2018 Dow Laggards Could Offer Material Upside Into 2019


Walgreens Boots Alliance Inc. (NASDAQ: WBA) is the newest member of the Dow industrials after GE was booted out, and that inclusion in the index took place just a few days ahead of Amazon’s announced acquisition of PillPack that will get Amazon into the pharmacy business (of sorts). This and some weakness earlier on have now put Walgreens shares down over 17% so far in 2018. At $60.01, Walgreens shares have a 52-week range of $59.07 to $83.89. That also puts the stock down almost 30% from its 52-week high.

Walgreens has seen many analysts downgrade the stock and cut price targets based on Amazon, and the latest consensus target of $73.73 is down from roughly $81 just a month earlier. If the lesson Kroger holds up from the Whole Foods acquisition were to remain static, it could spell trouble for Walgreens shares — then again, Whole Foods was an established player and leader in organic and natural foods while PillPack is still an infant in the business growth cycle.


As mentioned, General Electric Co. (NYSE: GE) has been booted out of the Dow and replaced by Walgreens, but even the most critical investor likely still would consider the conglomerate to be a blue chip stock. GE shares were last seen down 22% so far in 2018, which would make it the worst Dow stock had it not been jettisoned from the index.

GE now is going to unlock the value of its health care business, which will make for close to a $70 billion company according to some analysts. And GE is expected to unload its majority stake in Baker Hughes, a GE Co. (NYSE: BHGE) after it exits health care. GE closed out the first half of 2018 at $13.61 and has a 52-week range of $12.61 to $27.59, but the consensus price target (even with all the cautious ratings considered) is closer to $17.21 for a year ahead. GE also pays north of a 3% dividend yield.

It turns out that 18 of the 30 Dow stocks were negative in 2018. Other key Dow stocks that were in the red for the first half of 2018 were seen as follows on a total return basis that includes the impact of dividends:

  • Travelers: −9.8%
  • McDonald’s: −8.9%
  • IBM: −8.9%
  • DowDuPont: −7.4%
  • Verizon: −5%
  • Coca-Cola: −4.4%
  • JPMorgan: −2.5%
  • Walt Disney: −2.5%
  • United Technologies: −2%
  • American Express: −1.3%
  • Exxon Mobil: −1.1%

Stay tuned.

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