FR: How the Dow’s Latest Picks Have Fared

Article: How the Dow’s Latest Picks Have Fared

My next “Fool Revisited” piece is the second in the Dow series that began with this post. Whereas that piece discussed the old stalwarts of the Dow, today’s historic article examined the seven most recent additions (at the time) to the Dow Jones Industrial Average. The premise behind this series of articles was two-fold: first, we could ticker the index, so it let us put our articles in another place in hopes that more people would see. Second – and perhaps most important from an investing standpoint – I wanted to see if the addition to the Dow had improved the prospects of the stock, giving my readers something to look for should other changes be announced to this silly index that too many people care about.

Of the seven companies profiled, two are no longer included in the Dow Jones. Kraft Foods left the index in September 2012 after its split into Mondelez International and Kraft Foods Group, and was replaced by UnitedHealth Group. Bank of America (NYSE: BAC) left the index in September 2013, replaced by the “larger” (i.e. higher-priced) Goldman Sachs.

Similar to Alcoa in the previous Dow piece, being removed from the Index didn’t dramatically affect the performance of Bank of America, which has more than doubled the return of the S&P 500 since article publication on October 29, 2011. It is also not alone in performing better than the S&P 500; Pfizer (NYSE: PFE), Cisco Systems (Nasdaq: CSCO), and Travelers (NYSE: TRV) also outperformed the “market” during this time. Since article publication through February 23, 2018, here’s how they stack up according to CAGR and total return:

Stock Start Price End Price CAGR Total Growth Value of $10,000
Pfizer $15.84 $36.26 13.99% 128.91% $22,891
Verizon (NYSE: VZ) $28.60 $48.29 8.63% 68.85% $16,885
Chevron Corporation (NYSE: CVX) $86.65 $112.59 4.23% 29.94% $12,994
Bank of America $6.92 $32.03 27.41% 362.86% $46,286
Cisco Systems $15.51 $44.00 17.92% 183.69% $28,369
Travelers $51.16 $139.74 17.22% 173.14% $27,314
S&P 500 $1,285.09 $2,747.30 12.76% 113.78% $21,378

Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits

Looking solely at metrics, Bank of America seems like a decent company in which to invest: it’s profitable, has a relatively low P/B ratio, and is an industry leader as one of the largest banks in the world, giving it market moving power (it remains one the highest volume stocks on the market nearly every day). However, its past performance isn’t an indicator of how well it will do going forward. Of the six companies profiled here, I would probably invest in Verizon (despite its poor performance here) or Pfizer first before considering Bank of America.

Until next time…

Disclaimer: I do not own currently own shares in any of the mentioned companies, though I did recently close a position in Chevron within my mother’s portfolio which I manage. However, I have no plans to purchase shares of any company within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.

2 thoughts on “FR: How the Dow’s Latest Picks Have Fared

  1. Pingback: FR: Decades of Great Performance from 9 Dow Stocks | Trying Too Hard: A Blog

  2. Pingback: FR: A Decade of performance from 7 Dow Stocks | Trying Too Hard: A Blog

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