NEW YORK (TheStreet) -- It seems hard to believe but there are three stocks in the Dow Jones Industrial Average that you should actively avoid. If you own them, feel free to hold them; but if you don't, don't buy them.
Now 119 years old, the Dow Jones Industrial Average is the second oldest stock market index and the 30 stocks in this index make up some of the largest and influential companies in the U.S., representing about one quarter of the value of the entire U.S. stock market. Recently Apple (AAPL) made big news when it was added to the Dow in March, representing a new era of influential technology companies, replacing old-school telecom AT&T (T).
The stocks on this list are all rated Hold, with a C+ or C rating as per TheStreet Ratings. Check out which stocks are on the list. And when you're done be sure to check out the six best stocks on the DJIA.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Note: Year-to-date returns are based on June 22, 2015 closing prices.CVX data by YCharts
1. Chevron Corp. (CVX)
Industry: Energy/Oil & Gas
Market Cap: $188.6 billion
Rating: Hold, C
Year-to-date return: -10.6%
Chevron Corporation, through its subsidiaries, engages in the petroleum, chemicals, and power and energy operations worldwide. The company operates in two segments, Upstream and Downstream.
TheStreet said: "We rate CHEVRON CORP (CVX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CVX's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.96 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 38.7%. Since the same quarter one year prior, revenues fell by 37.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 43.1% when compared to the same quarter one year ago, falling from $4,512.00 million to $2,567.00 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHEVRON CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: CVX Ratings Report