The 5 Riskiest Stocks in the Dow: Bank of America Corp (BAC), Alcoa Inc (AA), Caterpillar Inc. (CAT)

Page 2 of 2

American Express Company (NYSE:AXP), beta = 1.80
American Express had to deal with the recession and financial crisis in much the same way as regular banks. With credit risk from its charge cards and falling transaction volumes during the economic slowdown, AmEx is tightly connected to the health of the economy.

Yet AmEx is doing its best to broaden its appeal beyond its traditional core base of wealthy customers. Its Bluebird prepaid debit-card initiative is aimed squarely at lower-income customers, with the capacity to generate brand new revenue and get its products in front of new faces. Prepaid cards are a highly competitive business right now, so AmEx still has plenty of risk, but it has a strong brand behind it in its drive for success.

General Electric Company (NYSE:GE) , beta = 1.63
General Electric was another near-casualty of the financial crisis, with the conglomerate’s GE Capital overwhelming GE’s traditional core industrial business. Since then, though, the company has bounced back by returning to its roots and moving forward in lucrative directions, including energy infrastructure.

In some ways, having a purer industrial focus leaves GE more vulnerable to the cyclical nature of its business. But given GE’s success even in a relatively unfriendly environment for industrial stocks worldwide, faster global growth could make the stock truly soar.

Use caution
One thing to be aware of in considering these stocks is that beta is a backward-looking measure. Although it’s reasonable to assume that stocks that have been risky in the past will continue to be risky in the future, that’s not an ironclad certainty looking forward. Nevertheless, being aware of the risks involved in every stock will leave you better prepared to handle inevitable future market downturns.

The article The 5 Riskiest Stocks in the Dow originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger owns warrants on Bank of America. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends American Express. The Motley Fool owns shares of Bank of America and General Electric.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2