Is it time to buy July’s worst-performing Dow Jones stocks?

In a difficult month for technology stocks, the Dow Jones Industrial Average it was actually the best performance of the three major indexes, as the blue chip index rose 4.4% in July.

However, not all Dow stocks were winners last month, as nine of the 30 Dow stocks ended lower. Let’s take a look at the three worst performers Dow Stocks to see if the pullback represents a buying opportunity for any of them.

1. Merck (down 8.6%)

Pharmaceutical giant Merck (NYSE:MRK) had the biggest drop last month of any Dow stock. Merck ended the month down 8.6% and all of those losses showed up in its earnings report at the end of the month when Merck lowered its full-year earnings guidance.

However, the cut in earnings per share guidance from $8.53-$8.65 to $7.94-$8.04 was due to a one-time $1.3 billion acquisition charge of EyeBio and not due to any fundamental problems in the business. The company also reported disappointing sales of its HPV vaccine Gardasil in the key market of China.

Its lead cancer drug, Keytruda, increased sales by 16%, or 21% in constant currency, to $7.3 billion, representing nearly half of its $16.1 billion in revenue for the quarter. Merck has also made several acquisitions to bolster its product pipeline, as Keytruda will likely face price competition later this decade.

The post-earnings sell-off in Merck stock seems overdone and pharmaceutical investors would be justified in taking advantage of it.

2. Microsoft (down 6.4%)

Microsoft (NASDAQ:MSFT) was the most valuable company on the market not long ago, but it ceded that title to Litter following the iPhone maker’s reveal of Apple Intelligence.

However, Microsoft remains a giant with a market capitalization of more than 3 billion dollars. However, investors began moving out of technology stocks and into small caps last month in preparation for lower interest rates, which are expected to rebound as rates fall.

Microsoft delivered a solid earnings report, with a 15% increase in revenue, but growth in Azure was slightly lower than expected and its growth rate slowed modestly from the March quarter. Microsoft has also aligned itself with AlphabetJuly’s post-earnings drop and as part of a broader sell-off in technology stocks.

Although Microsoft shares still look expensive, the business is running effectively, delivering solid earnings growth, and continues to be a leader in artificial intelligence. Buying on pullbacks seems like a good strategy here.

3. Walt Disney (down 5.6%)

Finally, Walt Disney (NYSE: DIS) had another disappointing performance in July as the entertainment giant is trading not far from 10-year lows.

The story continues

Pessimism about the streaming industry and theme parks weighed on Disney shares last month, even though the company has yet to report quarterly earnings. Comcast reported a 10% drop in theme park revenue, spooking Disney investors, and also said streaming subscribers on Peacock were down.

Disney’s downfall resulted from strong box office performance from titles such as Inside Out 2 It is Deadpool and Wolverineshowing that an important business segment is finally coming back to life after several years of weakness during the pandemic and beyond.

Disney also retained its rights to broadcast NBA games in the new contract with the basketball league. Overall, there were no warning signs for Disney this month, but the company will need to show investors solid results in its earnings report next week.

The stock is cheap enough to buy, but Disney has disappointed several times during the streaming era. The next year will be critical for the company as CEO Bob Iger aims to reform with the business clearly on track rather than struggling to transition to new platforms.

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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Jeremy Bowman holds positions at Walt Disney. The Motley Fool holds positions and recommends Alphabet, Apple, Merck, Microsoft and Walt Disney. The Motley Fool recommends Comcast and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The motley fool has a disclosure policy.

Is it time to buy July’s worst-performing Dow Jones stocks? was originally published by The Motley Fool