The Dow Jones Industrial Average climbed 1.8% in August. That's a great performance, especially considering the widely followed index is up roughly 8.5% year to date.
However, several Dow stocks fell last month. Is it time to buy August's worst-performing Dow Jones stocks?
1. Intel
Intel(NASDAQ: INTC) stood out by far as the worst Dow stock last month. Shares of the chipmaker plunged 28% in August and are down close to 60% in 2024.
What's behind Intel's malaise? Much of it is caused by changing market dynamics, with a marked increase in competition. Revenue and earnings are declining. The company plans to suspend its dividend in the fourth quarter. Intel is slashing costs, reducing its headcount by over 15%. Some investors are concerned that these cost-cutting efforts will include throwing in the towel on constructing a new chip fabrication plant in Germany.
The picture looked even worse only a few days ago. However, Intel's shares rebounded somewhat after news reports that the company was evaluating a spin-off of its manufacturing operations from its core chip design business.
Is Intel stock a good pick for investors looking for turnaround opportunities? Maybe, but I think the safest move is to stay on the sidelines for now. Intel competes in an intensively competitive industry where the company's central processing units (CPUs) have lost ground to graphics processing units (GPUs).
2. Chevron
Chevron's (NYSE: CVX) performance in August wasn't nearly as bad as Intel's. However, shares of the oil and gas giant still slid 7.8% lower last month. Chevron stock is also down slightly year to date.
It didn't help matters that Chevron's second-quarter earnings, which were reported on Aug. 2, came in below Wall Street's expectations. Investors are also anxious about Chevron's pending acquisition of Hess. This deal is important to Chevron because it would greatly expand and diversify the company's portfolio and production capacity. An arbitration panel plans to conduct a hearing in 2025 to address an issue related to ExxonMobil's challenge related to a joint venture in Guyana.
However, Chevron's management remains confident the Hess deal will close. More importantly, the company should be able to generate strong earnings and free cash flow growth over the long term regardless of what happens with this acquisition.
I think Chevron is a great pick to buy on the dip for income investors. The company's forward dividend yield was 4.4% at the end of Tuesday's trading session. Chevron has increased its dividend payout for 37 consecutive years.
3. Amazon
Amazon(NASDAQ: AMZN) stock skyrocketed 80% last year. Shares of the e-commerce and cloud services leader are beating the Dow Jones Industrial Average in 2024. However, August was a down month for Amazon, with the stock slipping 4.5% -- enough to make it the third-worst performer in the Dow.
You can blame Amazon's August decline squarely on its Q2 update. The company missed analysts' revenue estimates. Its guidance for Q3 revenue also fell short of expectations.
I think these are only short-term issues resulting from customers who are still feeling the sting of inflation and are focusing more on lower-price products. But inflation is moderating. Amazon's underlying businesses remain strong. And the key is that the migration to the cloud -- where Amazon is an industry leader, through Amazon Web Services (AWS) -- is still only in its early innings. Most global information technology (IT) spending still goes to traditional on-premises equipment and infrastructure. Over the next 10 to 15 years, this spending should shift increasingly to cloud-based solutions, with AWS poised to be one of the biggest beneficiaries.
We're also talking about a company that continually finds new markets to enter. Another one should be right around the corner. Amazon CEO Andy Jassy said in the Q2 conference call that the company will begin shipping production satellites later in 2024. He added that management thinks "this could be a very large business for us."
Is Amazon a Dow stock to buy on the dip? Absolutely.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights has positions in Amazon, Chevron, and ExxonMobil. The Motley Fool has positions in and recommends Amazon and Chevron. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
