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Moby Waller
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Moby Waller is a former CBOE Market Maker floor trader and off the floor London-based European Index Options Trader. He now works with BigTrends.com and is a Research Analyst and Portfolio Manager for BigTrends.com's ETF TRADR (http://www.bigtrends.com/getstarted/etfgrowth/), which provides... More
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  • 3 Lagging Blue Chip Stocks Poised for Relative Gains 0 comments
    Aug 13, 2009 11:11 AM | about stocks: WMT, XOM, MCD, SPY, SPY, DIA
    As you may be aware, the broad market has rallied strongly since bottoming out on March 9th of this year.  More recently, another upleg of the recovery rally began on July 13th.

    However, holders of 3 of the largest, most well-known and widely-owned stocks have not benefited from the recent market bounceback.

    Wal-Mart (NYSE:WMT), McDonalds (NYSE:MCD), and Exxon Mobil (NYSE:XOM) are the three names I'm referring to.  XOM is the biggest U.S. company in terms of market capitalization, WMT is 3rd, and MCD has a $60+ billion market cap (data source here).  Each of these stocks has a float of over 1 billion shares, and are widely held by both institutions and individual investors.

    How have these "mega blue chips" performed when compared to the S&P 500 Index (SPX) (NYSEARCA:SPY) since the March bottom?  Take a look at the chart below:

    Relative Performance Chart

    dtw081309ppa

    The bottom line from the above data is that these stocks have not participated in the rally from panic lows ... and it actually shows the impressive nature of the market rally that the S&P 500 and Dow Industrials have rallied despite these names not joining in.

    Now, we are shorter-term traders by nature here at BigTrends ... but for the long-term investor, I would speculate that the performance gap seen this year between the SPX and WMT, MCD, XOM will be narrowed in the future.  This could happen from the market coming down to meet their relative performance, or from relative outperformance in these 3 stocks. 

    The low-risk bet would seem to be to go long the 3 blue chips names for the long-term at these levels relative to the market.  Obviously, there is risk in any trade and this underperformance certainly could continue for some time.  Traders and investors should do their own due dilligence on these 3 companies to make sure that all is well ... but from my analysis, they will continue to be steady earnings-generators over the coming years.

    Disclosure -- I have no current positions or recommendations in WMT, MCD, or XOM, and this article may differ from the opinions or positions of other BigTrends analysts.  Additionally, I do recommend short-term option positions on the SPY in the Index Options Timer advisory service.

    Moby Waller
    BigTrends.com
    1-800-244-8736 

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