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The Dow Jones US Financials Index Is a Who’s Who of Crappy Companies
By JLP | June 10, 2008
How’s that for a title? LOL! I couldn’t help myself.
On December 31, 2007, the Dow Jones U.S. Financials Index contained 294 companies. As of yesterday’s close, that same index contained 287 companies. Some of the companies were kicked off the index because they were delisted by the stock exchange. Others were swallowed up by other companies. There were even a few additions to the index.
I wanted to see how the companies in the index performed so far this year so I compared the index at the beginning of the year with yesterday’s index. I researched the companies that were no longer in the index in order to get their performance numbers. I ignored the stocks that were added to the index this year. Of the 294 remaining companies, the average YTD return (not including dividends) was -14.32%! The median return was -7.92% (remember median means that half the companies had returns better than -7.92% and half had returns worse than -7.92%).
Of the 294 companies, 212 have negative returns so far in 2008. Roughly 28% of the 294 companies have YTD returns of -20% or worse! Over 19% of the companies are down over 30% so far this year.
Like I said, this is a who’s who of crappy companies.
If you’re interested, you can download the Excel spreadsheet I used for this post.
Topics: Investing, Miscellaneous | 6 Comments »
June 10th, 2008 at 6:11 pm
Looks like a pretty good buying opportunity for preferred stock in some of these companies. Many financials are issuing some attractive preferreds with juicy yields and pretty good credit ratings.
You can find some yields close to 10% right now. Could provide some good short-term income to offset some of the volatility while providing additional upside in terms of capital appreciation when things recover.
Although, I’d probably wait another month or so as I don’t think we’ve seen all of the damage unfold in this sector just yet.
June 10th, 2008 at 6:32 pm
Jeremy,
You’re probably right.
I think I would look at IYF, VFH, and XLF for financials and PFF for preferreds. The sector is still risky but at least there’s some diversification among these ETFs.
June 10th, 2008 at 6:47 pm
I have VFH in my Schwab account. It’s not pretty this year (that’s an understatement), but if you’re holding for the long-term (at least ten years), stuff reverts to the mean. My serious money for the next 12 years is all in CDs (laddered, of course), so these daily/weekly/monthly gyrations are of academic interest, but not retirement-threatening.
Bubbles form, bubbles burst. If you’re diversified, bubbles are just noise.
Yours,
Bozo
June 10th, 2008 at 8:09 pm
You know when I hear that good companies shares have negative returns on the exchange, I get excited because it’s a buying opportunity. Remember that we can’t change the price of shares on the market in the short term but we can buy quality and hold it for the long term and prosper
June 10th, 2008 at 8:23 pm
The financial sector is down … it’s the credit crunch you’ve been blogging about! Oil is up nowadays
June 11th, 2008 at 7:48 pm
… so crappy I’m buying them right now, thanks!