Schaeffer's Trading Floor Blog

Best & Worst Blue Chips of 2011: Bank of America and McDonald's

BAC is the worst Dow performer of the year, while MCD is the best

by 12/30/2011 2:42 PM
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Among the major U.S. equity indexes, the Dow Jones Industrial Average (DJIA) has turned in the best performance in 2011. With the final trading day of the calendar year wrapping up shortly, the index is up about 5.6% for the year -- compared to the S&P 500 Index (SPX), which seems bound and determined to finish completely flat. Currently, the SPX has trimmed its lead to just 0.07% for the year... almost as though none of those crazy price swings ever happened. However, while the indexes haven't covered much ground on a net basis, the same can't be said of individual Dow components. Take Bank of America Corporation (BAC - 5.51) and McDonald's Corporation (MCD - 100.41), for example.

Out of the 30 DJIA members, BAC is easily the biggest laggard of the past year. The beaten-down financial stock has shed about 59% of its value since the start of January, woefully underperforming its blue-chip compatriots. (For comparison's sake, Alcoa (AA) is the second-worst stock on the Dow, having dropped 44.1% of its value year-to-date.) If BAC breaches the $5 level heading into 2012, it should be interesting to see whether the bank can maintain its status as a member of the venerable average. If you'll recall, B of A joined the DJIA as recently as February 2008.

On the other hand, MCD has helped to offset some of those BAC losses. The fast-food firm has rallied roughly 31% over the past 12 months, edging out IBM (IBM) and its 25.5% advance. In fact, MCD is fresh off an all-time high of $101, tagged just yesterday, and is poised for its first-ever monthly finish above the century mark. However, most Wall Street analysts expect Mickey D's momentum to slow once the calendar turns. Thomson Reuters pegs the average 12-month price target on MCD at just $103.48, a slim 2.5% premium to the stock's new record high.

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