The Dow Jones experienced a big loss on Wednesday. The Dow Jones lost 4.62% of its total value or 519.83 points, a loss of historical meaning. All stocks that belong to the Dow Jones Industrial Average traded with loss, but four stocks' decline accounted for an index impact of 129.21 points of the 519.83 that were lost. These stocks have all seen great loss throughout the downtrend and all trade within the capital goods sector.
United Technologies Corporation (UTX), The Boeing Company (BA), 3M Company (MMM), and Caterpillar (CAT) contributed 129.21 points to the total loss of 519.83 within the Dow Jones Industrial Average. Each of these companies trade in the consumer goods sector, which has performed amongst the worst, with a monthly loss of 22.66%. With little to justify the accumulated loss of the sector, investors will wonder if now is the time to take advantage of cheap prices or if these companies will continue to fall.
United Technologies Corporation posted a loss on Wednesday of 5.77%. The company has lost 25.36% of its value over the last month with 18.59% during the last five days. The company recently announced quarterly earnings which beat estimates by 0.03 a share and increased revenue 9% year over year. In addition to a solid earnings report, the company increased full year EPS guidance by 0.10, a year over year growth of 13-15%. The company also had many key developments during the last month, which include new contracts and company acquisitions.
Under normal circumstances, this stock would have probably seen gains. All announcements made by the company were positive and suggest future growth. The stock has a dividend yield of 2.85, recently raising its quarterly dividend to 0.48. Before the downtrend, the stock was trading at 52-week highs with yearly gains in excess of 25%. It is reasonable to believe the stock is a buy at its current price of $67.44, which is near its 52-week low.
Boeing posted a loss on Wednesday of 7.28%. The company has now seen loss in excess of 23% over the last month with nearly 15% during the last five days. The company announced earnings that show an increase in profit of 20% year over year. Revenue increased by more than 6% as the company delivered four additional planes in comparison to the same period last year. The company's key developments include new orders, alliances, and additional contracts.
The company announced that it now expects to deliver five less planes than previously expected. The company did not make changes to revenue guidance but rather increased EPS, which reflects strong internal performance. The company's future looks very bright as the new aircraft products are underway and revenue is expected to rise significantly. I am unable to find any fundamental reason to validate the losses recently experienced. With a yield of 2.93 and a P/E of 12, the stock appears to be an obvious long term buy.
3M posted a loss on Wednesday of 5.39%. With that loss, the company has seen its stock value decrease nearly 20% over the last month. The company released its quarterly report on July 26, posting a 14.1% increase in sales, earning $1.60 a share, up 3.9% year over year. In addition to strong earnings, the company increased full year guidance with earnings between $6.10-6.25 a share.
Since 2009, the company has continued to see gains in revenue, net income, and EPS. The guidance for 2011 is expected to continue which would post three straight years of company growth. MMM has increased its assets and decreased long term debt over the last three years, showing a balance sheet that is getting stronger. The company has a dividend yield of 2.81 and is now trading at 52-week lows. Before the downtrend began, the company was trading at 52-week highs as the company's fundamentals and growth potential appeared promising. Regardless of short term price action, I see the company's current price as a buy. I have no doubt that the stock will be significantly higher within one year.
Caterpillar finished the trading day on Wednesday with a loss of 4.54%. During the last month, Caterpillar has dropped nearly 25% with more than 13% over the last five days. Caterpillar is a company with high expectations. The most recent quarterly report missed estimates posting a 44% increase in earnings year over year. The company has increased revenue at a remarkable rate, seeing an increase over the last five quarters. The company increased full year guidance and is now expecting $6.75-7.24 per share, 0.50 ahead of expectations. The company announced several key developments over the last month, which include new acquisitions and a new facility located in China.
Even with a monthly loss of 25%, the stock is still trading with yearly gains of nearly 17%. The company has a dividend yield of 2.20 and increased the quarterly dividend during the last month. I believe CAT is a strong buy as the company continues to increase profits. At $83.51, the company is trading with a P/E of under 14. At this price, the company has the potential to see further loss. However, I would not take the risk, as the chances of CAT seeing these prices after the downtrend has ended are rare. The company has been on a strong uptrend since March of 2009 and I expect the stock to continue the trend very soon.
These companies are similar in many ways. Each company has posted an earnings report during the last month that showed an increase in revenue and income. Each company trades with a yield of at least 2.2, which offers investors security in times of panic. Each company has posted at least two years of solid financial growth. Each company has strong balance sheets with a low amount of debt in comparison to earnings and total assets. Finally, each company has increased full year guidance which shows continued growth for a solid future.
These companies have several positives but also have the similarity of losing more than 20% of total value during the last month. The companies all trade as a part of the capital goods sector, which has underperformed the S&P during this time of loss. This loss within the sector can be directly related to the downfall of these four companies, as these companies are the largest of the sector. Believing that sector performance is a factor with these companies, I look to find some reason for excessive loss that underperformed the market. However, I am unable to find any logical reason as to why these companies have lost so much.
All four companies have released good news and have solid fundamentals. The sell-off is hard to explain, which makes me believe the upside is now greater than the downside. I do not believe we are headed towards another recession. In comparison to 2008, the financial sector is much stronger, the automotive industry is thriving, and balance sheets of the largest companies are better. However, I believe it is possible to see more loss before the market recovers. The question to ask is if these four companies have seen their losses and will now trade above the market. I do not know the answer to this question, but I do know that these companies are worth much more than their current price and I would take advantage of the situation. This can be done by simply buying at these low prices and taking the loss, if it occurs, over the short term. Once the market recovers, the prices are likely to never be seen again. Long term gains will exceed any short term losses and these fast growing stocks will offer excellent returns.