Which Dow stocks are underperforming the stock average?

Over the past 6 months the Dow Jones Industrial Average has risen by 17.5%. However, of the 30 companies that comprise the index, several have underperformed. This article looks at which stocks have underperformed the Dow and which ones might begin to do well in the second half of 2013.

This market advance has been led by defensive sectors such as health care, consumer staples and utilities. More recently however, we have begun to see sector rotation with utilities, health care, and consumer staples declining and sectors that have lagged such as energy, materials, technology and industrials beginning to improve.

The chart below shows the price action of the Dow Jones Industrial Average over the past six months (red line). It also shows five companies that have lagged the index. These companies and their sectors are: Alcoa (Basic Materials), Caterpillar (Industrial Goods), Exxon Mobil (Basic Materials/ Energy), General Electric (Industrial Goods), and IBM (Technology).

A 6 month (daily) chart of the Dow Jones Industrial Average + 5 stocks that have lagged the index (Click on the chart for a larger version)

A 6 month (daily) chart of the Dow Jones Industrial Average + 5 stocks that have lagged the index (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

It is always worth paying attention to those companies that are underperforming since they could provide the best upside in the future. And if this sector rotation continues into the second half of 2013 (as we expect it will), then it is companies in the energy, materials, technology and industrials sectors that should lead the way.

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