed and emerging, for a substantial portion of its revenue.

As investors are likely tired of hearing at this point, Europe’s sovereign debt crisis combined with fears about an economic hard landing in China are roiling scores of emerging markets. McDonald’s lost 3% in June, but year-to-date, things are much worse as the shares are down almost 12%.