Is It Time to Buy October's Worst-Performing Dow Jones Stocks?

As the market experienced a pullback in October, some of the Dow Jones Industrial Average's (DJIA) blue-chip stocks took a hit. But is it time to buy these worst-performing stocks, or should investors stay on the sidelines? Let's analyze Nike (NKE), Merck (MRK), and Dow (DOW) to determine if they present compelling investment opportunities.


1. Nike (NKE): Down 12.8% in October
Nike's recent struggles stem from disappointing earnings and market share loss. However, the sportswear giant's strong brand and new CEO, Elliott Hill, could signal a turnaround. Hill's experience in product and marketplace divisions may help Nike regain market share and stabilize its business. Additionally, a product refresh could drive sales and boost the stock's performance. Nike's dividend yield of 1.21% is slightly higher than its historical average, indicating potential undervaluation.


2. Merck (MRK): Down 9.9% in October
Merck's solid earnings report was driven by Keytruda, its drug that helps the immune system fight cancer. However, the company's concentration risk is mounting, as Keytruda approaches half of its sales. Merck's dividend yield of 2.9% is in line with its historical average, and its P/E ratio of 14 is lower than its 5-year average of 16, suggesting a potential buying opportunity. Despite its slow revenue growth, Merck's dividend yield may still attract investors.


3. Dow (DOW): Down 9.6% in October
Dow's decline was likely due to its cyclical nature and economic growth concerns. The company's slow revenue growth and underperformance may limit its appeal, but its 5.7% dividend yield could attract income-focused investors. Dow's P/E ratio of 8 is lower than its 5-year average of 12, indicating potential undervaluation.


Investors with a long-term, income-focused strategy may find opportunities in these worst-performing DJIA stocks. Nike's brand and new CEO, Merck's solid earnings, and Dow's high dividend yield could provide attractive returns for patient investors. However, it's essential to consider the fundamentals and growth prospects of each company before making an investment decision.

In conclusion, while the recent market pullback has created undervaluations in some DJIA stocks, investors should carefully evaluate each company's fundamentals and growth prospects before buying. An income-focused strategy, such as the Income Method, can help investors capitalize on these opportunities and secure steady returns over the long term.