Cramer: Can Dogs of the Dow Learn New Tricks?
If you're a dog-lover you probably won't care for this expression. But stocks in the DJIA that perform poorly are known as the Dogs of the Dow.
Perhaps the expression arose because these laggards were – like too many pooches we know – not well behaved.
In real life difficult dogs can be leashed or harnessed; we grow to love them – but can the same be said of their stock market counterparts?
Jim Cramer has some experience wrestling with those dogs of the Dow. Following are his insights.
(With the index turning in gains of 7.26% for 2012, the dogs are those stocks which under-performed.)
Johnson & Johnson gained 6.9% in 2012.
"I bet 2013 is the year new CEO Alex Gorsky takes matters into his own hands and breaks the company up to bring out value, which is why this is one of my favorite Dow stocks," said Cramer.
IBM gained 4.2% in 2012.
"IBM needs to show that it's not falling prey to Accenture's letdown and is more of an SAP like performer. I think it's too cheap and can easily double its 4.2% gain from last year," said Cramer.
Coca-Cola gained 3.6% in 2012.
"A weaker dollar and a return to a more robust Europe and Asia could mean a doubling of that performance, which is why my charitable trust wants to sink its teeth into the name in an aggressive way if it stays down here," said Cramer.
Microsoft's gained 2.9% in 2012.
"The increase seems a little stingy considering the company's new product cycle," mused Cramer. "I think the stock can return to the low $30s from $27, where it is now, and if not, I suspect this will be the year of new management and reorganization."
Boeing gained 2.7% in 2012.
"I can't believe Boeing performed this poorly," said Cramer with disbelief. "Worst shall not be first, but a tripling of that gain could be reasonable this year. I expect a terrific quarter here, the first of many."
Exxon gained 2.1% in 2012.
"Worldwide growth should make Exxon a much better play this year," said Cramer.
Chevron gained 1.6% in 2012.
"Oil was just a huge drag in 2012," said Cramer. "Next year should be better."
Alcoa gained 0.35% in 2012.
"Frankly, I just don't believe it can stay this low in a global growth environment. Plus, Alcoa will be helped only by the hideous expectations it has set for itself. A very low bar made of aluminum does keep it from advancing as the glut shows no sign of ending," said Cramer.
Caterpillar lost 1.1% in 2012.
"This may be the best dog in the kennel," said Cramer. "I think it's the best China play in the Dow, My charitable trust is betting that CAT could go up at least 10% before it even begins to get fairly valued."
DuPont lost 1.7% in 2012.
"It's cheap but unless this quarter gives us re-accelerated growth, something that could be impossible given its dependence on commodity chemicals, then it will only repeat its poor performance," said Cramer. "Color me nervous."
McDonald's lost 12.08% in 2012.
"McDonald's can recover some, but maybe not all," said Cramer. "It feels like the magic's gone and management doesn't recognize the daunting tasks ahead. A weak dollar seems like the only tailwind."
Intel lost 14.9% in 2012.
"We all know what's bad, how about what's good? There's a strong balance sheet and they are leveraged to the global economy," said Cramer. "Let's just say I don't expect Intel to lose money, which would be a nice improvement."
Hewlett-Packard lost 44.6% in 2012.
"This one put on a suicide vest and almost took the whole Dow down with its negative 44% performance. I don't expect a hideous repeat. However, I still expect it can't help the averages unless it's kicked out of them entirely, certainly a possibility, or it gets a bid from Oracle. Stranger things have happened."
*2012 gain or loss reflects the change in stock prices beginning 01-02-12 and ending 12-31-12.
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