The Dow Jones (^DJI) is made up of 30 of the most established and influential companies in the market. But even blue-chip stocks can struggle - some are dealing with slowing growth, outdated business models, or increasing competition.
Finding the best companies in the Dow Jones isn’t always straightforward, and that’s why we started StockStory. Keeping that in mind, here are three Dow Jones stocks to avoid and some better opportunities instead.
3M (MMM)
Market cap: $88.66 billion
Producers of the first asthma inhaler, 3M Company (NYSE: MMM) is a global conglomerate known for products in industries like healthcare, safety, electronics, and consumer goods.
Why Are We Bearish on MMM?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its operating margin
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
3M is trading at $171.63 per share, or 17.9x forward P/E. Check out our free in-depth research report to learn more about why MMM doesn’t pass our bar.
Sherwin-Williams (SHW)
Market cap: $78.68 billion
Widely known for its success in the paint industry, Sherwin-Williams (NYSE: SHW) is a manufacturer of paints, coatings, and related products.
Why Does SHW Give Us Pause?
- Annual sales growth of 4% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Anticipated sales growth of 4.6% for the next year implies demand will be shaky
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 3.8% annually
Sherwin-Williams’s stock price of $328.98 implies a valuation ratio of 25.2x forward P/E. To fully understand why you should be careful with SHW, check out our full research report (it’s free).
JPMorgan Chase (JPM)
Market cap: $891.7 billion
Tracing its roots back to 1799 when its earliest predecessor was founded by Aaron Burr, JPMorgan Chase (NYSE: JPM) is a leading financial services company offering investment banking, consumer banking, commercial banking, and asset management services globally.
Why Are We Wary of JPM?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 8% over the last two years was below our standards for the banking sector
- Net interest margin of 2.5% reflects its high servicing and capital costs
- Overall productivity is expected to decrease over the next year as Wall Street thinks its efficiency ratio will degrade by 1.7 percentage points
At $335.74 per share, JPMorgan Chase trades at 2.4x forward P/B. Read our free research report to see why you should think twice about including JPM in your portfolio.
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