2023 was a strong year for the Dow Jones Industrial Average (DJIA). Not only did the index return 16.2% for the year, but it also hit new all-time highs. Of course, not every stock in the 30-company index performed well last year. With that in mind, here’s a look at four poor performers from 2023 whose share prices could potentially rebound in 2024.
Chevron
First up is oil giant Chevron (NYSE:CVX). It was one of the worst performers in the Dow last year, with the Chevron share price falling 16%.
2023 was a tough year for oil stocks in general. For a start, oil prices were volatile. This volatility had a negative impact on cash flows across the industry. For the first nine months of the year, for example, Chevron’s cash flow from operations totalled $23.2 billion, nearly $14 billion less than the figure a year earlier.
Secondly, with technology stocks flying due to interest in artificial intelligence (AI), a lot of capital left the sector to chase higher returns.
In Chevron’s case, sentiment was also impacted negatively by M&A activity. In October, the company announced the acquisition of rival Hess in a $60 billion all-stock deal. This deal – one of the largest in history in the energy industry – introduces some acquisition risk.
Looking ahead, however, the Chevron share price could easily rebound, particularly if oil prices strengthen. At today’s stock price, Chevron looks cheap. Currently, the forward-looking price-to-earnings (P/E) ratio here is just 11 – way below the DJIA average.
Meanwhile, the company is throwing off piles of cash to shareholders in the form of dividends and share buybacks. At present, the dividend yield is about 4.3%.
With another oil price spike a real possibility due to the high level of geopolitical tension globally, this is a stock to keep an eye on in 2024.
3M Co
Another Dow stock that is looking cheap right now is multinational conglomerate 3M Co (NYSE:MMM). The 3M share price fell around 9% last year.
One major headwind for 3M in 2023 was legal issues. Recently, the company has been involved in a legal battle over its military earplugs. The settlement here is set to cost the group a significant amount of money.
3M’s exposure to consumer-facing markets, such as electronics and home goods, also had an impact on the stock last year. In September, it warned of a ‘slow-growth environment’ due to shifting consumer spending patterns.
Now, while there’s no guarantee that the 3M stock price will recover last year’s losses in 2024, it does look interesting at current levels.
As I mentioned above, 3M is cheap right now. Currently, the forward-looking P/E ratio is just 11.
What really stands out here is the technical setup. Recently, the 3M share price has started to rebound. And we have just seen a ‘golden cross’ – where the 50-day moving average has climbed above the 200-day moving average. This is typically a bullish signal.
With US stock brokers upgrading their price targets on the back of improving profitability, and the stock offering a 6% dividend, it’s definitely worth a look right now.
Nike
Next, we have athletic footwear and apparel powerhouse Nike (NYSE:NKE). The Nike share price registered a fall of around 7% for the year.
One of the key drivers of the share price weakness here was China’s economic woes. In 2022, sales from China represented around 15.5% of the company’s total revenues.
Another factor was a downturn in consumer spending (and a global shift from spending on goods to spending on experiences). This resulted in less demand for the company’s products, and higher inventory levels.
Looking ahead, these two factors could continue to put pressure on the stock in the near term. However, they are unlikely to last forever. Eventually, the Chinese economy is likely to pick up speed. And consumer spending should get a boost as global interest rates fall.
Now, the Nike stock price isn’t cheap. Currently, the forward-looking P/E ratio here is about 25. But this is a company with a strong brand and plenty of long-term growth potential. So, it’s probably worth a premium to the market.
Coca-Cola
Finally, we have the legendary Coca-Cola (NYSE:KO). The US Coca-Cola share price also fell around 7% in 2023.
The main reason Coke shares underperformed last year is that there was some concern that new GLP-1 obesity/weight loss drugs (Ozempic, Wegovy, etc.) could reduce demand for snacks and soft drinks going forward. These concerns had a particularly large impact on the stock (and many other stocks) late in the third quarter and early in the fourth, with the company’s share price falling close to $50 at one stage (from $65 in H1).
Now, there’s no doubt that GLP-1 drugs do add some uncertainty to the investment case here. However, most analysts tend to agree that the fears have been overblown. Analysts at JP Morgan, for example, have said that they see the company as “relatively more insulated” from GLP-1. That’s because around 80% of Coke’s volumes are international and 19 out of its 20 top drinks offer sugar-free alternatives.
At present, Coca-Cola shares trade on a forward-looking P/E ratio of around 21. So, the Coca-Cola stock price is still not cheap after the recent fall. That valuation could turn out to be a bargain, however. After all, this is a high-quality company with strong competitive advantages and an incredible dividend track record (50+ consecutive increases).
Edward Sheldon owns shares in Coca-Cola Co. and Nike
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
