If you like buying blue chips at bargain prices, there’s certainly no shortage of them right now. While the broad market finally started to move higher again last month, plenty of familiar stocks continued to move lower, adding to January’s and February’s losses.
Smart investors know this weakness translates into opportunity, of course. Just because shares of a respectable company have peeled back, however, doesn’t inherently mean it’s worth stepping into right now. It’s entirely possible the recent selling is just the latest leg of a much bigger pullback.
With that as the backdrop, here’s a closer look at the Dow Jones Industrial Average‘s (DJINDICES: ^DJI) three biggest losers from March, as well as a decision on whether they are buys as a result of their recent pullbacks.
March’s worst Dow performers
Last month’s worst laggards were Home Depot (NYSE: HD), Boeing (NYSE: BA), and Walt Disney (NYSE: DIS), down 5%, 7%, and 8% (respectively) in March. For the sake of comparison, the Dow itself mustered a gain of a little more than 2% for the same time frame.
Those poor performances aren’t horrible. They are notable, however, given their underlying reasons.
For Home Depot, the source of its pullback is continued worry that the housing market is about to implode. Interest rates are finally on the rise and should continue to inch higher for at least a couple of years. Moreover, as of February, pending home sales have fallen for four consecutive months. The slowdown poses a threat to both the new construction market as well as investments and upgrades of existing homes in anticipation of a sale.
Boeing’s tumble can largely be chalked up to the crash of a Boeing 737-800 passenger jet in China on March 21. Although the cause of the crash has yet to be determined and the plane in question was not one of the problem-plagued 737 MAX jets, the catastrophe did rekindle worries that Boeing’s reputation is irreparably damaged.
As for Walt Disney, a combination of internal conflict, customer boycotts, a temporary shutdown of Shanghai’s theme park related to COVID-19, and lackluster streaming growth are all undermining the stock’s performance. Investors are collectively saying it’s all more than the company can handle, adding to the sell-off that’s been underway since March of last year.
The question remains, however: Are any (or all) of these pullbacks good buying opportunities?
Answer: Not really.
Investors aren’t being irrational
Don’t misunderstand: As a general rule, it’s better to buy good stocks when they go “on sale” than it is to purchase them at full price. As was the case with March’s biggest losers among the Nasdaq Composite (NASDAQINDEX: ^IXIC) and the S&P 500 (SNPINDEX: ^GSPC) though, there’s something bigger happening with stocks right now. Recent sell-offs aren’t being driven by unnecessary worry. They’re a reflection of investor reasoning regarding each company’s foreseeable future.
Take Home Depot, for instance. While the real estate market’s slowdown doesn’t pose an existential threat to the home improvement retailer, it does present a headwind that could take an unpredictable toll on the company’s top and bottom lines. The market abhors uncertainty almost as much as it abhors disappointing results.
Then there’s Boeing. While the crashed 737-800 being operated by China Eastern Airlines is one of the world’s most commonly used passenger jets and boasts a healthy safety record, the aircraft maker can’t afford to be implicated in any design gaffe right now. Investors may wait to start buying in earnest again until Boeing’s been cleared of any prospective liability. That, however, could take months to determine.
As for Disney, while its involvement in political matters is nothing new, the fallout from that involvement appears to be worsening. Protesting parents appear to be a little more serious about no longer doing business with the company than they have in the past, while employees are a little bolder than they’ve historically been in demanding the company’s management publicly respond to their concerns. Such conflict leaves investors wondering if profits are still the priority, at a time when Walt Disney’s lauded streaming services aren’t exactly firing on all cylinders. Again, it could take months for the market to regain its previous comfort level in owning Disney stock.
Always check the broad market’s true temperature
This isn’t always the case, of course. Sometimes stocks suffer major tumbles because panicked investors sell first without thinking about the long-term fallout of troubling headlines. That was certainly the case in January, when the omicron variant of COVID-19 started to circulate in earnest, seemingly threatening another round of global shutdowns. Russia’s invasion of Ukraine beginning in late February also spooked investors. But in retrospect, it’s now clear the only thing to fear about those matters was the fear they sparked. Neither has actually proven to be a true crisis, save the continued pain at the gas pump.
It’s not exactly unmerited fear driving Disney, Boeing, and Home Depot shares lower though, or any other sinking stocks for that matter. Investors are actually being pretty levelheaded here. You’d be wise to take the hint they’re dropping for certain stocks.
Then there’s the bigger-picture takeaway: It always pays to understand the market environment you’re in since that ever-changing environment can push and pull stocks for short-lived as well as long-lived reasons.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool owns and recommends Home Depot and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.