Not all major indices have performed equally well so far in 2024. Year to date, the Nasdaq Composite is up 22.3%, while the S&P 500 index has delivered a solid 16.7%. However, the Dow Jones Industrial Average is sorely lagging with less than a 5% year-to-date gain.
While it’s typical for the Dow to underperform more growth-focused indexes during bull markets, this level of underperformance is a bit surprising considering outsized gains from Amazon, Microsoft, Goldman Sachs, and other large Dow components. Dig deeper, however, and there have been some significant sell-offs in reliable blue-chip stalwarts like UnitedHealth Group and Home Depot.
This could also spell opportunity. My preferred approach is to filter out the noise and focus on a path to recovery rather than getting too caught up in everything that is going wrong at the time. The Dow is a good starting point because many components have strong long-term investment theses.
Year-to-date, McDonald’s (NYSE: MCD) is the fourth-worst-performing Dow stock and Nike (NYSE: NKE) has been the worst. Despite some noteworthy obstacles, here’s why both companies stand out as particularly strong buys now.
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Nike is in a historic slowdown
Nike is hovering around its lowest level since the COVID-19 pandemic-induced plunge in spring 2020. At first glance, the sell-off seems unwarranted, considering that Nike’s sales are close to an all-time high and margins aren’t that low.
NKE Chart
However, the stock market cares more about where a company is headed than where it has been. And unfortunately, Nike has reached a breaking point.
Cracks in Nike’s business have been forming for a while now. After the company reported its first-quarter fiscal 2023 earnings in late September 2022, Nike stock tumbled all the way down to $82.22 per share on Oct. 3, 2022. The sell-off was due to falling profit, inflated inventory levels, and challenges with growth out of key markets, including China.
Nike’s recent earnings call featured many of the same nagging themes. Revenue growth has ground to a halt — with sales…
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