Is It Time to Buy October's Worst-Performing Dow Jones Stocks?

Source The Motley Fool

October ended with a thud for investors as disappointing earnings from Microsoft and Meta Platforms pushed the indexes down on the last day of the month, and an accounting scandal at AI server maker Super Micro Computer weighed on AI stocks.

As you can see from the chart below, the indexes sank into negative territory on the last day of the month.

^DJI Chart

^DJI data by YCharts

Market pullbacks can sometimes create buying opportunities, so let's take a look at the three worst-performing stocks in October to see if any of these blue chips are worth buying.

1. Nike (down 12.8%)

Nike's (NYSE: NKE) woes continued last month as the sportswear giant posted another quarter of disappointing results. It's losing market share to upstart rivals and trying to fix the mistakes that took place under former CEO John Donahoe.

Nike axed its CEO in September, bringing in longtime company veteran Elliott Hill to run the company. With revenue and profits falling by double-digits, Nike has a lot of work to stabilize the business and get back to growth. But Hill seems like a good choice for the job as he's run Nike's product and marketplace division, and should be able to help restore some of its historical strengths.

That includes rebuilding its wholesale business, which the company deprioritized to focus on its direct-to-consumer business. Ignoring wholesale customers gave an opportunity to its competitors. Nike could also use a product refresh, as it has relied too much on classic styles to drive sales.

Overall, there is comeback potential for the stock, but I'd like to see evidence that it's starting to gain traction before calling it a buy.

Several stock charts overlaid over one another.

Image source: Getty Images.

2. Merck (down 9.9%)

Pharmaceutical company Merck (NYSE: MRK) was another underperformer on the Dow last month. The stock fell steadily throughout October as rising interest rates pressured dividend stocks like Merck, which pays a dividend yield of 2.9%.

Merck delivered a solid earnings report at the end of the month, but the stock still fell on the news. Revenue in the quarter rose 4% to $16.7 billion, which was ahead of the consensus at $16.46 billion.

Sales were again driven by Keytruda, its drug that helps the immune system fight cancer, which was up 17% to $7.4 billion, making up nearly half of Merck's revenue. On the bottom line, the company reported adjusted earnings per share of $1.57, which beat estimates at $1.50.

Animal health sales were up 6%, but Merck's other drug franchises declined, including Gardasil, ProQuad, and Januvia, and the company's concentration risk is now mounting as Keytruda approaches half of its sales.

Considering its slow revenue growth, Merck's buy case doesn't seem compelling even after last month's pullback.

3. Dow (down 9.6%)

Chemical maker Dow (NYSE: DOW) is one of the smaller companies on the Dow Jones Industrial Average at a market cap of just $35 billion. The stock fell steadily over October, losing 9.6% to make it the third worst-performing stock on the blue chip index.

There wasn't a single reason for Dow's decline, though rising interest rates seemed to contribute to the stock's slide as Dow is a cyclical stock that's sensitive to economic growth.

The company reported just 1% growth in net sales in the quarter to $10.9 billion, on a 1% increase in volume. Pricing was flat too. On the bottom line, adjusted earnings per share fell from $0.48 to $0.47.

Dow has underperformed the Dow Jones Industrial Average and S&P 500 in recent years, and there's not a lot in the report that offers a reason to think it can change that streak. However, dividend investors may want to take advantage of the 5.7% dividend yield right now.

The company didn't give specific guidance, but it said the economic cycle was improving, and it's aiming for more than $3 billion in earnings by 2030.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Meta Platforms and Nike. The Motley Fool has positions in and recommends Merck, Meta Platforms, Microsoft, and Nike. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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