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A Foolish Take: What's Behind the Dow's 2019 Rise?

Dan Caplinger, The Motley Fool

The stock market has done quite well in 2019, with major stock indexes having seen double-digit percentage gains for the year. As of Sept. 6, the Dow Jones Industrial Average (DJINDICES: ^DJI) had risen almost 3,500 points, a gain of nearly 15% on the year.

Given the Dow's rise, it'd be reasonable to think that gains throughout the market benchmark's constituent stocks would be consistent. Yet that hasn't been the case this year. Although 23 of the Dow's 30 components have share prices above where they started the year, the remaining seven include four stocks that have lost 10% or more so far in 2019.

Person looking at a quad-screen monitor, with a city skyline behind windows in the background

Image source: Getty Images.

Winners and losers

Looking at which stocks have moved the most gives some color on the forces that investors are seeing in various parts of the market. Visa (NYSE: V) and Microsoft (NASDAQ: MSFT) have been the best stocks in the Dow so far in 2019; materials science specialist Dow Inc. (NYSE: DOW) and drugstore chain Walgreens Boots Alliance (NASDAQ: WBA) have done the worst.

Bar chart of the best and worst Dow stock performances year to date

Data source: Dogs of the Dow. Note: Performance of Dow Inc. is based on a mix of DowDuPont and Dow Inc. stock, following DowDuPont's breakup.

Among the winners, Visa has worked hard to cement its leadership position in the payment-processing space. Recent efforts have centered on creating faster direct-payment capabilities; these include the ongoing build-out and implementation of the Visa Direct platform, as well as acquisitions and partnerships to extend Visa's reach further across the globe. Meanwhile, Microsoft has continued its transformative strategy, moving toward cloud computing. The tech giant has taken advantage of strong demand for its popular software suites and has created a valuable cloud platform to drive profit growth.

Yet offsetting those big gains have been losses of over 20% from Dow Inc. and from Walgreens. The breakup of what used to be DowDuPont forced the overseers of the Dow Jones Industrials to replace DowDuPont with the materials science business that took the Dow name, and investors haven't been quick to embrace the slow-growth mature business that Dow Inc. ended up with. For Walgreens, a host of healthcare-related issues have weighed on performance: Falling prices for generic drugs, Brexit concerns for the company's U.K. operations, and competition from e-commerce retailers have all made shareholders hesitant to bet on Walgreens' future.

If the Dow finishes 2019 where it is today, it'll have been a good year overall for the average. But always look beyond the benchmarks for the winners and losers driving their overall performance. Seeing the industry trends will make you a better-informed investor.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and Visa. The Motley Fool has the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com