Johnson & Johnson
Why are investors shorting Johnson & Johnson (NYSE:JNJ)?
- A bet against Johnson & Johnson (NYSE:JNJ) is primarily a bet that the struggles in Europe will continue and that J&J’s growth rate won’t be sufficient to justify its forward P/E of 15. Johnson & Johnson (NYSE:JNJ)’s first-quarter report, however, would suggest otherwise: Domestic sales rose 11.2%, international sales ticked up 6.3% despite a negative 2.4% currency headwind, and adjusted EPS added 5% over the year-ago period.
Is this short interest warranted?
- Of all the most shorted Dow components, this is the biggest head-scratcher by far. Johnson & Johnson (NYSE:JNJ) purchased Synthes last year for $19.7 billion to expand its medical-device presence in rapidly growing markets (taking care of international growth). Earlier this year, it received approval from the Food and Drug Administration for a revolutionary new class of type 2 diabetes drug, Invokana (hello, organic growth!). Seriously? Investors want to bet against this? Dream on!
Hewlett-Packard
Why are investors shorting Hewlett-Packard Company (NYSE:HPQ)?
- On the flip side, Hewlett-Packard Company (NYSE:HPQ) has given short-sellers a laundry list of reasons to dislike the company. Among others, its most recent quarterly report showed revenue declines in all five major segments, it recently shed 27,000 jobs, and an IDC report last week showed an 18.9% drop in Hewlett-Packard Company (NYSE:HPQ) server shipments in North America in the first quarter compared to a 9.9% gain for struggling Dell Inc. (NASDAQ:DELL).
Is this short interest warranted?
- Everyone loves a turnaround story, but Hewlett-Packard Company (NYSE:HPQ) is a long way from having its plan fully implemented. CEO Meg Whitman is certainly an amazing cost-cutter, but I have yet to see what innovations HP will bring to the table to help differentiate its hardware from everyone else’s. Sure, HP is cheap on a forward-earnings basis, but it could get considerably more expensive if all of its business segments keep going in reverse. Here’s a stock the short-sellers have a firm grasp of.
Do these five Dow components deserve this pessimism? Share your thoughts in the comments section below.
The article The Dow’s 5 Most Hated Stocks originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams owns shares of Dell, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Intel and Johnson & Johnson.
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