Is It Time to Buy the Dow Jones' 2 Worst-Performing November … – The Motley Fool

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Stocks rallied last month as investors reacted to signs that inflation is coming down and that the Federal Reserve could start slowing its pace of interest rate hikes as soon as next week when the Federal Open Market Committee meets.
Of the three major indexes, the Dow Jones Industrial Average (^DJI) finished the month up 5.7%, outperforming the S&P 500 and the Nasdaq Composite, as shown in the chart below shows.
^SPX Chart
^SPX data by YCharts.
However, not every Dow stock was a winner. Two high-profile consumer names were the worst performing of the bunch: Disney (DIS -0.34%) and Apple (AAPL 0.25%). Let’s examine why each stock fell last month and whether they’re worth buying today.
DIS Chart
DIS data by YCharts.
Disney stock finished November down 8.1% due primarily to a disappointing fiscal fourth-quarter earnings report. The stock fell 13% on Nov. 9 after it missed both top- and bottom-line estimates on both top and bottom lines, and its adjusted earnings per share actually fell even as its theme parks segment benefited from the economic reopening. The company finished fiscal 2022 with a loss of $4 billion in its streaming segment, and investor excitement over Disney+ seems to have fizzled as losses have mounted.
The company followed that up by announcing a hiring freeze, and later in November, Disney surprised investors by pulling Bob Chapek out of the CEO chair and bringing back Bob Iger to serve as CEO once again.
That helped drive a rebound in the stock as Iger is credited with reinventing the company during his earlier tenure, acquiring Pixar, Marvel, Star Wars, and 20th Century Fox. Iger wasted a little time getting back to work, dismissing Chapek’s top lieutenants and announcing his intention to restructure the company to put storytelling at the center of the business, giving investors reason to buy into the recovery.
Apple has outperformed most of the tech sector this year as its business has generally been unaffected by recessionary fears, but the iPhone maker lost 3.5% in October, underperforming the broad market. At the beginning of the month, reports emerged that Apple was pausing hiring in a number of roles outside of research and development (R&D) in response to the weakening economic environment.
A few days later, Apple said it was experiencing production issues at a factory in Zhengzhou due to COVID restrictions. Those challenges carried on for the duration of the month as the company was later confronted with worker protests at the Foxconn plant. Apple said shipments of its iPhone 14 Pro and Pro Max would be delayed and customers would experience longer wait times for new products.
Analysts lowered their estimates over the course of the month as the production delays lingered and Apple was confronted with worker protests at the Zhengzhou plant.
Disney stock has plunged over the last year, but it has a good chance at a course correction under Iger. The company has many components for success, including a wealth of intellectual property and a unique flywheel model where distinct businesses reinforce one another.
Even before Iger’s arrival, management said that the losses in the streaming business would improve as the company launches an advertising tier and pulls back in marketing. Iger has also said he wants to sharpen the streaming service’s focus on profitability.
If Disney can improve its results in streaming while managing the decline in the linear TV business, the stock should outperform.
On the other hand, Apple is coming to the recessionary environment after a streak of outperformance. Year to date, the company has outperformed the Nasdaq Composite, but analysts are expecting slow growth in its new fiscal year, especially now that the company is facing supply chain issues.
Apple is coming off a strong fiscal fourth-quarter earnings report, and its consumer franchise looks as strong as ever. However, with growth expected to be temporarily impaired and the economy potentially sinking into a recession, there are better options than Apple for investors right now, though its long-term prospects remain solid.
Jeremy Bowman has positions in Walt Disney. The Motley Fool has positions in and recommends Apple and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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