Source: Commons.wikimedia.org.
Do investors have a reason to worry?
- The combination of higher payroll taxes and, more importantly, delayed tax refunds is certainly taking a bite out of Wal-Mart Stores, Inc. (NYSE:WMT)’s bottom line to start the year. This alone could have a very short-term negative effect on Wal-Mart’s share price and vindicate short-sellers. However, over the long run, Wal-Mart’s pricing clout is simply too strong for me to suggest making an extended bet against the company.
- Jumping one spot from the previous month is consumer-products maker Procter & Gamble. As I noted last month, consumer products like detergent and toothpaste are going to be purchased regardless of whether the economy is shrinking or growing rapidly, so it gives The Procter & Gamble Company (NYSE:PG) incredible pricing power across a wide swath of its products. Also, with relatively low volatility, P&G doesn’t tend to attract short-sellers looking for a quick buck.
Do investors have a reason to worry?
- Over the long run, P&G appears to be a safe bet to head higher, although over the next couple of quarters, short-sellers may have some ground to stand on. The Procter & Gamble Company (NYSE:PG)’s first-quarter report released in April failed to impress investors, as the company noted that increased marketing expenses have failed to boost sales of some key products. Higher marketing expenses will surely constrain profits in the interim and could give short-sellers a short but sizable opportunity to make their impact.
Why are short-sellers avoiding Pfizer?
- Big pharmaceutical companies like Pfizer are rarely atop investors’ short list primarily because of their high yields (3.2% in Pfizer’s case) and small price fluctuations. Adding to that, Pfizer Inc. (NYSE:PFE)’s been on fire ever since gaining U.S. approval for blood-thinning drug Eliquis, which was co-developed with Bristol Myers Squibb Co. (NYSE:BMY). Eliquis proved far superior in a head-to-head with Warfarin in nearly every respect and could generate up to $5 billion in peak sales.
Do investors have a reason to worry?
- I’d say the answer to this question is “definitely maybe.” The Eliquis approval was extremely important for Pfizer and Bristol Myers Squibb Co. (NYSE:BMY), as both product portfolios have been under pressure from patent expirations. Then again, over a three-year period (2011-2014), Pfizer Inc. (NYSE:PFE) is going to lose patent protection on about one-quarter of its revenue stream. While new drug approvals are great, they won’t immediately soften the blow of lost revenue from generic competition. With revenue declines expected this year and next, short-sellers could have a field day with Pfizer over the next two years.
Which Dow component listed above would you feel the safest owning? Share your thoughts in the comments section below.
The article The Dow’s 5 Most Loved Stocks originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any 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 General Electric and recommends Coca-Cola and Procter & Gamble.
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