As each new year gets approaches, investors start to wonder which of the 30 Dow Jones Industrial Average (DJIA) stocks will lead the market higher in the coming year. With all the doom and gloom in the oil and gas market over the past month, it would take a serious contrarian to bet that Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) would be the two best performing DJIA stocks of 2015.
Without trying to predict this as a real expectation with almost a month to go before 2015 starts, 24/7 Wall St. wanted to look at what might actually make Exxon and Chevron be the top-performing DJIA stocks of 2015. This of course goes beyond just hoping or guessing about higher oil prices in a snapback recovery.
The first thing to consider with most DJIA stocks is that sentiment gets too high when times are good for a company, and sentiment usually gets too negative when times are hard for a company. The DJIA indexers actually jettisoned Alcoa Inc. (NYSE: AA) from the Dow in late 2013, and its shares have doubled from the lows of 2013. Boeing Co. (NYSE: BA) was viewed very favorably at the end of 2013 after having gained 84% that year, and the expected gain for 2014 was projected to be almost 10% for 2014. So far its loss has been less than 1% year to date.
So, outside of an unexpected return to $100 oil, what serious issues would it take for the universe to make Exxon Mobil and Chevron the best DJIA stocks of 2015? For starters, let’s look backward here. As of Monday’s closing prices, Chevron was the second worst DJIA stock of 2014, with a return of worse than -7.3%. Exxon Mobil was the third worst-performing Dow stock of 2014, with a loss of almost 6.2%. Our own 2014 DJIA bull and bear outlook showed that analysts were predicting that Exxon would lose 4% and Chevron would gain almost 6%.
For 2015 to work out, it might seem like things would have to get even worse in the oil patch before they get better. Still, oil’s drop has been from over $100 down to well under $65. Would Exxon or Chevron issuing a profit warning take the stocks down enough to make them attractive for 2015? Perhaps.