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Banking industry

2012 Outlook for Dow's Laggards Unclear Amid Market Volatility

Strategic Insights

— 2 min read

Market uncertainty and high volatility may hinder the Dow Jones Industrial Average's laggards, which include Bank of America, Alcoa, Hewlett-Packard, and General Electric, from turning into leaders. The Dow has declined only 1.8% in 2011 after increasing 11% last year, but its future performance is clouded by the European debt crisis and slowing economic growth.

The Dow's worst-performing stocks in 2011 were largely victims of trends in the broader financial sector. Despite this, JPMorgan and General Electric stand out as potential rebounders. JPMorgan has buried its rivals, while General Electric has cut waste and is trading at a discount to peers.

Key Takeaways:

  • The Dow Jones Industrial Average has declined only 1.8% in 2011 after increasing 11% last year.
  • Bank of America has fallen 60% this year due to concerns over its capital requirements and a lawsuit by American International Group.
  • Alcoa has dropped 39% this year due to declining aluminum prices and weak demand.
  • Hewlett-Packard has tumbled 36% in 2011 due to uncertainty over its strategy, including a potential spinoff of its PC division.
  • General Electric has fallen 16% this year due to criticism over its nuclear reactor design and a questionable tax benefit.
  • JPMorgan is one of the two banks in the Dow Jones Industrial Average and has fared better than its peers.
  • General Electric has cut waste and is trading at a discount to peers, making it a more attractive investment.
  • JPMorgan is a leading financial institution and stands to benefit from any pickup in the banking industry.

Statistics:

  • The Dow Jones Industrial Average has declined only 1.8% in 2011.
  • Bank of America's stock price has fallen 60% this year.
  • Alcoa's stock price has dropped 39% this year.
  • Hewlett-Packard's stock price has tumbled 36% in 2011.
  • General Electric's stock price has fallen 16% this year.
  • JPMorgan's stock price is down 29% in 2011.
  • General Electric's forward earnings multiple is 9.6.
  • JPMorgan's forward earnings multiple is 6.

Sources:

  • Lindsey Bell, "NEW YORK (TheStreet (http://www.thestreet.com)) --"
  • Lindsey Bell, "To view this article on the web, click here: NEW YORK (TheStreet (http://www.thestreet.com))"
  • Lindsey Bell, "Written by Lindsey Bell (http://www.thestreet.com/author/1223502/lindsey-bell/all.html) in New York."
  • Lindsey Bell, "To follow the writer on Twitter, go to Lindsey Bell (http://twitter.com/lindseycbell)."
  • TheStreet Ratings' top-rated stocks for 2012 (http://www.thestreet.com/stock-market-news/10579592/top-rated-stocks/top-rated-stocks.html)

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